Passive Income Update – August 2013

avatar By: IS
Date posted: 08.13.2013 (3:00 am) | Write a Comment  (3 Comments)

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retirement2August… not much exciting is going on right? Actually, I’ve been working on a couple of important posts to be posted in the next few weeks, I continue to make progress. I’m still working on improving the USDP which might require dumping off Intel Corp (INTC)…time will tell.

The reason I post this monthly update is both to keep myself accountable but also have a more public discussion about my plans and how I can become financially independent as quickly as possible.

As time goes by, my objective is to be able to live entirely off of these new income streams but also be able be diversified enough to be ok no matter what happens. In many ways, that is what’s behind my interest in dividend income. For now, I prefer to avoid using actual numbers (might change later on) so what I will do is express all of this data in %. The objective of course is for all of these flows to end up generating 100% of my current income. I also want to gradually make sure that my income producing assets are not all locked away in accounts that will only be available upon retirement. In terms of income, I will be using my gross household income. Counting the bonus would only make things more difficult to track and would not represent how I currently live on my finances.

For example, if my base salary is currently 100K, my objective is to make 100K of passive income on an annual basis. This could be done through a variety of methods which I will be exploring of course. A few people tried to figure out how much capital I have by looking at the USDP size. The main issue is that the USDP is only part of my dividend income. I also get income from my ETF holdings, etc.

My primary objective remains to generate 100K in passive income on an annual basis as soon as possible, ideally from a few different sources. My partner just wrote about how he hopes to retire at age 35 which you can check out.

August Updates

-I posted the latest USDP update, with another one coming later this week
-I also looked into 2 major mistakes that investors do in my opinion… trying to time the market and overlooking the importance of fees.

How Much Do I Really Need?

I am aiming for an income of 100K or so, before taxes as a first goal. To be clear, I feel like I need significantly less than that. Why? I’ve described how I am living off of significantly less right now (I’m paying taxes, paying my house, saving, etc). I also have the option, as discussed of retiring in a foreign location.

Overall, I feel like aiming for the same level of income as I am currently making is very very reasonable and I could easily live with less but why aim lower if I’m confident I can reach that 100K?:)

Why Am I Doing This?

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I’m a strong believer in working with clear objectives but also holding myself accountable so writing about these objectives will without any doubt help me reach financial independence more quickly.

Current Passive Income Flows:

5.54% – Dividend/Investing Portfolio: I am currently generating a dividend yield of about 3.37%. This portfolio will be increasing over time. I use a bucket system which I will be writing more about but the main retirement components are a long term dividend portfolio (see the Ultimate Sustainable Dividend Portfolio) and an ETF portfolio (see BuildYourETFPortfolio for more details on how I build mine). I saw a slight increase here thanks to markets rising and a similar yield.

7.48% – Private Investment In My Online Company: I have discussed how my web company has been the best investment of my life so far. I’m happy to say that I was able to slightly increase my monthly income from the company even though it wasn’t expected. I certainly hope that will keep happening.

Total: 13.02%

It’s not spectacular by any means yet. That being said, I am 32 years old and do have a decent base (I could live with less easily).. I will continue to work on getting that total as close as I can do 100%:)

passive-aug2

Passive Income Ideas

0% – Real Estate: I have started writing about adding real estate to my income flows. One aspect that I love about Real Estate Investing is how much of an inflation hedge it will represent for my portfolio. So I started looking into some aspects such as investing into residential or commercial real estate as well as the question of becoming (or not) a landlord.

0% – P2P Lending – I started exploring the idea and wrote my first post about it here:)

0% – Annuity – No intention of buying an annuity for the time being

0% – Farming – I know it sounds crazy but I’ve started looking into it as you can see from my post a couple of weeks ago

0% – Other ideas – I could end up starting other businesses or projects will I’ll certainly keep you posted about.

What I Am Not/Will Not Include

-Pensions: I do know that the government will be paying me a sum of money once I retire. However, given how poor government finances look like these days, I personally think it’s crazy to count on the government actually fulfilling its promises. It won’t happen. Yes, there will be money, but not anywhere what is currently being promised. Whatever I do end up getting will be a nice surprise.

-I feel like I am being extremely conservative here. By not including my government pension and also not including the fact that lower revenues will mean less taxes to be paid, I’m overestimating the amount of passive income that is truly needed. That is more than fine by me. I’d also like to think that my house will be paid by then making my level of spending lower all things being equal.

My Long Term Passive Income Objectives

January 2014: $12,000/year
January 2018: $25,000/year
January 2023: $50,000/year
January 2030: $100,000/year

I love seeing that little blue line above the red one, it’s a very nice thing to see:) The trend isn’t as convincing but I do expect jumps to occur on year-ends as I receive a bonus from my day job. Hopefully that will happen in a few months:)

passive-aug1

Do you have any questions or comments? I’d love to hear any ideas or how you’ve been managing on your end as well!

 

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3 Comments

  1. Comment by $25000 Dividends — August 13, 2013 @ 8:01 am
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    $100K in annual income seems really high. I wouldn’t know how to spend it all. Do you actually expect to be spending +$8000 per month when retired? Isn’t $2K or 4K enough?

    Just curious to know what your current or anticipated expenses are like.

    Cheers

  2. Comment by IS — August 14, 2013 @ 4:21 am
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    @25K Dividends – Great question but yes I do aim for 100K. I wrote a post to be published next week about it. Thanks for the question!

  3. Comment by Derek - MoneyAhoy.com — August 27, 2013 @ 8:12 am
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    Looks like you’re on the right track – keep up the good work! Any reason why you’re not including any growth stocks in your planning?

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