Passive Income Update – January 2014

avatar By: IS
Date posted: 01.23.2014 (3:00 am) | Write a Comment  (6 Comments)

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retire_22The start of a new year is always a great time to think about the longer term stuff and while I know my retirement is several decades away, I’m hoping to become financially independent much earlier than that. It’s also encouraging to reach a new year as I get my once-a-year performance bonus in December which always gives a boost to these accounts.

Do you have long term financial objectives? Are you tracking those on a monthly or yearly basis?

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.

With both sides of the US government acting like complete fools these days, more than ever I feel like being financially independent is critical, don’t you? So here is how I went about this whole process:

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.

January Updates

-The latest update of the USDP was published last week
-I did end up getting a good bonus at year-end which mostly went towards my investing portfolio so there is a nice increase in the passive income of that portfolio.

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. I discussed the idea of needing 100K in yearly income here.

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:

7.39% – Dividend/Investing Portfolio: I am currently generating a dividend yield of about 3.30%. 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: 14.87%

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%:)

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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. I’ve also looked into the possibility of renting property that I’d own though AirBnB (and an updated post here) and a few other questions I had been wondering about.

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

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Ahhh! So that big jump in passive income doesn’t quite seem as impressive on this chart. I guess that is to be expected as it is such a long term project that the one key is long term consistency rather than having a step back or a big jump. I’ll keep working at it:)

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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6 Comments

  1. Comment by writing2reality — February 8, 2014 @ 9:59 am
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    Nice job, and your progression over the last year and a half has been remarkable. I like the income diversity between the online and investment income, and think P2P lending would be a great fit for your portfolio. I will hit my five year mark investing with Lending Club this coming spring, and have only had great success. Feel free to ping me if you have any questions about P2P lending.

  2. Comment by RICARDO — February 9, 2014 @ 11:21 am
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    It is intresting to see the income curve accerating as time passes. AH! The joys of dividend compounding.
    I aim for a 10% increase in dividends year to year. Not too ambitious but the amounts keep getting higher each and every year.
    Last year I realized a 17% dividend growth but that includes new stocks added with the RRSP and TFS contributions. Hoping for another 10% this year over last year’s total. BCE has just helped me out with their div increase.
    100K will probably be a “normal” retirement income by the time you get there (2050?)so it is probably not excessive.

  3. Comment by RICARDO — February 9, 2014 @ 11:22 am
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    OPPS! I had you working past 65 in my last comment. LOL

  4. Comment by IS — February 13, 2014 @ 7:41 pm
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    @writing2reality – That is great, if ever you can give me additional info about how you’ve done, I’d appreciate it for sure

  5. Comment by IS — February 13, 2014 @ 7:42 pm
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    @Ricardo – LOL:) No worries. Yes, the curve is nice but I’m also helped by the fact that my $1000 contribution per month has a big impact on what was recently a 20K portfolio

  6. Comment by writing2reality — February 13, 2014 @ 8:44 pm
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    Feel free to check out my site (www.writeyourownreality.com) for more info. Over the course of my investing, I’ve earned greater than 10% IRR. Not bad for a fairly stable alternative investment.

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