passive income Archives - Lazy Man and Money

The Passive Income Pyramid

June 3, 2019 by Lazy Man 3 Comments

Passive income is difficult to come by. Sure we’d all like money for doing nothing, but that’s hardly sustainable. Some have argued that passive income doesn’t really exist. We’ll have to save that question for another day. Today, I want to talk about income that is “passive-ish.”

Every month, I write an article about our five income streams. I focus on the four that are “passive-ish.” Here is one visual representation of those income streams:

This is my passive income pyramid. The income stream at the bottom is not passive at all. As you move up the pyramid the income streams take less and less work.

Navigating the Passive Income Pyramid

Let’s work our way down from the top:

1. Investment Income (Passive Income – 100%)

This is any interest or dividend income that you earn from various investment securities: Stocks, Bonds, CDs, REITs, etc. Look for this income in your brokerage or bank account. You typically don’t need to do any work other than the initial purchase of the investment.

The big downside to this type of income is that you have to earned the money before you can invest it. If you are a fan of the 4% “rule” a million dollars will likely provide you with $40,000 of passive income for a reasonably long pyramid of time.

2. Real Estate (Estimated Passive Income – 80-95%)

Being a landlord is clearly a job. However, it’s often just a few days of the year. There’s work in changing tenants and when appliances break down. The rest of the time, you can mostly cash rent checks.

Like the investment income above, you have to earn the money before you can invest it. However, due to leverage, you may only need 20% (or less) of the money to start with.

Note: I used a range of estimated passive income as a property manager can take the work out of being a landlord.

3. Dog Sitting (Estimated Passive Income – 70%)

Dog sitting is clearly work too. However, it’s work that my kids can do or at least help with. I’ve made over $50,000 dog sitting on Rover. (Read my review here)

There are some downsides with dog sitting. It doesn’t pay a lot. Some people don’t like dogs. It’s much easier to do if you work from home. It helps to have a house with a yard. You give up flexibility of travel or going out.

However, I can make some money while I’m doing a different job, watching Netflix, or even running some quick errands.

4. Blogging (Estimated Passive Income – 50%)

Blogging for dollars is a lot of work. Most people don’t make anything. I think I was lucky that I got started a long time ago. With around 2500 articles over 13 years, this website brings in some solid passive income. I have had some months where I was away on vacation and there was still a decent base income.

The downside is that it takes a lifetime to write all the content. You also have to promote the content which means being active on social media. It took me approximately 2 hours to make the above graphic as I struggled trying to figure out how to edit EPS vector graphics files in LibreDraw. I finally gave up and used a regular graphic editor, which still took more time than you would imagined.

5. Career / Job (Estimated Passive Income – 0%)

This is straight up work. You put in the hours and are paid accordingly. You don’t work, you don’t get paid (with the exception of standard vacation time.)

You could reasonably argue that this doesn’t belong on the passive income pyramid at all. I decided to include it as a comparison for everything. Also, it’s likely the main source of income of people reading this.

My main motivation for creating this pyramid was to highlight the “passive-ish” levels above this. These levels form what I call “alternative income.”

What is Alternative Income?

I’ve been writing about alternative income streams for years. Other than my alternative income report, I don’t write about them too often, because they are hard to come by.

While these four are our alternative income sources, you might have another source. Maybe you wrote a book (even an ebook) that sells 100 copies a month. Maybe your first 4 mambos didn’t pay off, but you Lou Bega’d some big music royalties on the 5th try. Maybe you developed an eCourse and people pay to learn that skill. Maybe you own a bunch of vending machines and collect many quarters every month.

Where do all those fit on the Passive Income Pyramid? I’ll leave that as an exercise for you. I’d put Bega’s towards the top and the vending machines towards the bottom.

While I happen to have to have more of these alternative income streams than most, quantity doesn’t beat quality. There are many people with a huge amount of investment income that can live a 100% passive income lifestyle. My wife’s military pension will fall into that category as well. Some have real estate empires that they’d automated well. To live a passive income lifestyle, you don’t necessarily have to have a lot of alternative income streams, just one really good one.

Can you think of some more alternative income sources that could fit on our pyramid? Let me know in the comments.

Grow That Dividend Snowball!

August 5, 2015 by Lazy Man 3 Comments

I read a great article from Retire By 40 across my reader today. I think you’ll love it as much as I did. I wanted to do a little more than just share it over Twitter where it can slip away.

Joe Udo writes about building his dividend snowball. It starts with an explanation of Dave Ramsey’s debt snowball which coaches people to eliminate their debts by starting small and building momentum.

As Udo points out, the same theory applies in the other direction.

If you want to create a passive income, you have to start somewhere. So start investing in dividend producing stocks. Keep saving money and putting money into them so that the dividends grow to replace your bills. Start with small bills. For example, I’d probably start with my Amazon Prime bill. The annual $99 price comes out to be $8.25 a month. If you had $3,300 in a dividend stock that pays 3% a year, you’d have free Amazon Prime.

It might not sound like a great idea to put $3,300 aside for Amazon Prime, but if you think of it as something that is more critical, such as electric bill, it seems a little better. It also also worth noting that stocks tend to appreciate, so even if you start with $1000 now, it will likely grow over time to pass that $3,300 number. That’s the power of the compound interest and a dividend snow ball.

I’ve been saying a similar thing for years, but I think Udo articulated the process here better than I have.

I’m a big fan of cash flow creating financial freedom rather than the typical case of building a huge nest egg and drawing it down in retirement. It’s hard to focus on having $2 million in retirement accounts. It’s easier to say, “Hey, my cash flow covers my utilities now… COOL!”

Dividends aren’t the only way to create this cash flow goal. As I write in my annual “What Does an Annual $200,000 in Retirement Income Look Like?” article, I’m taking a number of paths. In fact, I haven’t thought much about dividends. As far as stock market equities go, I’ve been focused on investing in big index funds.

However, we also have rental properties. They are bit of a headache now, but over time, they could provide some very good passive income (we may have to hire a property manager to make that work).

There’s also Lending Club, which seems to yield more than 7% in my years of investing with them. That’s much better than most companies’ dividends. That also means it reinvests and grows a lot faster too.

Finally, I’m starting to get into the dog sitting business with DogVacay.com. While it isn’t exactly passive income, I’m walking our own dog anyway. I’m picking up my dog’s poop in the backyard. It isn’t too much work to have a second visiting dog. In fact, it might be less work as it gives my dog entertainment. This is just something getting off the ground in the next month, so I’ll report more about it after some practice. My hope is that it brings in a few hundred dollars per month. That pays a lot of utility bills… maybe even a car payment.

If we can save it and invest it, we’ll just be growing that dividend snowfall that much faster.

Alternative Income Streams – May 2009

May 8, 2009 by Lazy Man 5 Comments

I’m a little late with my alternative income for last month. I tell myself it’s because I’ve been busy, but more likely it’s that the numbers are down. After taxes, I cleared $1,411.34. That’s still a good number and pays for a large amount of my necessary expenses (i.e. rent, food, insurance, utilities, etc.), so I’m taking a Stuart Smalley approach. Even though it’s down around $500 from previous months.

It’s not surprising to me that the number is down. I could throw out the easy excuse that it’s the economy… I even believe that to some degree. I’ve been focusing my efforts on my a full-time job (a contract job that pays over six figures) and training a new puppy. I usually hate trading time for money… it doesn’t scale in the way I want it to if I’m going to achieve financial in a few years. However, if I can leverage the money from my full-time job to other profitable enterprises, it’s a move I have to make… especially in this economy where cash is king.

This month isn’t shaping up to be much better, but I’ve made a few connections at Finovate that may pay off down the line.

The Best Money Blog You Aren’t Reading

August 1, 2011 by Lazy Man 23 Comments

I’m even Lazier than usual today. Rather than write some article that blows, I’m going to introduce you to a site that I know you’ll love: The Smart Passive Income Blog. Why will you love it? Because it’s what I wanted Lazy Man and Money to be when I started it. Somewhere along the line, I got lost and never got there.

Pat Flynn (who doesn’t know I’m writing this) writes about how he makes passive income. Each month, he gives the details on how much he made (just as I do). He also breaks down the sources of his income (something I don’t do). The majority of his passive income comes from an eBook he sells at In The Leed.com. I don’t know what the LEED is, but that’s really not the point. He’s created a product and does well with it.

Smart Passive Income has become daily reading for me. Each article is, well, smart. There are a lot of sites that give out general information – stuff like “Save Money, Spend Less than You Earn, etc…” Smart Passive Income isn’t one of those sites. It’s got specific, actionable information. You read about Pat’s experiment making money with eHow. You read about the process of how he started his own company. He’s got a great site design and does something that I haven’t been willing to do – put his name and face out there.

I could continue gushing over his site, but I should mention that it’s not perfect. I noticed a couple of months ago Pat put up a picture of himself in an LaDainian Tomlinson shirt. When you bleed Patriot Nation blood as I do, that’s simply inexcusable ;-).