Happy March everyone! I’m getting excited for the weather to get better. It’s still too cold for me up here in New England. At least the days are getting longer. I recently gave an an update here about little stuff going on in our life. I’ve been a little down lately, but can you tell that I’m trying to be more upbeat?

We started February by watching Punxsutawney Phil’s Groundhog Day routine. I took a picture of the kids with my laptop, but I couldn’t figure out why until just now. It worked out well that it happened before school. It looked like they had a good party going on down there. Maybe one day we’ll go in person.

We went into Providence to do some ice bumper boats. It’s like bumper cars, but you do on ice. It’s expensive, but it’s become a tradition now. We also use it as an excuse to get up to Providence to do some other things that we wouldn’t normally do down in Newport.

(Here’s what the ice bumper boats look like.)

I started co-teaching Lego Robotics with another parent for my younger kids’ class. It’s a bunch of 2nd and 3rd graders meeting at 5:30PM. At that point, they are barely evolved Gremlins, but we’ve managed to learn something. Perhaps more importantly, they kids are having fun. The high school class is there at the same time and they’ve built some very impressive things, which is always entertaining. The group got a grant or somehow bought a $100,000 Boston Dynamics dog (Spot), but we didn’t play with that until March, so you’ll have to come back next month to see it.

My wife and I also celebrated Valentine’s Day at the Officer’s Club on the base. We were married there almost 16 years ago. We first went that dinner 16 years ago, because they wanted us to see what a function was like before getting married there. We’ve been trying to go whenever they have offered it. It’s a little like an anniversary of sorts.

We finally got a little snow, just a few inches – enough for the kids to get some sledding in. It was fun for about the first 45 minutes and then they proceeded to try to kill each other. This happens a lot.

Let’s start the new and improved Passive Income report. I’ve streamlined this a bit, so hopefully, it will be a faster, easier read. I’ll try to continue to trim it down through the year.

I used to call it alternative income, but that idea didn’t catch on as it did when I used it back in 2008. Everyone loves “passive income” better. If you are a new reader, you’re going to want to refer to my Alternative Income FAQ as you may have some questions about the math that I’m going to use in this post.

The way I calculate these numbers requires that little explanation – it isn’t intuitive. I do things a little differently to show the journey. For example, we don’t have much real passive income from our rental properties. We still have mortgages to pay off. Instead, I calculate the percentage of equity we have to show where we are on that journey. Over time, the bank owns less of the properties, and we own more of them. There will be no mortgages when this number gets to 100%, and all that rental income can be used for living expenses.

When calculating the percentage of rental income, I take the rent (minus estimated expenses) and apply it to the portion of equity we own. Think of it like you and a friend owning a property 50/50. This would be how you’d handle it, with each of you splitting the profits at the end 50/50. If your friend is the bank and it owns 80%, you should only count on 20% of that net rental income. We used to be in that 20% range, but now it’s closer to 75%.

Lazy Man’s Passive Income

I categorize our passive income into three primary sources that are represented mainly in my passive income pyramid. For this report, I ignore the bottom section, “career/job,” – that’s not passive at all. (I 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 my “somewhat active” income. They are a little passive because I can make money even when I’m not immediately tending to them. I can do other money-making activities while I board dogs. When I’m on vacation, some blog money still comes in. I combine real estate and investment income as their separate main sources of very passive income. This way, if you want only to count those, you can do that.

New for this year, my passive income is only going to be 50% of blogging and dog-sitting income, 80% of real estate, and 100% of dividend income. That rewards types of income that are truly passive and punishes my quasi-passive sources like blogging.

1. Blogging + Dog Sitting Income

February is often a good month for dog sitting. A lot of schools have a February vacation. Our kids’ private school is unusual because they have a March vacation. That means that I’m around for when everyone else goes on vacation – which works out very well. My dog boarding income was 75% more than February of 2022, so that’s fantastic!

(I like when the dogs run like this, because they come back in and sleep for a few hours. That’s the easy money!)

Blogging income continues to go downhill. You may have noticed, but I haven’t been motivated to write a lot lately.

In January, “dogs and blogs” combined for $2,226.37. In February, it was:

Total Blogging + Dog Sitting Income: $5,521.50

That’s a really good number, but I needed it. January is typically bad. We’re going on vacation in March, which means limited dog boarding. Things will hopefully pick back up in April.

My kids help with the dog sitting. My 10-year-old is extremely good with dogs at this point. He can feed them, let them out, and play with them in the yard. He’s spending more time in front of the clients as a helper at pick-ups and drop-offs. My 9-year-old was a little slower to develop dog skills, but he’s carved out a household niche catering to the smaller dogs – he just loves them.

Their help means I can pay them a legitimately earned income (a 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. Here’s why kids should start a Roth IRA as soon as possible.

2. Rental Property Income

Rental property income is very boring lately. When mortgage rates are high, we don’t see any gains in pricing. So we continue to build equity by paying own the mortgages. It’s slow going.

Unfortunately, one of our properties has had a few problems lately. I guess the boiler was never properly vented and that’s creating an issue that requires repiping a bunch of stuff. I think it might be better to just sell the properties and invest in the market. We’ll have to run the numbers and see what kind of return we’re getting from rents. We haven’t raised our rents in a long time and they are way under market value. Why deal with headaches and stress if we can make the same money more passively?

(It’s always fun to look at my kids’ homework. He didn’t get too far with regrouping/borrowing here, but it worked out in the end.)

In the last month, we went from 75.76% to 76.05% ownership of the equity in our properties. It’s a very tiny change from month to month. In a year, we might only get 3% more equity. If we owned both of our rental properties with no mortgages (100% of the equity), we’d make about $2,200 a month after insurance, property taxes, condo fees, and estimated condo maintenance.

If you multiply our rents of $2,200 by the amount of equity we have, 76.05%, you get $1,673/mo. in estimated passive income. Last month it was $1,667/mo. This $6 in passive income isn’t going to do too much, but it adds up over time.

When I started tracking rental property income this way (January 2017), we only owned 36.4% of the properties, and the properties had lower rents. The math worked out to $1,174 of passive income back then. In six years, it grew a ton. We sold our biggest rental property last year and invested that money in the stock market. It’s much more passive now. That was a strong driver as to why I started to count certain passive income sources as less valuable than others in this report.

When we get to 100% ownership of the two properties, they should bring about $25,000 after expenses. Rent is inflation resistant as it’ll rise over time. That means that even though this is $25,000 in today’s dollars, it will still have that buying power in the future.

Total Rental Property Income: $1,673

3. Dividend Income

For this section, I look at our stock market investments. I assume we could earn a 2.5% dividend yield on those investments. That assumption is a conservative number that helps us think about what kind of cash we can expect. It should be easy to get that 2.5% number as we could simply put all of our portfolios in a high-dividend ETF. For example, the high-yield ETF, HDV, is currently paying a 3.52% yield.

With today’s interest rates, a 2.5% yield seems ridiculously low. I need to remember that interest rates could go back to where they were a year ago.

(I guess the kids are still young enough to enjoy a fun game of box! They ended up cutting this one into a house with a door they could call through. It was an access tunnel into a kids’ room for a few days.)

Most bloggers use the actual dividends they earned that month. I have quite a few accounts, and I’m too Lazy to add up the dividends on them. Even if we aren’t getting the 2.5% number now, we could always move the money around from growth to dividends if we needed to live off the cash flow. A vast majority of our money is in retirement accounts, so cash flow isn’t important to us now. I also combine all the taxable and retirement account numbers. It’s too much work to separate them out.

We continue to get a profit-sharing check since I bought (a lot of) a company. The company is doing well, and they occasionally throw an extra profit-sharing check to me. The investment income from this is essentially the same as dividend income. It is taxed differently, but for this report, it makes sense to group all stock ownership in this bucket.

The markets moved down a bit, so this is going to go down too. Oh well, at least it generally moves up.

With the market recovery, our dividend-ish income grew quite a bit:

Total Dividend-ish Income: $3,960

Last month it was $4,031. That’s a loss of $71. So much for last month’s gain of over $180. It’s two steps forward and one step back.

In January 2017, the dividend income was at $1,180/mo. We’re almost at $50,000 a year – enough for us to live fairly well, especially if we paid off our mortgage. For the 35th month in a row (?), we’re looking into estate planning, but they gave us a lot of paperwork to do before we can move forward. I’m still not making any progress on this. For the first time in about 15 months, I got to a point where I thought I might be able to get the paperwork back out. One of my main goals for the year is to work on this, so hopefully, it won’t just become another wish.

Adjusted Passive Income

I used to combine real estate and dividend income into “very close to passive income.” However, now I’ll simply add up the 50% dogs/blogs, 80% real estate, and 100% dividend income. This makes things a lot easier.

Dog/Blogs: $5,521.50 – Adjusted to $2,760.75
Rentals: $1,673 – Adjusted to $1,338.40
Dividends: $3,960 – Remains at $3,960

Dogs/Blogs Blue Line
Rental – Red Line
Dividend – Yellow Line

Total Adjusted Passive Income: $8,059.15

Last month it was $6,477.79. So you can see that even if I count dogs/blogs at 50% that’s the main difference here. The rental and dividend stuff didn’t move too much.

Annually, this $8k-ish number is about $96,000 of passive income. As you’ll see in the chart below our 3-month average of this number is almost always in the $8-9k range. So I guess it’s reasonable to call it $100k a year.

It’s very useful to have different income streams. As blogging income becomes more difficult, dog boarding income has grown to supplement it. For a long time, real estate didn’t grow much at all; then, in the last couple of years, it grew a ton. The stock market grew for more than a decade from 2010 to 2021 but had a little setback last year. When something goes down, it seems another thing jumps up and over time we are making consistent progress.

The chance of all the income streams falling on hard times is low, but certainly not impossible. If we had another event like the Great Recession in 2008, they’d all be impacted quite a bit. In that case, we’d have to rely more on active income (the other 50% of our dogs/blogs, 20% of rental income, and other jobs) or rely on savings for a while. Also, dog boarding went away completely with COVID, so something like that can be just around the corner.

(The Valentine’s Day dinner was $85 (including a bottle of wine), which is a very, very nice for a date night.)

It’s also important to remember that these numbers aren’t “real” because much of the money isn’t liquid. We can’t spend those retirement investments without penalties. We can’t access the equity we have in properties without selling them or opening a HELOC. There are some money moves around these, but it’s not worth making any of them until my wife retires.

You’d think we’d feel “rich” having won the money game. We don’t. Our social circle tends to have generationally rich people. However, we are “rich” relative to many people’s circumstances. Money is relative. It’s nice not to have to worry about emergency bills and make reasonable splurges.

(The blue line represents the total adjusted passive income. The Red Line represents the three-month average.)

The three-month average in February 2021 was $5,678.80. In February 2022, it was $7,381.33. Now in February of 2023, it is $8,109.95. I think we can grow it more in 2023, but we shut down for renovations for half of January and lost some dog income. This helps me feel a little better about losing the blog income.

I don’t know how long dog boarding will last. It was a lot of work last year. This year has been easier with the lighter schedule. I think that with dog boarding, either the market will change or I’ll change. Perhaps I’ll want to travel more. Perhaps, I’ll want a different challenge. I’m on my third career (software engineering, blogging, and dog boarding), so it would be naive of me to think it might be my last.

None of the numbers here include my wife’s bread-winning day job as a pharmacist or the minor freelance work I’ve been doing over the last few years – neither is passive at all. When my wife retires, we can count her vested military pension as more passive income. It looks like it might be worth around $68,500 and includes access to a good health care plan. A pension is like a passive income cheat code. They are so rare nowadays.

For now, this active income (including the dog boarding) is the fuel that drives the passive income engine – it allows us to live well, get our kids a top education at a privaet school, pay off our mortgages, and invest. My income doesn’t match my wife’s, but the flexibility gives me the time to stretch almost every dollar in much of our spending. It also allows me the flexibility to bring the kids to school and to after-school activities.

Net Worth Update

My net worth updates aren’t fascinating as I don’t share the exact numbers. That’s why it’s just a footnote, not its own article.

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

(Finally, the proof of sledding. Good free fun if you already own a couple of sleds as we do.)

This past month, our net worth was down 1.25%. For the year it’s up 1.81%. We’re getting close to our all-time highs. That’s great, considering that the markets are still off their highs by nearly 10%. I feel like I can truly say that we’re in the best money situation we’ve ever been in. I know a lot of people can’t say the same – inflation and the down market can be difficult.

There’s a big wild card in calculating our net worth. Now that my wife’s military pension is vested, it’s reasonable to ask whether we should include it in our net worth. If the U.S. government didn’t back it like treasuries or FDIC, I may feel I should account for some uncertainty. I decided that it does make sense to include it. She could have earned a larger immediate salary 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.

It’s important to recognize that everyone is in a different place in their financial journey. I’ve been blogging about personal finance for 16 years. FIRE wasn’t a “thing” back in 2006, but that’s been my goal since the first sentence of this blog.

We naturally are further along in that journey than some younger readers who may be just starting. Many of those readers are saddled with huge student loans that we didn’t have to deal with. 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 10 of blogging and early retirement planning. Please try to use it as motivation for what may be possible (depending on your circumstances and market luck) over 15-20 years.

How was your month? Let me know in the comments.

We’re into August, so July is in the rearview mirror. This means that I can review all the July numbers. The short update is that the numbers were amazing because I sat every dog in the world… and the blogging income wasn’t bad either. We’ll get to the details in that in a little bit. Let’s start with a life update.

Usually, life updates in this space are all positive. That’s because I go through my phone’s pictures over the last month and it reminds me of the fun times when I took pictures. Usually, when bad things are happening, I don’t stop to take pictures of them. However, sometimes there are exceptions, so let’s get that out of them out of the way.

When we didn’t the million dollar email we were expecting, my wife took it hard. Actually, it wasn’t as hard as in the past, but as the president of a large organization, she had to console dozens and dozens of people along with a bunch of other related activities. That wasn’t a fun part of the month. Around the same time, my mother shared with me an obituary of an old “friend” from high school. I put “friend” in quotes because he was in a circle of friends with me, but we didn’t get along that well. I’m debating about writing an article about it.

Now that I’ve got the bad news stuff behind me let’s get to the fun stuff. This last July we:

• We celebrated the Fourth of July with some friends.
• We went on a vacation to Hershey Park in Pennsylvania. We’ve done this a few times and it can be a frugal vacation, especially because it is a drive for us. However, we stayed at the deluxe hotel and did some fancy experiences so it cost a little more.
• We stayed at the Cartoon Network Hotel in Lancaster Pennsylvania. My kids love Cartoon Network shows, so this was a great trip. For a converted motel, the Cartoon Network Hotel isn’t half bad. You have to set your expectation that it is a motel and not a hotel.
• We went to a local topiary garden as they had an art exhibit of giant bugs in addition to their typical animals made from bushes.

Gumball and Darwin at the Cartoon Network Hotel. Parents, if you have to watch a kid show, the Amazing World of Gumball is an extremely good choice.

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 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 – June 2021

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

I continue to see growth in the dog sitting business. That’s what happens when everyone gets vaccines and goes on vacation after getting a pandemic dog. In April it grew 447%, which was really just acknowledging how small the dog sitting business was. In May, it grew another 27%, which was about the most we ever made in a month. In June it grew 65% from May’s numbers. Eclipsing record earnings by 65% was simply amazing. In July, it grew 49%. So that’s building records on top of records.

Some of that growth is simply due to hosting more dogs. However, I also raised prices around 20% to be more in-line with the market. It’s easier to play Lemonade Stand when it’s just a game on your computer. It’s difficult when your emotions for a dog and a regular client come into play.

In any event, more dogs at higher rates lead to more dog sitting income.

This wasn’t my idea, but I remember sparklers being popular when I was a kid. No one was hurt.

In the past, I have written that dog sitting is passive-ish income, which is why it is on this report. However, to do the kind of numbers that we did in June, it was very, very active. That month was child’s play compared to this month. Some of the activity was managing the dogs themselves, but a lot of it is managing the dog owners. We had a lot of Meet and Greets which take a lot of time and coordination of schedules. They are necessary and useful for all parties. In the ideal dog-sitting situation, we’d have 3 dogs who are all repeat customers each day. They’d be long stays with few dog pick-ups and drop-offs. We don’t usually get that, especially because tourism is high in the Newport, RI area.

Dog sitting should go back to being more passive in the fall when kids go back to school and families travel less. Beach town tourism disappears in the wintertime as you might imagine.

Blogging income was beyond expectations as well. A couple of the advertisements that were ordered in June were executed in July. That’s great for July, but some of the advertisements in July didn’t get paid yet. I’ll push those to August. August is already looking like another great income month with plenty of dogs and blog income.

In June, dogs and blogs combined for a total of $4,334.71. In July, it was:

Total Blogging + Dog Sitting Income: $7,148.45

We hit another record for the year.

With the pandemic and no dog-sitting income, I didn’t think I’d make my goals this year, but it is looking like I might pass them now.

With dog-sitting back, 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, but it’s more of a work in progress. 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. During school, they have too much to keep them busy. I thought we might make progress this summer, but their camps and our vacations are keeping them busy.

(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

For one month, Zillow’s estimates on the property values stayed more or less the same. That’s significant because some properties rose 20% last month. It’s time for real estate to take a break.

This month we went from 70.08% to 70.59% ownership of the equity in our properties. It was a very small gain as Zillow raised the Zestimate a bit of one property. Some of the gain is simply paying down the mortgages. We are only a few years away from getting real profits from the rental properties.

I love Milton Hershey’s famous quote about happiness.

If we owned the rental properties with no mortgages (100% of the equity), I calculate that, after insurance, property taxes, condo fees, and estimated condo maintenance we’d make about $3,400 a month. That number represents our net gain.

If you multiply our expected net rent $3,400 by the amount of equity we have (i.e. where we are on our journey to 100% equity ownership), 70.59%, you get $2,400 in estimated monthly passive income. When I started tracking this (January, 2017), we only owned 36.4% of the properties and the properties had lower rents. The math worked out to $1,174 back then. So in a little more than 4 years, we’ve seen that number double. That’s the power of 15-year mortgages.

In about 5 years from now, 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 rents as costs of living go up), we don’t have to factor in inflation like other investments. So we can think of it as around $40,000/yr. of income in today’s dollars buying the same value 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 $2,383.

Total Rental Property Income: $2400

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 ideas here. We can also look at making passive income with Dividend Kings. If we 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.)

Big bugs and animal bushes (not pictured)

The markets seemed to hover around highs. We lost some money in some places, but made money in other places. Overall we made minor investment gains. Like with the real estate markets it makes sense for things to take a pause. I think it’s good for the markets to take a pause. When everything goes up several percent each month it makes me worried that there’s a bubble.

We continue to get a profit-sharing check since I bought (a lot of) a company. The business was almost ideally positioned in this pandemic 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: $3,821

Last month, it was $3,808. This dividend-estimated number hasn’t historically moved that much from month to month, so this is a good return back to those times. When I started tracking this number in 2017 we were at $1,180/mo. Our money is really working hard to multiply, especially because we aren’t investing much, but instead focusing on saving money for my wife to retire.

This is the pool at Hotel Hershey. Who needs an amusement park?

Annualized, this monthly $3,821 is $45,846. 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 probably let this investment continue to compound for another 14 years until we are age 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. I need to see an estate planning lawyer and possibly some other tax and financial professionals soon.

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 I may write a book someday. This is important to separate from the dogs and blogs income at the beginning that definitely takes some more work.

The stock and real estate markets just keep going up and up even if it was just a little this month.

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 a while. Of course a bad economy may impact both at the same time, but that’s what an emergency fund is for.

Me and one of the kids make a chocolate bar. It was expensive ($25+ per bar), but a good experience. The other kid chose a different experience with mom. I know I need to lose the white socks with the shoes.

Last month I said that I was losing confidence in the recovery. There are still too many people who haven’t gotten the vaccine. The Delta variant is causing cases to rise quite a bit. I tell my kids that COVID last year was like Charmander, but this Delta variant looks like Charizard. (Pokemon evolutions seemed like a natural analogy.) They understand the good news in that we have vaccines to battle it now. Fortunately, in Rhode Island are highly vaccinated. My kids are too young to get the vaccine, so we just have to be careful if they are indoors with strangers. This month we found out that it is even worse than we thought. Even though we are vaccinated we could get COVID and pass it on to our kids. That’s a pretty bad thought.

Very Close to Passive Income: $6,220

Last month it was $6,191. The $6,220 is another all-time high. The small gains aren’t impressive, but slow and steady wins the race.

This would be almost $75,000 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), because the money isn’t liquid. We have gained almost $4,000/mo. in passive-ish income in a little more than 4 years. I used to wonder if we can get to $8,000/mo. in passive income by the start of 2025. A year ago, it was a stretch goal… now it feels like a certainty.

Final Passive Income

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

Passive Income: $13,369.45

Last month it was $10,525.71. That’s a huge jump and an all-time high. I spent the last year thinking that I’d hit new lows. With most of the money coming from passive-ish income that seems to consistently grow, the difference is what I can earn from dogs and blogs. This summer dog season is always big, but never this big. It’s great for blog income to come back at the same time.

I had set a goal at the start of the year for this to average $8,000 for the year, but I honestly didn’t think it was possible. Dogs and blogs were not performing at the start of the year. However, it’s over $9,000 on average now, so we just have to keep things going through the leaner winter months.

The Newport Officer’s Club has a great view of the Pell Bridge. We get at least one picture every year.

This ~$13,000+/mo income is more than $160,000 a year. That (hypothetical) annual income for writing on a blog, taking care of dogs, and investing is very nice. However, this amount of dog care isn’t something that I want to continue over the longer term. If we could manage 100K from all these sources we’d be doing quite well – 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 the last 16 months have proven, you never know what bad news is lurking around the corner. This preparation gives us the financial flexibility to fight it.

On the way to Hershey, we stopped at Harold and Kumar’s favorite place.

None of the numbers here include my wife’s day job of bread-winning pharmacist income, her vested military pension (more passive income when she retires), or the freelance work I’ve been doing over the last few 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 the flexibility gives me the time to stretch almost every dollar in almost all our spending. It also gives me the flexibility to bring the kids to a bunch of events.

I love two things about the graph below. First, there’s a solid trend of the numbers staying high for several months now. Second, it doesn’t dip down too far. It’s been above $6,000 for a while now. It seems safe to say that $7,000 or $7,500 should be considered the new floor.

(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.

July was a boring number for our net worth. We saw it jump 0.52%. For the year overall, our net worth is up 24.26%. That’s usually the best we do in any year.

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 we should include it in our net worth. I decided that it does make sense to include it. She could have earned more in immediate salary 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 ~$2.4 million. However, like most of the money mentioned in this article, this isn’t money we can spend right now.

How was your July? Let me know in the comments.

It’s a little before the middle of the month, so it’s time to review November’s passive income. I usually do all the math on the 5th of the month so that tenant checks have been cashed and our mortgage payments are paid.

Before we get to the financial stuff, here’s a little life update.

It’s been a slow blogging week (or more) for me. The realization that Christmas isn’t really happening combined with unending rain hasn’t put me in the best of moods. Even my 8-year-old said, “What’s the point of decorating for Christmas if no one is going to see it?”

I’ll get into December next month. This article is about November. The big memory I have is about Thanksgiving. We were planning to have one family over as the guidelines allowed. During the week of planning, the governor’s message got mixed to the point that the two days before, I felt like we need to call it off. My wife (who has been running some of the COVID response for the state) politely overruled me (she’s the most tactful person I know) and we did have Thanksgiving with the other family. I was too nervous about everything to really enjoy it.

November is also usually a time for Black Friday shopping. I love finding deals online. This year, I didn’t find much that we needed. I didn’t end up doing much shopping at all. Most personal finance blogs would applaud this, but this is a year where a few good material things may lift our spirits for a while. We have the money for those things because we’ve saved on travel and restaurants.

On the bright side, the kids completed another month of in-person learning without much incident at the school. The school sent home a few grades in the pod for a day or two while close contacts instances are tested. So far we’ve only missed one day for one kid. It’s a big highlight to have the kids in school. It feels so important for my 6-year-old who is just starting to explode in his reading abilities.

We also spent much of the month cleaning out the new rental property and getting it ready for move-in. One of the pictures below is of the kids getting ready to help out. We paid them minimum wage for two hours of work and I threw in a pack of Pokemon cards and a dessert that they like. The kids loved the 2-bedroom place, so I made sure to get a video of them explaining all their hopes and dreams of living in it together. We’ll see if they still feel the same way 15 years from now.

I have fewer pictures to share this month. It’s been that kind of month. What I do have to share though is uplifting, so we do have that.

My 8-year-old found this at a yard sale. It was 25 cents well spent. I liked the message of recycling trash into art.

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 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 – October 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

November was a very bad month for blogging income. I don’t remember it ever being so bad, but that’s been the way that blogging business has gone for the last decade or so. I expected better because it included a big shopping season which is usually when I can make some extra money referring products. I didn’t see too many deals worth referring though.

Additionally, COVID has killed the need for dog sitting this year. I think this is going to be down until next 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.

In October, dogs and blogs combined for a total of $1767.85. In November, it was:

Total Blogging + Dog Sitting Income: $1,021.93

While it is depressing to see the number continue down, I have to remember that a lot of it is still COVID. I should be able to make double that. Also, for the number of hours worked, that hourly rate is very, very good. I have some ideas on how I can improve each area, but I’m focusing on getting more done around the house. I can see the direct improvements and that is more uplifting than hoping the extra blogging work turns into something.

My 6-year spent a day and a half building a Nintendo Labo for the Switch over the Thanksgiving break. Once you build your robot, you get to be one in a video game smashing things with your feet and punching your arms. It’s an amazing toy, but it seems hard to find now.

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 6-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. We’ll see what happens during the winter break.

(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 closed on the condo in November. We spent some time cleaning it up and it looks like it is ready to rent. We had hoped to get it rented for December 1st, but it looks like it will be January.

In this picture the kids are dancing more than cleaning, but actual cleaning happened, I swear.

As for November’s numbers, Zillow’s estimates of our properties were a little down. We paid down some of the mortgages. In the end, it was mostly a wash. That’s the third straight month that we haven’t had gains here. We’ve gained around $50K in equity this year, so this pause is fine. I expect that early next year, we’ll continue to grow equity by paying down the mortgages and hopefully seeing some growth in the value of the properties.

This month we went from 60.64% to 60.71% of the equity in our properties. Again, it wasn’t much, but we’ll take it. 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. I recently updated this with the new property and it looks like we’ll be at $3,387.50 – a minor difference.

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) 60.71% you get $2,056 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 $882/mo. That’s good passive growth in almost 4 years.

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 $2,054.

Total Rental Property Income: $2,056

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 kids are reading a Pokemon Sword and Shield guide book that I found on sale. It’s hardcover and around 300 pages, but they’ll still spend an hour or two looking up stuff.

On the last snapshot, November, the market was doing great – it’s just been a big bull market. Our portfolio is at an all-time high. We’ll see if investments can continue to grow. Last month I wrote, “with COVID cases continuing to rise, there may be another shutdown in the future.” We’ve seen California shut down and my state of Rhode Island is “on pause.” It was supposed to be 2 weeks, but it’s extended to 3 now. 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 pandemic 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: $3,323

Last month, it was $3,143. 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 fairly extreme.

Annualized, this monthly $3,323 is $39,871. 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 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.

Towards the end of the month, the kids helped decorate our Christmas tree with ornaments from over the years.

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.

Here we are in month 9 of an 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: $5,379

Last month it was $5,197. The $5,379 extends our all-time high.

This would be ~$62,000 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 to the kids for them to build on – unless we choose to draw them down for more fun, charity, or other spending.

This is a sample of my 6-year-old’s homework. Everything he does with school work is like this. He’ll change the problem to something else and solve that instead. It makes me laugh. Fortunately, he does the problems correctly, so I know he gets the concept. I’m jealous of his creativity.

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 $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: $6,400.93

Last month it was $6,964.85. 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 nearly ~$6400+/mo income is ~$76K+ 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, $76K 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 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. 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 November, our net worth did extremely well. We saw it jump by 3.95%. For the year overall, our net worth is up 21.65%. 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 21.65% in a year might be above average. With the Rule of 72, we’d double our net worth in a little more than 3.33 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 14 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.