We made it through 2020. Too bad 2021 is worse so far. I hope we can get through the next couple of weeks without too many incidents. I look forward to things being boring for a while.

Before I fully switch into 2021, I need to finish off the financials for 2020. As always, I’ll add some personal anecdotes, so you don’t fall asleep with the boring financial writing.

December was filled with birthdays and Christmases. Instead of doing Four Christmases like we usually have to do, we only had to do a couple. It’s hard to find silver linings in the pandemic, but running to a couple of different states and getting back after 1 AM is tough.

(Traditionally, we read a few Christmas books before bed to get nice and tired for Santa.)

To help with the rising cases after Thanksgiving, Rhode Island had a “pause” and scaled back some businesses at the start of December. The kids’ school didn’t shut down and while some other grades were sent home, they continued without an actual case. (They only sent a grade home if there had been a report of a “close contact.”) The pod set-up seems to be working well. So far (through Jan 12th), we’ve only missed a total of 5 in-person days (replaced by 4 at-home days) between both kids. I don’t know if I’d say that there’s a light at the end of the tunnel for them (since vaccinations are far off for 8-year-olds), but as we get to better weather and vaccines things will be better for them as well.

When things opened up, The kids got to eat some Pikachu pancakes, before doing to a Launch trampoline park. It’s hard when a kid can’t do a birthday, so this was a substitute. I think it worked better than the car parades of last year that were so depressing.

Pika! Pika! Don’t Eat Me! Nooo!

We also a staycation at a local hotel. One of the great things about living in a summer resort town like Newport, RI is that everything is built for the influx of people in the summer. So in the winter, restaurants and hotels are empty. We had the whole pool to ourselves for a couple of hours. Later we hid objects around the room and played “Hot or Cold.” It’s good to switch things up if you can do them mostly safely during the pandemic.

This normal-looking nautical lamp amazed this future engineer.

That’s enough lead-in… let’s start the Passive Income report. I used to call this the Alternative Income Report, but everyone loves passive income better. While I transition to the new terminology, there may be some “alternative income” mentions including the FAQ. If you are a new reader, you’re going to want to refer to my Alternative Income FAQ as you’ll likely have a lot of questions.

We didn’t have much snow over the last couple of years but got an 8-inch storm in December.

The way I calculate these numbers requires that long explanation – it isn’t intuitive at all. The reason why I do things a little differently is that this catalogs a journey. For example, we don’t have passive income from our rental properties while we are paying down their mortgages. Instead, I calculate the percentage of equity we have to show where on that journey we are. Each month you see that the bank owns less and we own more. When we get to owning 100% there will be no mortgages and all that rental income can be used for living expenses.

Lazy Man’s Passive Income – December 2020

I categorize our passive income into 3 main sources that are largely represented in my passive income pyramid. For this report, I ignore the bottom section, “career/job” – that’s not passive at all. (I do have some income in that area, but that’s not the focus of this report.) I combine dog sitting and blogging into one section of “somewhat active” income. I leave real estate and investment income as their own separate main sources of very passive income.

1. Blogging + Dog Sitting Income

December was a very bad month for blogging income. I usually get a lot of advertising inquiries a month, maybe 8-10 or so. I don’t remember getting a single one in December. I’ll need to figure out how I can do better. For now, I’ll just have to deal with it.

We found the Christmas Star! Maybe when the next 800-year event happens we’ll remember to bring our telescope (and have a good one – ours is fairly cheap.)

Additionally, COVID has killed the need for dog sitting this year. We got a couple of stays in December and due to holiday rates, it wasn’t horrible. I think dog sitting is going to be down until summer. I’m hopeful COVID will be down with vaccines and everyone getting more time outside. Summer is a big vacation and tourist season for us, so if that happens I can make some money again. If not, it’s no big deal.

In November, dogs and blogs combined for a total of $1,021.93 – the lowest in years. In December, it was:

Total Blogging + Dog Sitting Income: $1,036.52

That’s really poor, but at least I didn’t have to do too much work for it. If I tried to calculate an hourly rate it would be really, really good. Just as importantly, I enjoy writing this blog. The dogs that we are sitting are regular customers… and great dogs. It’s a good combination.

When there is some dog sitting my kids can pitch in to help. My 8-year old is extremely good with dogs at this point. He can feed them, let them out, and play with them in the yard. My 7-year-old is good too. This help means that I can pay them a legitimately earned income (a small percentage of the overall dog-sitting income). Because the income is earned they can save money in their kid Roth IRAs and it will be money that they’ll never pay tax on. I want to get them more involved in blogging, taking pictures and things like that, but it’s going slow. They get a lot of school work and home work.

(Note: The blue line is the monthly number. The red line is a 3-month average which helps smooth the curve.)

2. Rental Property Income

We recently sold a condo and bought a new one that’s closer to us. It’s much easier to manage. We got new tenants in January, so finally we’ll start getting money from it. I’m very excited about the tenants that we got. They volunteered to paint the whole place and do other improvements. We weren’t expecting this, but it looks great now. We’re giving them a big discount on the rent – it’s the right thing to do.

Santa comes down every street in our town over a couple of weeks. It’s hard to get a good picture of him, because he’s so busy, but I was able to catch this.

As for December’s numbers, Zillow’s estimates of our properties were up – always a good thing. We paid down the mortgages as we always do. We gained around $60K in equity in 2020, just like we did in 2019. It is difficult to deal with tenants, but I like to think of those equity gains as a $60,000 salary. We can’t spend the money, because it isn’t liquid. Still, the “work” for that $60,000 is pretty minimal.

This month we went from 60.71% to 61.55% ownership of the equity in our properties. That’s a really nice move forward. Previously, I calculated that, after insurance, property taxes, condo fees, and estimated maintenance we’d make $3,325 a month. That number represents our net gain. I recently updated this with the new property and it looks like we’ll be at $3,387.50 – a minor difference.

Bored kids are imaginative kids, I’m told. Here they build a fort in our living room, which carried on up in their bedrooms.

If you multiply our expected net rent $3,387.50 by the amount of equity we have (i.e. where we are on our journey) 61.55% you get $2,085 in estimated monthly passive income. When I started tracking this (beginning of 2017), we only owned 36.4% of the properties and they had lower rents. The math worked out to $1,174 back then. So in 47 months, we’ve seen the number grow $911/mo. That’s good passive growth in 4 years.

As the years march on, the ratio will grow to 100% of a rent that should net $3,387.50 monthly after expenses. Since rent is inflation-resistant, we can raise it as costs of living go up. We don’t have to factor in inflation like other investments. So we can think of it as $40,800/yr. of income in today’s dollars buying the same value of stuff in the future. That should be enough money for us to live on with our own home paid off (plus our solar panels, frugal shopping habits, and military healthcare.)

In the previous report, the rental property income was $2,056.

Total Rental Property Income: $2,085

3. Dividend Income

For this section, I assume we will earn a 2.5% dividend yield on our holdings. That could be from a high-dividend ETF or from simply holding strong companies that have a long history of dividend growth. There are some income investing here. We can also look at making passive income with dividend kings. If I wanted to simply retire on this dividend income, I would get Sure Dividend’s newsletter to try to get closer to a 4% average dividend yield. That link to the newsletter has a special discount rate and in full disclosure, I make a few dollars if you sign up for it.

The market has been doing great – it’s just been a big bull market. Some of the stocks that I picked have done really well. I wouldn’t have expected Snapchat, Pinterest, and solar panels to be up 5x, but they have. Once again, our portfolio is at an all-time high. We’ll see if investments can continue to grow. The stock market economy doesn’t seem to care about COVID because it’s looking to the future with vaccines.

We continue to get a profit-sharing check since I bought (a lot of) a company. The business is doing well. It’s actually almost ideally positioned in this pandameic due to its virtual nature. The investment income from this is essentially the same as dividend income. It is taxed differently, but for the purposes of this report, it makes sense to group together all stock ownership in this bucket.

Total Dividend-ish Income: $3,441

Last month, it was $3,323 and we jumped up again. We are now far past the pre-COVID number highs. This number rarely goes up much (since it’s a small percentage of our nest egg), but this was another month of extreme gains.

Kids at the Launch trampoline park. It’s kind of weird to social distance while bouncing around, but it was mostly empty for a lot of the time we were there. The kids said it was the best time they’ve had in forever… which may be 2 days in “kid time.”

Annualized, this monthly $3,441 is $41,296. If our mortgage was paid off, we might be able to live on this by itself. However, because most of our investments are in retirement accounts, we can’t use much of this potential income for now. (We can use the profit-sharing check as it goes straight to our checking account.) We’ll let this investment continue to compound for another 15 years until we are 59.5. Then we’ll have to see if we want to tap it or let it continue until we are required to take some of it at age 72.

Very Close to Passive Income

Our “very close to passive income” is a combination of rental property income and dividend income. If there were some royalty income from books, movies, or music, I’d include that as well. I’m too tone-deaf to have a rockstar music career, but maybe I’ll write a book someday.

Kids love Just Dance on the Nintendo Switch. I like a video game that gets them moving.

The stock market goes up and down fast, even more so nowadays. That makes the dividend calculation fluctuate a lot more than it normally would. We don’t know if companies can reliably pay dividends anymore. Without customers and profits, many companies have cut their dividends. However, the stock market is looking ahead to summer 2021 with a lot of vaccine and outside time.

The rental property income typically keeps going up because the mortgages are always getting paid down every month. Unless there’s a housing market crash, this should continue to happen. We haven’t seen any kind of crash… instead the housing market is booming.

For a few years, I’ve been saying:

I love having both types of income working together for us. I think everyone interested in FIRE should have stocks and real estate income streams. The diversification gives me great confidence that we’ll be better prepared than most people in the case of an unfortunate economic event. We’ll still likely get rent checks if the stock market crashes. We’ll still get dividend checks if a tenant is late paying for awhile. Of course a bad economy may impact both at the same time, but that’s what an emergency fund is for.

Finally, our 8-year-old stayed up for the New Year. His younger brother had to the good sense to go to sleep hours before.

We are almost a full year in of a ginormous unfortunate economic event (it’s worse outside of economics, but for the sake of this article, I’ll stick to economics). Stocks went down a lot, but then went back up. Real estate has held steady. Overall, the plan keeps rolling along, even during COVID-19.

While the stock market is doing well, the real economy is very bad. It used to be terrible, but some people are getting back to work and some jobs are coming back. We’re finally getting a president who won’t ignore COVID and hope it disappears. We’re also getting a president who is going to start to reverse the climate change disaster that sees so many natural disasters ravage the United States. Even if you are a heartless soul who doesn’t care about the people losing everything in fires, you should be able to agree that American business works best when it literally doesn’t have to put out fires.

Very Close to Passive Income: $5,526

Last month it was $5,379. The $5,526 extends our all-time high.

This would be over $65,000 a year of almost completely passive income. What’s better is that there would be no need to touch the investments themselves. We wouldn’t have to sell stocks or get a reverse mortgage. Property maintenance and property taxes for rental properties are already factored in. We would still have all the underlying assets (property, stocks, etc.) and be able to pass these on to the kids for them to build on – unless we choose to draw them down for more fun, charity, or other spending.

This “very close to passive income” has grown from $2,354/mo. in January 2017. It’s worth noting that, once again, these are fudged numbers that aren’t “real” yet (except for the profit-sharing check). We’re just about at four years of tracking this number, and we have gained more than $3,000 in passive-ish income. I wonder if we can get to $8,000/mo. in passive income by the start of 2025 (which will be another 4 years). I think that would be too aggressive, but it would give us something to hope for.

Final Passive Income

When you add up “dogs and blogs” to the “very close to passive income” you get:

Passive Income: $6,562.52

Last month it was $6,400.93. I’d like to see this get closer to $8,000 in 2021, but I need a plan to add something new – it doesn’t look like dogs and blogs is going to get me there. For now, I’ll just be happy that with four different income streams (and two consistent ones), there isn’t much room for everything to drop.

This $6500+/mo income is $78,750.24 a year. That largely hypothetical annual income for writing on a blog, taking care of one dog, and investing is really nice. In the long term, $78K would be a lot more income than we’d need – given our necessary expenses for the next 45 years. Of course, those necessary expenses aren’t going to cover all our spending, but it’s a large percentage of it.

As 2020 has proven, you never know what bad news is lurking around the corner. This preparation gives us the financial flexibility to fight it.

None of the numbers here include my wife’s bread-winning pharmacist income, her vested military pension (more passive income), or the freelance work I’ve been doing over the last couple of years (which isn’t passive at all). That’s the fuel that drives the passive income engine – it allows us to live well and invest. My income doesn’t match my wife’s, but I’m good at stretching a dollar in almost all our spending.

As always, I’m still hoping to write a book someday. That would add some more passive income. My wife will probably get her book out first. She’s had an incredibly interesting life until she met me – I am so boring. I may tip my toe into self-publishing sometime this year. I would love to talk to a real publisher, but I don’t want to take on the “job” of writing. That’s probably a deal-breaker. If you know someone who I could talk to contact me.

My favorite thing about the graph below is that it doesn’t dip down too far. It’s been above $6,000 for a while now. Though we are getting close to dipping below that $6,000 mark. If it dips below $6000 and touches $5000, we’ll have to examine some things.

(Once again, the blue line is the monthly number. The red line is a 3-month average which helps smooth the curve.)

Net Worth Update

My net worth updates aren’t very exciting as I don’t share the exact numbers. That’s why it’s just a footnote here.

I truly believe that net worth is one of the most important numbers in personal finance so it is worth sharing in some way. Showing relative growth can be useful.

Like most investors in December, our net worth did extremely well. We saw it jump 3.58%. For the year overall, our net worth is up 26.01%. If you didn’t know better you might think 2020 was another boring, great financial year – a typical saving and investing plan for us. In fact, growing our net worth 26.01% in a year might be above average. With the Rule of 72, we’d double our net worth in around 3 years.

Diversification helps a lot in bad times. Even when the stock market was way down, we were still grounded with our real estate. We can’t control the market, but we can be happy that the amazing river of compound interest has been working well for us over the years.

I feel it’s important to acknowledge that everyone is in a different place in their financial journey. I’ve been blogging about personal finance for 15 years. FIRE wasn’t a “thing” back then, but it’s in the news a lot now. We naturally are further along in that journey than some younger readers who may be just starting out. If you are one of these readers, I hope you won’t be discouraged by some of the numbers above. I didn’t start many of these graphs until year 11 of blogging (year 13 of early retirement planning). Please try to use it as motivation for what may be possible (depending on your circumstances and market luck) over 10-15 years.

There’s a big wild card in calculating our net worth. Now that my wife’s pension is vested, it’s reasonable to ask whether to include a pension in your net worth. I decided that it does make sense to include it. She could have earned more direct monetary compensation if she didn’t work for the government. That would have boosted all the numbers across the board. Calculating pension value is not easy, but here’s the best way to know what a pension is worth. In the end, it seems my wife’s pension may be worth $2.3 million. However, like most of the money mentioned in this article, this isn’t money we can spend right now.

Because the pension would dominate our net worth, I’ll note two separate numbers in my personal spreadsheet. I don’t share the numbers anyway, aside from these hints, so I don’t think it should matter much to you. It’s not like I’m suggesting that you might want to make a financial-based decision on a pension.

I always end this article by asking how your last month went. I know that COVID-19 is making everything difficult. I hope that some of it is getting easier. I’m sure that for many the kids going back to school, in whatever form, represents new challenges and anxieties. Feel free to use the comment space to vent, I try to give a thoughtful reply to every comment I get.

It’s a little past the middle of the month and that means I’m a little late to review September 2020’s passive income. Many other bloggers get their reviews out early. I like to wait until the tenant checks have come and our mortgage payments are deducted from our accounts. By the 7th of the month, our checking accounts seem to stabilize with all the typical big bills paid off.

This month’s report is going to be very different in one area than the previous 30-something reports before. We sold an investment property and are in the process of buying a new one. This is a big shake-up to the usual boring monthly mortgage payoff that grows our equity a tiny percentage. It’s also a big test as to whether my system of calculating the value of the real estate still stands despite the big change.

September is always a busy month for us. We have back to school, FinCon (the personal finance media convention), and gearing up for open enrollment for healthcare plans (the busy time for my wife’s work). There was no FinCon this year, so that’s one less thing to focus on. Our schools opened up with a ton of precautions, so there was a little more preparation necessary this year. My wife is working more on COVID detail than open enrollment, so that’s different as well.

We managed to stay busy by selling one investment property and buying a new one. I’m also still cleaning out the garage and basement so that we can make a little more living area in the house.

We also had a full slate of events with the kids. We did a local corn maze and went to a food truck event. We also did something called a BoldrDash run. That’s like a very beginner level Spartan-type obstacle race. It was a little muddy and there was a lot of climbing, but we worked together and the 6 and 8 year-old did fine. On the topic of there being an 8-year old, we had an 8th birthday party. This may sound all very irresponsible with COVID, but we all wearing masks, outside, and socially distanced. The birthday party was with the same kids from the school’s pod so the event was little different than what they do every day, except for it being more outside and maybe more of a chance of touching.

The kids started karate, but it was inside with masks and social distancing. We also got them signed up and started with Boy Scouts, but it’s starting a little slow. There aren’t a lot of kids into it this year and the pack leader is deployed in the Middle East. The closest to a picture I have to show of that is a scouting-at-home activity where the kids made SnapShips, which went well.

I find myself taking more pictures of events so that when I review the month, I can realize all the things we did. The individual days go by very fast. Typically the morning is rushing the kids to school. The early evening is picking them, making dinner, getting their homework done, doing karate/boy scouts, etc. I think most families are like that though. I have to think about how we can stop and smell the roses a bit.

That’s enough lead-in… let’s start the Passive Income report. I used to call this the Alternative Income Report, but everyone loves passive income better. While I transition to the new terminology, there may be some “alternative income” mentions including the FAQ. If you are a new reader, you’re going to want to refer to my Alternative Income FAQ as you’ll likely have a lot of questions.

The way I calculate these numbers requires that long explanation – it isn’t intuitive at all. The reason why I do things a little differently is that it is a journey. For example, we don’t have passive income from our rental properties while we are paying down their mortgages. Instead, I calculate the percentage of equity we have to show where on that journey we are.

Lazy Man’s Passive Income – September 2020

I categorize our passive income into 3 main sources that are largely represented in my passive income pyramid. For this report, I ignore the bottom section, “career/job” – that’s not passive at all. (I do have some income in that area, but that’s not the focus of this report.) I combine dog sitting and blogging into one section of “somewhat active” income. I leave real estate and investment income as their own separate main sources of very passive income.

1. Blogging + Dog Sitting Income

We finally got dog sitting back in August as people seemed to start to travel again. Much like Keyser Soze, September’s income was, “…and like that – poof – [it’s] gone!” September is always a terrible month for dog sitting. Sometimes we get some people for Labor Day weekend, but most people are focused on getting back to work and the start of school. There simply isn’t much travel at all.

Our blog income recovered a very little bit. The good news is that I got more traffic than usual. The bad news is that I got fewer advertisers overall. The advertising piece is an unpredictable roller coaster that I don’t have much control over. The same could be said about traffic, but I have a little bit more control. I like this trend of increasing traffic and it makes me want to keep it going. Fortunately, with the kids doing great in school I have more time to write.

In August, dogs and blogs combined for a total of $1995.01. In September, it was:

Total Blogging + Dog Sitting Income: $1329.27

That’s the lowest number of the year. I’m not too worried though as October has bounced back a bit. I also don’t feel so bad since much of September was spent getting the kids back in the school routine and selling our investment condo.

Now that dog sitting is coming back my kids can get back to work and pitch in to help. My 7-year old even went to the animal shelter for camp and came back with so many tips and tricks for training dogs. This help means that I can pay them a legitimately earned income (a small percentage of the overall dog-sitting income). Because the income is earned they can save money in their kid Roth IRAs and it will be money that they’ll never pay tax on. I want to get them more involved in blogging, taking pictures and things like that, but it’s going slow. I have a plan for them to be able to help with an article or two by the end of the year.

(Note: The blue line is the monthly number. The red line is a 3-month average which helps smooth the curve.)

2. Rental Property Income

As I mentioned in the open, this section hasn’t changed much since I started this report. We hadn’t bought a new property in 7 years. Well, 2020 means change. We had a tenant move out (her decision without telling us). We are using this opportunity to do a 1031 exchange – selling one property and buying a new one without paying taxes on the gains. The plan is to get a condo that’s much closer and easier for us to manage. It’s also close to the local Navy base, which should let us use my wife’s military connections to get high-quality tenants.

We sold one condo and are under agreement on the new condo. We expect to close in a week or two. For this section, I’m going to assume that goes through.

We sold our old condo for $170K and netted $108K after closing costs and paying off the mortgage. That was a great return on the $25K that we put down in 2012. We bought the new condo at $205K, so we’ll finance around 95K.

We were 7 years away from paying off the old mortgage. Now it’s reset to 20 years, and it adjusts every 5 years. We didn’t have much of an option, because we incorporated as an LLC. I didn’t know it at the time, but that necessitates a commercial mortgage. Commercial mortgage terms are bad – stay away if you can. Incorporating as an LLC was a huge mistake, but that’s a story for its own article. We should be able to rent this condo for $1800 and net around $1000 a month. We’ll try to put much of that money towards the principal so that we can get it close to a 7-year mortgage again.

When my wife realized that we would be netting around $1000/mo. on the property, her jaw dropped. This is when the investment properties became “real” for her. For the first time, we’ll be getting true passive-ish income and not just waiting for it all to happen in 2027 when all the mortgages were looking to get paid off.

We had mostly been cash flow neutral with the 15-year mortgages. This gives us some cash flexibility with all our properties.

As for September’s numbers though, we took a step back. We lose some equity in the sale (paying the agent and lawyers). We also haven’t finished buying the replacement condo, so we aren’t making any payments to lower what our debt on that will be. Things will hopefully start picking up by the time we review November’s numbers.

We went from having 66.10% of the equity in our properties to 60.64%. That was to be expected with the fees to sell. Previously, I calculated that, after insurance, property taxes, condo fees, and estimated maintenance we’d make $3,325 a month. That number because it represents our net gain.

With the new condo, I’ve re-examined everything and run the numbers again. Before I was a general rule of thumb and estimates. I took more time to do the calculation as accurately as I can now. It turns out that we can expect around $3,387.50 now. That didn’t change much. I think I underestimated expenses before, so the new condo with the new calculation mostly balances that out that mistake

If you multiply our expected net rent $3,387.50 by the amount of equity we have (i.e. where we are on our journey) 60.64% you get $2,054 in estimated monthly passive income. When I started tracking this (beginning of 2017), we only owned 36.4% of the properties and they had lower rents. The math worked out to $1,174 back then. So in 44 months, we’ve seen the number grow $880/mo. That’s good passive growth in almost 4 years.

It looks like the formula still works with the property switch.

As the years march on, the ratio will grow to 100% of a rent that should net $3,400 monthly after expenses. Since rent is inflation-resistant, we can raise it as costs of living go up, we don’t have to factor in inflation like other investments. So we can think of it as $40,800/yr. of income in today’s dollars buying the same value of stuff in the future. That should be enough money for us to live on with our own home paid off (plus our solar panels, frugal shopping habits, and military healthcare.)

In the previous report, the rental property income was $2,198.

Total Rental Property Income: $2,054

3. Dividend Income

For this section, I assume we will earn a 2.5% dividend yield on our holdings. That could be from a high-dividend ETF or from simply holding strong companies that have a long history of dividend growth. For that we’ll look at making passive income with dividend kings. If I wanted to simply retire on this dividend income, I would get Sure Dividend’s newsletter to try to get closer to a 4% average dividend yield. That link to the newsletter has a special discount rate and in full disclosure, I make a few dollars if you sign up for it.

On the last snapshot, September 5, the market was doing great. The market continued to inch up to October 5th. Maybe the market loves the free money that the government is giving out to help with the impact of COVID. Maybe it’s looking forward to vaccines and full opening up the country for business. I’m scared by all this, but I can’t deny the math.

We continue to get a profit-sharing check since I bought (a lot of) a company. The business is doing well. It’s actually almost ideally positioned due to its virtual nature. The investment income from this is essentially the same as dividend income. It is taxed differently, but for the purposes of this report, it makes sense to group together all stock ownership in this bucket.

Total Dividend-ish Income: $3,010

Last month, it was $2,999. We are past the pre-COVID numbers. We aren’t far above it, but it’s amazing that we are even close.

Annualized, this monthly $3,010 is ~$36,000. If our mortgage was paid off, we might be able to live on this by itself. However, because most of our investments are in retirement accounts, we can’t use much of this potential income for now. (We can use the profit-sharing check as it goes straight to our checking account.) We’ll let this investment continue to compound for another 15 years until we are 59.5. Then we’ll have to see if we want to tap it or let it continue until we are required to take some of it at age 72.

Very Close to Passive Income

Our “very close to passive income” is a combination of rental property income and dividend income. If there were some royalty income from books, movies, or music, I’d include that here. I’m too tone-deaf to have a rockstar music career, but maybe I’ll write a book someday.

The stock market goes up and down fast, even more so nowadays. That makes the dividend calculation fluctuate a lot more than it normally would. We don’t even know if companies can reliably pay dividends anymore. Without customers and profits, many companies have cut their dividends.

The rental property income typically keeps going up because the mortgages are always getting paid down every month. Unless there’s a housing market crash, this should continue to happen. We haven’t seen any kind of crash yet.

For a few years, I’ve been saying:

I love having both types of income working together for us. I think everyone interested in FIRE should have stocks and real estate income streams. The diversification gives me great confidence that we’ll be better prepared than most people in the case of an unfortunate economic event. We’ll still likely get rent checks if the stock market crashes. We’ll still get dividend checks if a tenant is late paying for awhile. Of course a bad economy may impact both at the same time, but that’s what an emergency fund is for.

Here we are in an unfortunate economic event. Stocks went down a lot, but then went back up. Real estate has held steady. Overall, plan keeps rolling along, even during COVID-19.

While the stock market is doing well, the real economy is terrible. No president wants to see six-figure homeland deaths, and an unemployment rate balloon to ~15%. A president shouldn’t want to see climate change create millions of acres of fires. The best answer is a bailout of nearly everyone and everything at a cost of several trillion dollars… and it may go up from there. If only the people in political power believed that an ounce of prevention was worth a pound of cure, the United States would be in a much better situation. To make things worse, the president doesn’t acknowledge that the United States had one of the worst response of any country. The United States will suffer economically more than it would have if we had a competent president in the beginning. Let’s hope we get there in November.

Very Close to Passive Income: $5,064.00

Last month it was $5,197.00. For the first time in a while we didn’t make a new high.

This would be more $60,000 a year of almost completely passive income. What’s better is that there would be no need to touch the investments themselves. We wouldn’t have to sell stocks or get a reverse mortgage. Property maintenance and taxes are included. We would still have all the underlying assets (property, stocks, etc.) and be able to pass these to the kids for them to build on – unless we choose to draw them down for more fun, charity, or other spending.

This “very close to passive income” has grown from $2,354/mo. in January 2017. It’s worth noting that, once again, these are fudged numbers that aren’t “real” yet (except for that profit-sharing check). In a few months, we’ll get to four years of tracking this number, and we may have gained $3,000 in passive-ish income. I wonder if we can get to $8,000/mo. in passive income by 2025 (another 4 years).

Final Passive Income

When you add up “dogs and blogs” to the “very close to passive income” you get:

Passive Income: $6,393.27

Last month it was $7,225.11. This is going in the wrong direction obviously. I had forgotten how bad dog sitting is when the summer ends. The good news is that this sets a low bar for me to beat in October. Also, with four different income streams here (and two consistent ones), there isn’t much room for everything to drop.

This nearly ~$6400+/mo income is ~$75K+ a year. That largely hypothetical annual income for writing on a blog, taking care of one dog, and investing isn’t half bad. In the long term, $75K would be a lot more income than we’d need – given our necessary expenses for the next 45 years. Of course, those necessary expenses aren’t going to cover all our spending, but it’s a large percentage of it.

As 2020 has proven, you never know what bad news is lurking around the corner. This preparation gives us the financial flexibility to fight it.

None of the numbers here include my wife’s bread-winning pharmacist income, her vested military pension (more passive income), or the freelance work I’ve been doing over the last couple of years (which isn’t passive at all). That’s the fuel that drives the passive income engine – it allows us to invest more and live well. This is especially true since I’m good at stretching a dollar.

As always, I’m still hoping to write a book someday. That would add some more passive income. My wife will probably get her book out first. She’s had an incredibly interesting life until she met me – I am so boring. I may tip my toe into self-publishing sometime next year. I would love to talk to a real publisher, but I don’t want to take on the “job” of writing. That’s probably a deal-breaker. If you know someone who I could talk to contact me.

My favorite thing about the graph below is that it doesn’t dip down too far. It’s been above $6,000 for a while now. Though we are getting close to dipping below that $6,000 mark. COVID-19 may have held it back by a couple of thousand dollars a month from all the income streams. I don’t want to think about what could have been.

(Once again, the blue line is the monthly number. The red line is a 3-month average which helps smooth the curve.)

Net Worth Update

My net worth updates aren’t very exciting as I don’t share the exact numbers. That’s why it’s just a footnote here.

I truly believe that net worth is one of the most important numbers in personal finance so it is worth sharing in some way. Showing relative growth can be useful, I think.

Like most investors in August, our net worth did very well. It was an average jump of 0.65% growth. For the year, our net worth is UP 12.82%. If you didn’t know better you might think 2020 was another boring year – a typical saving and investing plan for us.

Diversification helps a lot in bad times. Even when the stock market was way down, we were still grounded with our real estate. We can’t control the market, but we can be happy that the amazing river of compound interest has been working well for us over the years.

I feel it’s important to acknowledge that everyone is in a different place in their financial journey. I’ve been blogging about personal finance for 14 years. FIRE wasn’t a “thing” back then, but it’s in the news all the time now. We naturally are further along in that journey than some younger readers who may be more towards the beginning of their journey. If you are one of these readers, I hope you won’t be discouraged by some of the numbers above. I didn’t start many of these graphs until year 11 of blogging (year 13 of early retirement planning). Please try to use it as motivation for what may be possible (depending on your circumstances and market luck) over 10-15 years.

There’s a big wild card in calculating our net worth. Now that my wife’s pension is vested, it’s reasonable to ask whether to include a pension in your net worth. I decided that it does make sense to include it. She could have earned more direct monetary compensation if she didn’t work for the government. That would have boosted all the numbers across the board. Calculating pension value is not easy, but here’s the best way to know what a pension is worth. In the end, it seems my wife’s pension may be worth $2.3 million. However, like most of the money mentioned in this article, this isn’t money we can spend right now.

Because the pension would ridiculously dominate our net worth, I’ll note two separate numbers in my personal spreadsheet. I don’t share the numbers anyway, aside from these hints, so I don’t think it should matter much to you. It’s not like I’m suggesting that you might want to make a financial-based decision on a pension.

I always end this article by asking how your last month went. I know that COVID-19 is making everything difficult. I hope that some of it is getting easier. I’m sure that for many the kids going back to school, in whatever form, represents new challenges and anxieties. Feel free to use the comment space to vent, I try to give a thoughtful reply to every comment I get.

Once again, I’m late in reporting last month’s numbers. However, this is a new one that I’m rushing to get it before the end of this month. Much of the month has been consumed by our tenant breaking their lease and subsequet condo turnover.

We’re looking to do a 1031 Exchange, which means that we’d be buying a new place on short notice. I always recommend making big financial decisions on no notice when you don’t have any time to evaluate it. I hope the sarcasm came across there because it’s the exact opposite of what I recommend. Alas, it wouldn’t be 2020 without having to adapt to some kind of a mess, so here we are.

I could spend paragraphs on this August, but I don’t want to short-change July. That said, I barely remember some of the pictures below from July. The ones at the beginning were essentially two months ago – or two decades in Pandemic Time (PT).

I always like to take pictures of good times and good events. When I look back on them later, it seems like it was a perfect month. There’s a lot less of the sibling fighting and stress in day-to-day life. It’s all there, but it is covered well.

Because July is such a blur, here’s what in some of the pictures below. We got to do a charity “Beach Bash” for a local nature preservation. The kids had a great time on the beach with s’mores, Ben & Jerry’s ice cream, and live music. We had a day of blueberry picking. My wife and I tried to celebrate our 13th anniversary, but it didn’t go well the first time – so we tried again. The kids got to play in a friend’s inflatable hot tub… and now I’m thinking we might need one. We got to spend an evening with friends in one of Newport’s most famous public parks. The kids jumped of a rock a few dozen times planning their stunt landings.

Not pictured is the giant red-tailed hawk that decided to hang out in our back yard and the kids’ first trip the arcade since COVID. I also didn’t get any camp photos. Yes, the kids had a successful few weeks of camp.

That’s enough lead-in… let’s start the Passive Income report. I used to call this the Alternative Income Report, but everyone loves passive income better. While I transition to the new terminology, there may be some “alternative income” mentions including the FAQ. If you are a new reader, you’re going to want to refer to my Alternative Income FAQ as you’ll likely have a lot of questions.

The way I calculate these numbers requires that long explanation – it isn’t intuitive at all. The reason why I do things a little differently is that it is a journey. For example, we don’t have passive income from our rental properties while we are paying down their mortgages. These numbers reflect the progress of that journey.

Lazy Man’s Passive Income – July 2020

I categorize our passive income into 3 main sources that are largely represented in my passive income pyramid. For this report, I ignore the bottom section, “career/job” – that’s not passive at all. I combine dog sitting and blogging into one section of “somewhat active” income. I leave real estate and investment income as their own separate main sources of very passive income.

1. Blogging + Dog Sitting Income

After a few months of zero dog sitting, we’re getting dog requests again. The requests tricked in late June, but July was almost half of a normal non-COVID month.

(This is my own dog. He so proud of finally ripping that dog toy and doesn’t look one bit guilty. He’ll get no judgment from me. That’s what the dog toys are for.)

Blogging income has been consistently low since coronavirus started. Advertising is down, but our spending, in general, is down too. Few people are searching for information about retiring early. In July we had the kids at camp and I got to write more. Often writing blog posts doesn’t pay off until the future. Also, sometimes an advertiser may make a small change that temporarily negates a month of writing. It’s a little like investing in the stock market. I’m investing more money, but the stock market could go down and end up losing money. That still doesn’t mean that I shouldn’t have invested that money in the first place.

In June, dogs and blogs combined for a total of $1,804.15. In July, it was:

Total Blogging + Dog Sitting Income: $2,407.09

This is almost exactly the average for the year. As you can tell from the chart below, this is ticking upward nicely.

Now that dog sitting is coming back my kids can get back to work and pitch in to help. My 7-year old even went to the animal shelter for camp and came back with so many tips and tricks for training dogs. This help means that I can pay them a legitimately earned income (a small percentage of the overall dog-sitting income). Because the income is earned they can save money in their kid Roth IRAs and it will be money that they’ll never pay tax on. I want to get them more involved in blogging, taking pictures, and things like that, but it’s going slow. I have a plan for them to be able to help with a few articles by the end of the year. I need to work quickly though, because once school starts in a few days, it will be hard to get them focused.

(Note: The blue line is the monthly number. The red line is a 3-month average which helps smooth the curve.)

2. Rental Property Income

After a brief pause where I thought that Zillow was starting to finally factor in COVID-19, we reached new highs in real estate ownership. The value of our properties went up a bit. As with every month, we paid off a couple of thousand dollars of mortgage debt and grow some equity. This combination leads to growth in this area.

(The kids picking blueberries. We’ve made progress on mask-wearing since these pictures. However, we were socially distant and outdoors.)

The big news is that we lost a tenant due to financial hardship, so this category is going to look a little different going forward as we sell one property and buy another. I have to think about what I’m doing over the next couple of months during the transition. I’m hopeful that in a few months, we’ll be able to say that this number is moving up nicely with the new property.

We now have 64.81% of the equity in our properties with a combined rent of $3,325 after insurance, property taxes, condo fees, and estimated maintenance. I use that number because it represents our net gain.

If you multiply $3,325 by 64.81% you get $2,155 in estimated monthly passive income. When I started tracking this (beginning of 2017), we only owned 36.4% of the properties and they had lower rents. The math worked out to $1,174 back then. So in 42 months, we’ve seen the number grow $981/mo. That’s like giving ourselves an annual $11,772 raise until the end of time. It’s a very nice gain from 3+ years ago.

The change in properties will be a real test of this accounting procedure. We’ll suddenly lose a percentage of equity, but the rent profit should grow. I’m curious to see how it all works out when the dust settles.

As the years march on, the ratio will grow to 100% of a rent that should be around $3,750 monthly Since rent is inflation-resistant, we can raise it as costs of living go up, we don’t have to factor in inflation like other investments. With the change in properties, we may be more likely to reach the annual $40,000 income. It should be enough money for us to live on with our own home paid off (plus our solar panels, frugal shopping habits, and military healthcare.)

In the previous report, the rental property income was $2,141. This number always moves slowly as it only changes if one of two things happens: 1) The properties go up in value. 2) We charge more for rent.

Total Rental Property Income: $2,155

3. Dividend Income

For this section, I assume we will earn a 2.5% dividend yield on our holdings. That could be from a high-dividend ETF or from simply holding strong companies that have a long history of dividend growth. For that we’ll look at making passive income with dividend kings. If I wanted to simply retire on this dividend income, I would get Sure Dividend’s newsletter to try to get closer to a 4% average dividend yield. That link to the newsletter has a special discount rate and in full disclosure, I make a few dollars if you sign up for it.

(The kids enjoying the beach. It’s a different kind of enjoyment this year, but it’s better than what many people have, so we’ll take the wins wherever we get them.)

On the last snapshot, July 7, the market was doing great. Maybe the market loves the free money that the government is giving out. Maybe it’s looking forward to vaccines and opening up the country for business. I’m scared by all this, but I can’t deny the math. The market has done very well over the last month. Those last four sentences were actually straight from the last report. I didn’t have to change anything, because the market continued as you probably know.

We continue to get a profit-sharing check since I bought (a lot of) a company. The business is doing well. It’s actually almost ideally positioned due to its virtual nature. The investment income from this is essentially the same as dividend income. It is taxed differently, but for the purposes of this report, it makes sense to group together all stock ownership in this bucket.

Total Dividend-ish Income: $2,958

Last month, it was $2,856. We’re now at pre-COVID numbers and the stock market is back to where it was. Growing $102 over the month is a lot. These numbers were from August 5th, so writing this on August 28th, we’re looking at greater numbers for September’s report.

Annualized, this monthly $2,958 is ~$35,500. If our mortgage was paid off, we probably be able to live on this by itself. However, because most of our investments are in retirement accounts, we can’t use much of this income for now. (We can use the profit-sharing check as it goes straight to our checking account.) We’ll let the rest of this income continue to compound for at least another 15 years, but hopefully a lot longer.

Very Close to Passive Income

Our “very close to passive income” is a combination of rental property income and dividend income. If there were some royalty income from books, movies, or music, I’d include that here. I’m too tone-deaf to have a rockstar music career, but maybe there’s room to have a book someday.

The stock market goes up and down fast, even more so nowadays. That makes the dividend calculation fluctuate a lot more than it normally would. We don’t even know if companies can reliably pay dividends anymore. Without customers and profits, many companies have cut their dividends.

(This was view of our annivesary lunch. With the kids in camp, it was easier, and cheaper, to escape for the day and watch the sailboats with some wine.)

The rental property income typically keeps going up because the mortgages are always getting paid down every month. Unless there’s a housing market crash, this should continue to happen. That housing crash may be coming, but for this month it hasn’t happened.

For a few years, I’ve been saying:

I love having both types of income working together for us. I think everyone interested in FIRE should have stocks and real estate income streams. The diversification gives me great confidence that we’ll be better prepared than most people in the case of an unfortunate economic event. We’ll still likely get rent checks if the stock market crashes. We’ll still get dividend checks if a tenant is late paying for awhile. Of course a bad economy may impact both at the same time, but that’s what an emergency fund is for.

Here we are in an unfortunate economic event. Our stocks went down a lot, but then went back up. Our real estate has held steady. A couple of our tenants continue to pay rent, but one couldn’t and chose to move out before telling us. Overall, the plan keeps rolling along, even during COVID.

While the stock market is doing well, the real economy is terrible. No President wants to see long food lines, six-figure homeland deaths, and an unemployment rate balloon to ~15%. The best answer is a bailout of nearly everyone and everything at a cost of several trillion dollars… and it may go up from there. If only the people in political power believed that an ounce of prevention was worth a pound of cure, the United States would be in a much better situation. To make things worse, he doesn’t acknowledge that the United States had the worst response of any country.

I know some people don’t like politics, but those politics directly lead to more than a hundred thousand deaths, economic disaster, massive job losses, kid homeschooling, and overall loneliness and doom. It’s simple cause-effect and I’d rather not have a repeat in 2021… or worse if we have to wait until 2024 for competency. I don’t like it when the world laughs and pities America for being an unmitigated mess.

Very Close to Passive Income: $5,113

Last month it was $4,997. We are now well into new highs. That would be $61,354 a year of almost completely passive income thrown off investments without ever drawing down on them. We would still have all the underlying assets (property, stocks, etc.) and be able to will these to the kids for them to build on.

This “very close to passive income” has grown from $2,354 in January 2017. It’s worth noting that, once again, these are fudged numbers that aren’t “real” yet (except for that profit-sharing check). Add in stock market growth (of a conservative 4%) and this number could be real, non-fudged $100K/year. I’m especially looking forward to 7 years from now when most of the mortgages on the investment properties (and our primary residence) are paid off. That’s going to be a huge financial swing for us.

Final Passive Income

When you add up “dogs and blogs” to the “very close to passive income” you get:

Passive Income: $7,520.09

Last month it was $6,801.15, so we’re getting back to some growth. All of our passive-ish sources are trending in the right direction now.

This nearly $7500+/mo income is $90K+ a year. That largely hypothetical annual income for writing on a blog, taking care of one dog, and investing feels like a dream. In the long term, $90K would be a lot more income than we’d need. Here’s what our necessary expenses look like… for the next 45 years. Of course, those necessary expenses aren’t everything, but it’s a large percentage of everything.

As 2020 has proven, you never know what bad news is lurking around the corner. This preparation gives us the financial flexibility to fight it.

(This is my favorite picture of the month. I took a lot of pictures, but this one of the best ones I got them jumping. Maybe when you are a 6 and 7 year old, COVID doesn’t ruin ALL the fun.)

None of the numbers here include my wife’s bread-winning pharmacist income, her vested military pension (more passive income), or the freelance work I’ve been doing over the last couple of years (which isn’t passive at all). That’s the fuel that drives the passive income engine – it allows us to invest more and live well.

As always, I’m still hoping to write a book someday. That would add some more passive income. My wife will probably get her book out first. She had an incredibly interesting life until she met me – I am so boring. I may tip my toe into self-publishing sometime next year. I would love to talk to a real publisher, but I don’t want to take on the “job” of writing. That’s probably a deal-breaker. If you know someone who I could talk to contact me.

My favorite thing about the graph below is that it doesn’t dip down too far. It’s been above $6,000 for a while now. I thought that it may be tested with the coronavirus, but it doesn’t look like it will be.

(Once again, the blue line is the monthly number. The red line is a 3-month average which helps smooth the curve.)

Net Worth Update

My net worth updates aren’t very exciting as I don’t share the exact numbers. That’s why it’s just a footnote here.

I truly believe that net worth is one of the most important numbers in personal finance so it is worth sharing in some way. Showing relative growth can be useful, I think.

(Boarding on the beach is a good way to stay safe from COVID and have some fun. Hopefully, next year surfing classes will be back and we can start on that as a family.)

Like most investors in July, our net worth did very well. It was a big jump of 3.57% growth. For the year, our net worth is UP 9.02%. If you didn’t know better you might think 2020 was another boring year and a typical saving and investing plan.

Diversification helps a lot in bad times. Even when the stock market was way down, we were still grounded with our real estate. We can’t control the market, but we can be happy that the amazing river of compound interest has been working well for us over the years.

I feel it’s important to acknowledge that everyone is in a different place in their financial journey. I’ve been blogging about personal finance for 14 years. FIRE wasn’t a “thing” back then, but it’s in the news all the time now. We naturally are further along in that journey than some younger readers who may be more towards the beginning of their journey. If you are one of these readers, I hope you won’t be discouraged by some of the numbers above. I didn’t start many of these graphs until year 11 of blogging (year 13 of early retirement planning). Please try to use it as motivation for what may be possible (depending on your circumstances and market luck) over 10-15 years.

(We really need to get one of these inflatable hot tubs, right? I’m afraid of getting one this late in the season. Seems like it would better to purchase in the spring and use it from March on. It’s worth the $750 and maintenance, right?)

There’s a big wild card in calculating our net worth. Now that my wife’s pension is vested, it’s reasonable to ask whether to include a pension in your net worth. I decided that it does make sense to include it. She could have earned more direct monetary compensation if she didn’t work for the government. That would have boosted all the numbers across the board. Calculating pension value is not easy, but here’s the best way to know what a pension is worth. In the end, it seems my wife’s pension may be worth $2.3 million. However, like most of the money mentioned in this article, this isn’t money we can spend right now.

Because the pension would ridiculously dominate our net worth, I’ll note two separate numbers in my personal spreadsheet. I don’t share the numbers anyway, aside from these hints, so I don’t think it should matter much to you. It’s not like I’m suggesting that you might want to make a financial-based decision on a pension.

I always end this article by asking how your last month went. I know that COVID-19 is making everything difficult. I hope that some of it is getting easier. I’m sure that for many the kids going back to school, in whatever form, represents new challenges and anxieties. Feel free to use the comment space to vent, I try to give a thoughtful reply every comment I get.