Whether I’m planning for retirement or a little extra security, passive income is always the right answer

I enjoy my job, but I am guessing if I had the opportunity to simply “manage my own affairs”, I’d jump at it. I guess I’d like the ability to choose not to work. Or, do something more meaningful.

It’s a nice dream. But, without a job I will definitely need to increase both the number and the volume of my Passive income streams. As you can see from the screenshot from my Personal Capital below, retirement on my 401k and investment streams alone is a long way off at 53... best case scenario. 

Given the recent volatility in the market, I’ve been realizing that passive income is also an incredibly effective hedge against a recession, if and when it comes. If I lost my job, even a small passive income stream could give me the extra month or two I need to find a new one during a recession.

Maybe someday I could grow my passive income to the point where I don’t need a job at all. Either way, it’s an investment worth making. But to grow my passive income streams, I have to take stock of where they are at currently.

In this post I will do a full review of how much passive income I am making from each source, and set myself a realistic action plan for improving it ASAP.

State of the union: My passive income investments

Right now I have three sources of passive income: the condo, my stock Portfolio, and this blog. 

The Condo

Current status: As I documented earlier this year, the condo has been a fantastic source of wealth creation, but it isn’t an income generating machine. Like… not even close. 

Currently, rent is $2400 with monthly expenses (ex. maintenance) coming in at $2300 after my HOA fee was raised. I know, yowza. If the property value hadn’t appreciated so much in the past two years I would be a bit concerned.

• Monthly income: $1000

• Yearly income: $1200

Goal: I did recently raise the rent with the existing tenants (who are great). When/if they leave next year, I hope to be able to raise it to $2500 or $2600 at which point it will be a more significant income generator for me.

To be fair, the condo is useful beyond income generation. It is an amazing vehicle for tax savings, thanks to depreciation. The slow but steady paydown of the mortgage is also a clear wealth generator, although it has no affect on my passive income.

Plan to achieve passive income goal: I will have to wait to see what the current tenants want to do before I know if I will be able to raise rent. It will also be interesting to see if there is a recession because it could negatively affect rents and property values. If the economy stays on track I should be able to get $2500 or more out of the condo and clear $150-$250 a month in income. Not great, but not awful either.

Investment portfolio

Current status: As I wrote up in my yearly report, I made a 2.6% yield on my portfolio which totaled up to around $1800. 

Goal: That 2.6% yield is pretty good for an 85% stock portfolio, but that doesn’t meant it couldn’t be better. I think I can probably reallocate a little bit to increase income without distorting my allocation. I’d like to reach a 2.75% yield, and with additional investments increase my passive income to $2500 a year by the end of the year. 

Plan to achieve passive income goal: Quite simply, I need to save. The more money that’s in the portfolio, the more I earn. I have a plan to be able to put around $1500-2000 per month away in passive income investments within my portfolio. That means every month I will grow my passive income by $20-40. Again, not great, but powerful over time.

Other than saving more, the only way I can increase my income is by increasing the yield on the portfolio. Conveniently, I was already planning on trying to skew my new investments towards bonds this year. In my view, the economy is in the last year or two of a very very good run, and it wouldn’t hurt for me to be a LITTLE more conservative right now. That also has the advantage of increasing yield in the portfolio as a whole (since bonds are the highest yielding components of the portfolio). REIT’s are the second highest yielding element of my current portfolio, and they’ve gotten hammered recently.

The BLOG

Current status: Right now, the blog is my largest passive income generator, but it is hugely inconsistent. Most of my income comes from AdSense and affiliate ads, and my income can vary from $750-$1500 a month depending. I didn’t start the blog intending for it to be an income generator, but as traffic has picked up so has the revenue. To be honest, I am a finance blogger and I’d be a HACK if I wasn’t at least trying to make some money from my time investment.

Goal: I don’t really want to set a goal for the blog right now, because it’s so early and I make so little. All the same, to cover my hosting expenses from Squarespace and at least offset the considerable time investment, it only seem reasonable to shoot for a monthly goal of $2000, or $24,000 annualized. 

Plan to reach goal: This one is simple. Make great content, and promote it. If user growth increases the way it has been recently, I should be able to make that goal without a sweat. I will also continue to optimize my AdSense placements as much as possible (and take advantage of their awesome in product optimization tools). 

Am I ever going to have some freedom with my passive income portfolio?

Right now, I am making a total of around ~$20,000 a year from my passive income streams, almost all of that from my investment portfolio and the blog. If I am able to juice my investments, raise rent on the condo, and keep making great content for the blog, I think I’ll be able to get that to $30-35k annualized a year from now. That’s not life changing, but it is significant. If I’m able to build on that number little by little, year by year, I should have the freedom to choose not to work by around ~45. 

After a long, long week at the office, I can confidently say that is a goal worth grinding for.