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How We’re Generating Passive Income in 2017


Our Passive Income 2017Late last year, I received a few requests to update our passive income more frequently. So here it is – a new monthly series to keep track of our passive income. Actually, this will be very helpful for me as well. Previously, I review our passive income once per year and it is too much to do in one session. It would be much easier to update my spreadsheet once per month so I can stay on top of it.

First a little background. One of our long term goals is to generate enough passive income to cover our expenses. The challenge is to do this by 2020 so Mrs. RB40 will have the option join me in early retirement. In theory, she could retire right now but she is not quite ready to pull the plug yet. She wants a little more financial security. Currently, we support ourselves by a combination of these following income streams.

  • Mrs. RB40 works full-time.
  • I blog part time and generate some online income.
  • Passive income from the stock market, rental properties, and other investments.

This is working very well for us and we still save and invest over $50,000 per year. If Mrs. RB40 stops working now, we’d need to stop saving and start withdrawing a little money from our investment every year. (In 2016, we’d need to withdraw about $8,000 to cover our living expenses) I think this is perfectly fine because our withdrawal rate would be less than 1% which is very safe over the long term. However, she just isn’t comfortable with any withdrawal, so she is determined to continue working until our FI ratio is 100%. That is – as long as she like her job.

FI Ratio 

FI ratio = passive income / expense

The FI ratio is a simple way to track our progress toward total financial independence. Once we reach 100%, then it would may give Mrs. RB40 enough financial security to stop working full-time. Personally, I think it’s overkill, but I guess it’s better to err on the side of caution. Normally, financial independence means having about 25-30x your annual expenses which we already achieved in 2012.

In 2016, we generated about $38,000 in passive income. It was our best year so far, but that’s not quite enough to cover our expenses. We spent about $54,000 last year which makes our current FI ratio at 70%. Actually, that’s exactly where I hoped to be, so I’m satisfied with our progress. Okay, let’s see how we’re doing so far in 2017.

2017 passive income

For 2017, my target FI ratio is 78%. If we can keep increasing our passive income at this pace, then we should reach 100% by the end of 2020. Let’s go over our investments one at a time and see where we stand. This year, our passive income needs to increase to $42,000. That’s a big jump, so it won’t be easy.

Taxable accounts

Dividend Income 2017Dividend Income (target $11,500)

First up is our dividend growth income portfolio. Dividend income is my favorite form of passive income. You own a small part of a public company and they do most of the work for you. These days, I focus on companies that consistently grow their dividend income over the years. That way our dividend income will keep growing even if we don’t add new money. Currently, we reinvest all the income from this portfolio, but we’ll probably use it to pay our expenses once Mrs. RB40 retires full time.

As for reinvestment, I don’t DRIP in this portfolio. I just accumulate the dividend and invest in a stock whenever I see good value. Recently, I purchased Amgen, Kimberly Clark, and Consolidated Edison. The stock market is a bit high, but I’m too impatient to sit on the sidelines any longer. I’m pretty sure it will be fine in the long run (30+ years).

I’ll compare our performance to VIG, Vanguard’s Dividend Appreciation ETF.

For 2017, I expect to receive at least $11,250 from our dividend portfolio. This is assuming the dividend at least remain stable. I’m hopeful that we can reach $11,500 via dividend increases, reinvestment, and additional investment.

01/01/2017 value = $329,134

January Dividend Portfolio Update

01/31/2017 value = $330,417 (0.63% YTD gain)

YTD dividend income = $892

Our dividend portfolio took a beating in January as Q4 results came out. Target, Walmart, Leggett & Platt, Western Union, Sysco, and GE were all big losers and they drove our portfolio down quite a bit. This is the risk of buying individual stocks. Also, is this the beginning of the end? If the blue chips companies can’t improve their earnings, then this bull market won’t last much longer.

VIG, our benchmark, gained 1.8% and handily beat our portfolio. The year is still young so perhaps we will catch up later in the year.

Rental property (target $3,000)

Currently, we have a small duplex and a 1 bedroom condo in our rental property portfolio. I’ll skip the condo because we co-own it with my brother. Besides, it breaks even so it’s not really all that interesting at this point. The duplex is more challenging because it is an older home and needs more maintenance and repairs. I just raised the rent, but we still won’t be making much income this year because we’ll need to paint the exterior. The appreciation has been good, though.

On a good month, we should collect about $800 in passive income. Painting the exterior will cost over $5,000. Hopefully, we don’t have any other major repair in 2017.

January Rental Update

YTD rental income = $1,064

January was a relatively good month at the duplex. We didn’t have to do any repair so our rental income was good. I had to drop by quite a few times, though. We had more snow than usual and I had to shovel the sidewalk. When the snow melted the basement got wet so I had to drop by a few times to clean up. Anyway, it was a good month financially, but more work for me than previous months.

P2P lending (target $600)

I’m slowly pulling our investment out of Prosper.com. I’m just not a very good investor there. You’d probably have better luck if you have time to browse the loans. Our ROI is about 8% which isn’t bad. However, these unsecured loans won’t perform well when we see an economic downturn. P2P loans will be the first thing that borrowers will default on when they run into financial problems. I’m just getting out while we’re ahead.

January P2P Lending update

YTD P2P lending income = $65

Real estate lending (target $500)

Here is something new – I’m going give real estate crowdfunding a try this year. I just opened an account at Realty Shares and linked my bank account.

For new investors, there is a 30 day cooling off period before you can invest. The SEC recommends this to allow investors to become more familiar with the investment platform and the different types of investments available. During this period, investors can view the offerings available, but they can’t invest until the waiting period is over.

Fortunately, you can get this waiting period waived by filling out your investor profile and scheduling a follow-up call with Realty Shares. The follow-up call took about 5 minutes and they went over the different types of investments that are available. I got my cooling off period removed and invested $8,000 in a strip mall in Arizona. The ROI is projected to be 17%. The partner has extensive experience in that location so I’m optimistic about the project.

You can sign up with Realty Shares through this link if you’re interested in real estate crowdfunding. I will write about my experience investing with Realty Shares soon. Currently, only accredited investors can invest at Realty Shares. Accredited means your net worth is at least one million dollars excluding your primary residence. I think you can still browse the investment listing even if you’re not accredited.

January Real Estate Crowdfunding update

The investment is pending so no income yet.


This one is more for fun. You’ve heard of Kickstarter. That’s where you try get funding if you’ve got a great idea, but what about after you’ve got a good product? A company needs money to buy inventory and that’s where Kickfurther steps in.

Kickfurther is similar to P2P lending, but investors lend to small businesses instead of individual borrowers. The big difference here is the money will be used to fund inventory. The investors own the inventory and we can vote to liquidate the inventory if the business can’t sell it. Usually, I try to pick loans that already have a purchase order lined up. You can find out more and receive $5 to start through this link.

It’s interesting to see what kind of new products are coming into the market and then to pick a company to invest in. The ROI has been good for the companies that repay on time. I think I got around from 10% return in 2016. I need to go over the tax form in detail when it comes in. A few companies are late, but they are still actively trying to move their products. Hopefully, these late loans will be paid back soon. I only have $1,300 invested here so the income will be pretty small. You should not invest a large portion of your net worth with KickFurther. Investing in a small business is very risky and it is likely that you’ll lose some money. Only invest money that you can afford to lose. I would invest less than 0.1% of your net worth here. Truthfully, it’s a bit like gambling because you never know which business will default.

January Kickfuther update

YTD KickFurther income = $54


Our saving account and reward checking account. They’re boring, but everyone needs them.

YTD interest = $20

Tax advantaged accounts

Now to the tax advantaged accounts. The money in these retirement accounts isn’t readily accessible at this time, but they still count as passive income. Once we both retire full time, we’ll build a Roth IRA ladder to access these retirement accounts. Most of the investments in these accounts are invested in low cost Vanguard funds. All dividend income here will be reinvested via DRIP (back into the funds).

2017 tax advantaged account

2017 Passive Income

To wrap it up, I’m optimistic that 2017 will be the best year for our passive income yet. The challenge for us is to keep our expenses relatively flat. That way, the denominator doesn’t screw up our FI ratio.

FI ratio = passive income / expense

Passive income grows slowly so we really need to control our expenses.

In January, our passive income looks good. I think we’re on track to beat 2016, but it’s hard to say at this point. We’ll have a better picture after the end of Q1. On the other hand, we had a very low expense month. I think this was mostly due to bad weather and luck. We didn’t do much because it was so snowy/rainy and cold. We were lucky because there weren’t any expensive maintenance in January. I’m starting to get tired of owning multiple properties. There is always something going wrong. We have quiet a few more repairs in February.

If you plan to track your passive income, you should consider signing up for Personal Capital to help manage your investment accounts. They are very useful and I could get all my passive income info from one site. This is an affiliate link and we may receive a referral fee if you use this link to sign up.

Is there anything else that you’d like to see on this passive income update? Stay tune for the next update in a month or so.

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{ 91 comments… add one }
  • Mr. Tako @ Mr. Tako Escapes January 9, 2017, 12:27 am

    Very cool Joe. I have a similar post on my blog, update monthly with our latest expenses and passive income numbers.

    In 2016 that amounted to about $48,000 in dividends. I’d like to grow that by at least 10% in 2017.

    Like you, I want 100% of my expenses covered by passive income!

    • retirebyforty January 9, 2017, 7:22 am

      Your dividend income is really great and you don’t even count the tax advantaged accounts. Nice job.

  • Sam @ Financial Samurai January 9, 2017, 12:45 am

    Nice details Joe. I’m pretty sure you will get there this year.

    Since $24,000 out of the $38,000 of income is from the tax-advantaged retirement accounts, is the goal to have all your expenses covered just accounting since you won’t be able to access the income until 60?

    If so, won’t this require you to just withdraw down your non-tax advantageous principal anyway? This is a great argument for Mrs. to retire early as a result, since drawing down principal is an inevitability.


    • retirebyforty January 9, 2017, 7:24 am

      We’re planning to access our retirement accounts by building a Roth IRA ladder. Although, when we get there, we won’t need to take out that much because we’ll still have my online income. It looks like we’ll need $10k per year and that shouldn’t be a big deal to take out of the Roth.
      But yes, it’s just accounting.

      • Sam @ Financial Samurai January 10, 2017, 1:06 am

        Time for the Mrs. to let go of the rope! Since you’ve done the math, have several years of not working under your belt, and know the ups and downs, it seems to me that she should have no problem leaving to share the early retirement life with you.

        That said, if she likes her job, then by all means keep going. But if not…. I say it’s time for her to be free. You guys can do A LOT as a team more dedicated to the site.


        • retirebyforty January 10, 2017, 8:14 pm

          It’d be great if she can come onboard. She’d be able to help redesign the site.

  • Ernie Zelinski January 9, 2017, 12:59 am

    Have you ever considered writing a book to see if you can have another means of generating residual income?

    In today’s blog post, Joel Friedlander of The Book Designer Blog talks about his progress/success as a blogger and how it became apparent that he needed to write a book.


    Pay attention to this bit on Joel’s blog post:

    “As my blog had grown more popular, I started to get invited to industry events, writers conferences, and publishing groups of various kinds. When I first spoke at one of these big conferences, the host bookstore asked where to get “my book.” I didn’t have a book. But I realized I needed one, and had a ready source of content in my blog archives. After scanning the 400+ posts I had at the time, 43 became the book I could take to conferences with me: “A Self-Publisher’s Companion.”

    Just a note that if your book becomes successful, it will also help you generate other surprise bonus income. For example, I recently was contacted to make a presentation about “The Joy of NOT Working” at a career conference to be attended by 1,200 to 1,300 career practitioners. I will end up making $3,000 US plus first-class expenses for a 45-minute speech, not to mention that I can use the paid-for Business Class flight to stop off in Montreal, which I have wanted to visit for some time. What’s more, I just got contacted on Friday by a financial consultant wanting me to make a presentation about “How to Retire Happy, Wild, and Free” to 200 to 500 retired members of one of the best known organizations in New York City. If I get this gig, I will end up making a similar amount of profit as I will at the career conference and will use the paid-for Business Class flight to stop in Toronto to visit my friends. (Of course, these paid-for Business Class flights will generate more Aeroplan miles for me as will my paying for them on my Visa.)

    In short, a successful book, besides generating residual income, can also help generate other forms of surprise bonus income for you.

    Ernie J. Zelinski
    International Best-Selling Author, Innovator, and Unconventional Career Expert
    Author of the Bestseller “How to Retire Happy, Wild, and Free”
    (Over 310,000 copies sold and published in 9 languages)
    and the International Bestseller “The Joy of Not Working”
    (Over 295,000 copies sold and published in 17 languages)

    • retirebyforty January 9, 2017, 7:28 am

      Yes, I’m thinking about writing a book. It might take me a while to actually do it, though. I just can’t find the time to sit down and do it. I’ll probably have to take a couple of months off from blogging to write a book.

  • Aaron Smykowski January 9, 2017, 1:37 am

    Hey Joe, just a couple of comments.

    1. Be careful about the tax handling of these alternative investments. I know Kickfurther is all taxes as short term capital gains. Not sure about reality shares.

    2. Did you know that dividend stocks are historically very overpriced right now? I know it feels good to slowly raise a number of passive income generated each year but until you actually retire you don’t need it. I would think your main focus should be overall growth (stock price + dividend yield). What is the overall growth compared with other alternatives? It’s easy to buy an entire dividend stock portfolio when you actually need that income. Just some food for thought.

    • retirebyforty January 9, 2017, 7:33 am

      1. Yes, peer to peer lending and crowdfunding are all short term capital gains.
      2. The whole stock market is overpriced at this point. We don’t churn much so most of these stocks have been in our portfolio for years now. The overall growth has been better than the overall market over the last few years, but that could change. From what I understand, dividend stocks weather a bear market better than other stocks.
      What investments are you investing in now? The stock market is overprice and will probably continue higher next year.

  • Aaron Smykowski January 9, 2017, 1:38 am
    • Ten Factorial Rocks February 14, 2017, 2:22 am

      Aaron, thanks for sharing the link. I read the WSJ article and the interesting comments below it. The article is more relevant to dividend mutual funds than a portfolio of diversified dividend paying stocks. It’s like the broader market. If the market is pricey, doesn’t mean every stock in it is.

  • Jon @ Be Net Worthy January 9, 2017, 3:27 am

    Well done Joe! Thanks for sharing the numbers, it is great to see how much progress you have made. I love the goal of covering 100% of expenses with passive income. That would be a huge milestone!

    Keep up the good work and best of luck in 2017!

    • retirebyforty January 9, 2017, 8:46 am

      Thanks and good luck to you as well. 🙂

  • Thanks for sharing your detailed plan Joe. I’m really interested in Mrs. Rb40 and her take on continuing to work, but I’ll continue to follow your story for now 😉 I am planning a dive into Realty Shares too this year. I just haven’t had the time to devote to learning enough about it to “jump in” yet. Hopefully I’ll have it figured out in the next few months.

    • retirebyforty January 9, 2017, 8:47 am

      I haven’t had time to research much at Realty Shares either. It looks like the better deals require higher initial investment. I’ll try to start this month, but it’d be fine later too. Good luck!

  • Full Time Finance January 9, 2017, 4:39 am

    My big concern with the FI ratio is how much of it is market performance dependent, dividends get reduced in down times after all. That means it might be 100 percent in 2016 and 50 in 2017 due to no fault of your own. I much prefer a 3 percent rule assuming that I might see 1 percent passive. A two percent reduction in principle a year would take fifty years. I’d use a fire calculator to do the real math as it’s not the simple given net worth still fluctuates yearly as would 3 percents impact.

    • retirebyforty January 9, 2017, 8:51 am

      Most of the companies I own have very good dividend track record. Hopefully, they won’t have to reduce their dividend much in the next recession. I don’t think it will fluctuate as much as the S&P 500 index. The problem with 3% is what will you do when the markets crash. If it drops 50%, withdrawal would be a huge problem. I don’t trust FIRE calculators because I think they are a bit too optimistic.
      Thanks for your input.

  • Jay @ ITF January 9, 2017, 4:50 am

    Thanks for the detailed passive income report. And congratulations on all your progress in 2016. It looks like you are well on your way to getting that FI Ratio exactly where it needs to be.

  • Apathy Ends January 9, 2017, 4:51 am

    Appreciate the full breakdown of what you own.

    How much time do you spend researching dividend stocks before you buy? Browsing through the companies It looks like they have all been around for awhile and getting historical data would be pretty quick- just curious if you do a deep dive on them.

    • retirebyforty January 9, 2017, 8:52 am

      I’ve been keeping an eye on these stocks for a few months now. Whenever I see a stock I’m interested in, I’d put it on my list and keep checking them periodically. I check pay out ratio and a few other financial numbers, but probably could do a better job. Generally, I try to buy undervalue stocks.

  • Mrs. Picky Pincher January 9, 2017, 5:07 am

    I’m super jealous that you can blog part-time. I feel giddy just thinking of how much I could get done without a full-on 9-to-5. Oh well.
    Congrats on that 70% FI ratio. I’m pretty sure ours is in the negative (debt will do that), so we have a while to go on our FIRE journey. 😉
    Just out of curiosity, how did you become educated on investing? I’m not a numbers person whatsoever but I know I need to get my butt in gear with an investment plan; I’m just not sure where to start when I know almost zero about investing.

    • retirebyforty January 9, 2017, 8:55 am

      I love being self employed part time. Life is so much better than working for a corporation.
      Investing? I read books, magazines, and blogs. There are a ton of educational material out there. I’d start with Money magazine. It’s an easy read. In the beginning, focus on saving as much as you can and invest in low cost index funds. Once you’ve got a good base, then it’ll be easier to invest in individual stocks. Good luck!

  • Erik @ Hippies de Land Rover January 9, 2017, 5:17 am

    Hey Joe! Great report and idea to follow up every month. It would be interesting too if you could share your stocks picking strategy. Think about it, it could be why did you add X stock to your portfolio. Good look in this 2017!

    • retirebyforty January 9, 2017, 8:55 am

      I’ll work on how I pick dividend stock. It would help me as well because my screen probably would improve too.

  • Nicoleandmaggie January 9, 2017, 5:22 am

    Maybe I missed this, but do you include principal pay down on your rental property in your numbers or do you subtract that out?

    • retirebyforty January 9, 2017, 8:56 am

      No, I don’t include principal pay down. I just look at the cash flow. The principal pay down just goes to the bank…

      • Nicoleandmaggie January 10, 2017, 3:47 pm

        But unless you are willing to foreclose, it is erasing a liability. I guess if you only care about cash flow and not assets… that would also explain how you view dividends and not stock appreciation even though they are really both income. There are a lot of ways to increase cash flow that decrease your net worth…

        • retirebyforty January 10, 2017, 8:21 pm

          The real estate value and stock appreciation are rolled up in the net worth spread sheet.
          Net worth gain is good, but it doesn’t help pay the bills. 🙂

  • The Green Swan January 9, 2017, 5:34 am

    Hi Joe, thanks for the update and I look forward to the regular updates. I had never heard of Kickfurther before. Just by reading your description of it though, I’d be a little nervous of this…for many of the same reasons you are getting out of Prosper. If a small business has to resort to Kickfurther for a loan and is willing to pay 8% – 20% interest for it then that is a huge red flag (when the prime rate is 3.25% today…))! I’ve been a banker for 10 years with experience lending to small companies all the way up to the largest publicly traded companies and there is a lot that gives me pause about Kickfurther.

    But anyway, here’s to a great 2017 and getting closer and closer to 100% coverage!

    • retirebyforty January 9, 2017, 8:58 am

      Thank you for your input. I have about $2,000 at Kickfuther and probably won’t add anymore. It’s just a hobby account. Of course, now you made me more nervous. 🙂
      Does bank make loan for inventory? I don’t know enough about the lending process at the bank.

      • The Green Swan January 9, 2017, 9:12 am

        You bet, banks will lend to companies specific to inventory and accounts receivables (companies’ primary working capital and short term assets). And for riskier customers, the collateral of those assets is managed very tightly (think weekly and even daily sometimes). There is a lot that goes into banking clients like this, let me tell you.

        Granted, it is just a couple thousand and play account for you so you couldn’t get hurt too bad by it. But in a downturn, I’d expect some pain here. Inventory seems to disappear during those times…even with the tightest collateral controls.

      • K January 12, 2017, 9:14 am

        I have an 800 credit score and three decades experience, and “I” would not jump through the hoops banks required for a small inventory loan. I never let them (despite their begging) get their claws into my business. The point is, I CAN see why people/businesses would go this route RATHER than simply use a bank…the time that would be wasted dealing with meetings and red tape is better put to use actually running the business.

  • Lazy Man and Money January 9, 2017, 6:21 am

    I love the change.

    I don’t track my dividend income, because I like Aaron Smykowski’s advice of just focusing on growth. Also, our investments are in retirement accounts that we wouldn’t be easily able to tap (even with the IRA ladder) for some time (due to the good problem of other income). I wonder if it makes sense to just through a 2.5% number out there on the assumption that I could sell all the current equities and buy a dividend fund/portfolio.

    I was wondering if refinancing (and extending) the investment property brings in more income. Also, is it worth trying to amortize the costs of home improvements? It seems that if you don’t, it’s going to vary a lot by each year, which means you might be 100% FI one year and then not the next year.

    • retirebyforty January 9, 2017, 9:01 am

      I’m pretty sure we could start withdrawing from our Roth IRA now. We already have a ladder because we invested in our Roth for many years now. Also, we don’t need a lot of supplemental income even after Mrs. RB40 retires. We probably need just $10k per year.
      Refinancing might work. We probably could pull out some money because the value increased quite a bit over the last few years. Rentals are a bit of a pain…

  • Ms. Montana January 9, 2017, 6:40 am

    I’ll be interested to see how your rental incomes goes. We own 2 rentals, and so far they have been really profitable. I’m not sure how much money we will put into them this year. But we usually clear $12,000 from the 2 of them.

    • retirebyforty January 9, 2017, 9:02 am

      It’s awesome that your rentals are so profitable. I guess I’m just not a very good real estate investor. It’ll pay off when we sell… The real estate price in Portland is too high to make much income.

      • Ms. Montana January 9, 2017, 9:31 am

        It wasn’t so much savvy investing, as it was having a lot of cash ready when the housing market busted. So when everyone else was scared and running away, we bought 3 fixer upper houses. For all three, our total loan amount is about $133k. One being fully paid with cash (no loan.) If we bought one right now, it would be challenging to find something we could buy with a small down payment and still get $200-$300 a month income from. The application can be great as well, especially if you don’t have too much cash in them. Ours have all almost doubled in value. =)

  • Smart Provisions January 9, 2017, 7:17 am

    Very details plan, Joe!

    I don’t currently track my dividends on my investment account, but I’ll start doing it to get more clarity of how my investments are doing.

    I’m really interested in how the real estate passive income would work as I’m currently reading up a bit on it myself.

    Looking forward to the next post!

  • Ty January 9, 2017, 7:25 am

    This is great, Joe. Nice diversification. I’ll be interested to follow you this year for updates your crowd funding investments.

    Like @financialsamurai I think you’ve got a good argument for your wife to FIRE earlier that she expected. And like @makesmarterdecisions I’d love to hear her take on all of this 🙂

    • retirebyforty January 9, 2017, 9:03 am

      Mrs. RB40 is our editor so she knows what I’m thinking. She’s just not quite ready for ER, though. She needs more financial security. She is very conservative.

  • Wes @ thepursuitofhappiness.me January 9, 2017, 7:32 am

    Hi Joe, Do you use a management company for your rental properties or do you manage it yourself?

    • retirebyforty January 9, 2017, 9:04 am

      I manage the properties. Usually, it doesn’t take that much time, but some months are worse than others.

      • Wes @ TPOHappiness January 12, 2017, 4:51 am

        Would you be willing to share the number of average weekly hours spent on management of the properties would be?


        • retirebyforty January 12, 2017, 7:46 am

          It’s hard to find the average because sometime I spend a lot of time managing it. When there is a big repair, I need to schedule and meet contractors and such. If there aren’t much problems, then I don’t have to do much at all. In November and December, I think I spent just a few hours per month. Less than 1 hour per week on a good month.

  • Mr Crazy Kicks January 9, 2017, 7:39 am

    Great stuff, you have your hands in a lot of interesting investments! I am with you on the P2P lending – I had a good amount of money invested when the market crashed. I was trying to get better rates, so not all of my loans had the best ratings. After the crash a majority of the loans defaulted, and I took a big hit. That was the last time I invested in uncollateralized debt, I think you are wise to take your winnings and move on.

    Best of luck in exceeding your new 21017 goals 🙂

    • retirebyforty January 9, 2017, 9:05 am

      Thanks for your input. I’ll let the P2P account wind down this year and reassess the situation again at the end of 2017. I might have to put the rest of the loans in secondary market if it takes too long to wind down.

  • Mr. Grumby January 9, 2017, 8:40 am

    Thanks Joe- The passive income approach through dividends in particular will be instrumental in our early retirement date next year at this time. We hope to avoid drawing from our principal for at least a year or two. I probably won’t delve into P2P at this point, but it is interesting to learn about.

  • M January 9, 2017, 10:09 am

    Q: Can you pls share with us your asset allocation, means bonds/equity ratio?
    It is very interesting to learn what is your approach to risk of loss due to equity market issues.

    • retirebyforty January 9, 2017, 10:32 am

      Sure, here is our asset allocation.
      US stocks – 50%
      International stocks – 23%
      Bond – 17%
      alternatives, REIT and such – 10%
      We had 20% bond, but it decreased recently. I probably should bring that up to 20% again this year.

  • Revanche @ A Gai Shan Life January 9, 2017, 11:27 am

    I like that we hold stocks in some of the same companies 🙂 As you can see in my update today, we are nowhere near your dividends because I just dipped my toe into dividend investing a couple years ago but we have the same approach. We’re due for another selection soon, I’m hoping to see a little dip in the market but we can’t hold our breath waiting for it.

    • retirebyforty January 9, 2017, 9:41 pm

      I think at this point, it’s probably best to just average in. Trump seems to be good for the stock market so I think 2017 will be another good year. A downturn is coming, though. Maybe in 2-3 years? I have no idea. Good luck!

  • TJ January 9, 2017, 12:22 pm

    It’s cool to see the companies you selected. Some of them are pretty big holdings in my core mutual fund. I like the idea of spending more time researching individual dividend paying stocks when I reach FI and can spend less time working.

  • Dividend Growth Investor January 9, 2017, 12:27 pm


    You have some solid dividend income. I think that as you and your wife manage to save more each year, and you reinvest those dividends, you could expect to see that dividend income grow quite nicely. If your current yield is 3%, you can easily expect 5% – 6% in organic annual dividend growth. If you reinvest those dividends, you can expect 8% – 9% growth in dividend income, before even adding any new money.

    Plus, once you pay off your mortgage on the apartment you live in, your expenses would decrease, wouldn’t they?


    • retirebyforty January 9, 2017, 9:46 pm

      Our yield on cost is around 4.5% after about 5 years of gradually transitioning into dividend investing. That’s not too bad.
      Once we pay off our mortgage, the expense will decrease a bit. We’ll still have to pay HOA and property tax, though. Our expense probably will decrease about 20% once the mortgage is paid off. We’re not in a hurry to do it with this interest rate.

  • RocDoc January 9, 2017, 1:28 pm

    Joe, do you recommend owning rental property? I’ve never tried being a land lord before. I’ve read that rental property can be much more lucrative than mutual funds and stocks if you are able to get a good property (good cap rate)and have good management skills or hire a good property manager. I think my husband and I would get too stressed and tired out worrying about a rental property. Stocks and mutual funds are so convenient and easy. And the market is not too stressful as long as you have sufficient cash and bonds to get you through 5 to 8 bad market years. I would still enjoy having the diversification of a rental property but I don’t think I’d enjoy the potential problems! Maybe when I quit working full time I’ll feel like I have more energy to tackle a rental.

    • Iyer to retire January 9, 2017, 3:54 pm

      The thumb rule is 0.6 to 1% return per month on your investment properties. Thus, your net is 5% and above per year (post HOA, insurance, warranty, property tax, management fee). Remember, all line items in the brackets are tax deductible if properly documented.

      Also, majority of “good” american renters fall under the affordable slab off$1200- $1500. Anything below, they can live in an apartment rather than dealing with a private owner.
      Anything above, affording renter crowd is less and chance of you messing up is more.

      So, your rental property (3+bed, 2+bath – preferably single story) value should be anywhere between $180000 – $225000.
      All the best.


    • retirebyforty January 9, 2017, 9:49 pm

      I think owning rental property is a great way to build wealth. It seems in expensive area, the appreciation is really good. In cheaper area, the cash flow is better. I’d say try it and see how it goes. You might be better than you think. If you want to minimize problems, then buy a newer property.
      If you’re not comfortable with it, you could look into REIT or Realty Shares. Those companies will give you some exposure to real estate.

  • Roadrunner January 9, 2017, 2:44 pm

    That’s a really nice and detailed overview. Have you ever thought about increasing the rental portion of your passive income? Or would an extra real estate be too much hassle?

    • retirebyforty January 9, 2017, 9:50 pm

      We can’t afford local properties anymore. We’d have to look for an out of state property and I’m not quite comfortable with that yet. Maybe in the future. I read that it is a great way to make passive income, though.

  • Mr. All things money January 9, 2017, 2:48 pm

    Wow you have a lot going on. I can focus on only one or two things and just try to do them well. I am not too good in hustling across many areas. All this P2P stuff seems too risky in terms of default rate, good you got out while still ahead.

    • retirebyforty January 9, 2017, 9:52 pm

      I had a lot of defaults over the years, but the rate is so high that I still came out ahead. Once the economy turns south, the default rate will sky rocket. We don’t know when this will happen, though. Probably in the next few years.

  • Iyer to retire January 9, 2017, 3:45 pm

    can you comment on your contributions (if any) on bonds and annuities?

    Is it a wise investment for early retirees?
    Are you for it , against it?

    • retirebyforty January 9, 2017, 9:53 pm

      We have about 17% in bonds at this time. The primary reason is because the stock market is too high. If we get a crash, I’ll move some money from bonds to stock.
      I don’t like annuities at this point. I prefer to manage my own investment. And I think the payout is bad because the interest rate is so low.

  • Steve @ FI Warrior January 9, 2017, 6:25 pm

    Awesome job generating dividend income! I have the same goal as you which is to have all our expenses covered by passive income.

    In 2016, we generated $27,018.95 from dividends. My goal is to grow that by 11-14% in 2017.

    Keep up the great work and good luck on generating more passive income.


  • Go Finance Yourself! January 9, 2017, 9:33 pm

    Kickfurther sounds really interesting. I haven’t heard of it before. The returns sound similar to individual P2P lending but with potentially less risk involved as the loans are secured by inventory. The inventory could be tough to liquidate and require some big discounts, but at least there would be something there if a loan goes bad. I might have to look into this as I’m planning on expanding my P2P investing this year.

    Looks like you have some pretty good stocks in your dividend portfolio that are earning a pretty decent yield. When I move into the retirement phase, I plan on converting a good portion of my growth stocks into dividend payers. Out of curiosity, what is your criteria for selecting dividend stocks?

  • Dominic @ Gen Y Finance Guy January 10, 2017, 4:58 am

    Hey Joe – I love this idea…probably because I have decided to start a similar series. My wife and I have done a fantastic job growing our incomes from our careers (we brought in $339K in 2016 and project $450K in 2017), but realized that that income is heavily dependent on our day jobs.

    The past 5 years has been focused on adding jet fuel to growing the income side of the equation and getting our after tax savings rate to 50% (which we hit for the first time in 2016, and are projected at 63% for 2017).

    The next 5 years will be focused on created more passive income. I spent some time between Christmas and New Years pulling together our current passive income from our rental property, dividends, and interest and was pleasantly surprised that we are already generating almost $28,000/year in passive income.

    The goal this year is to get that up to an annual pace of $50,000 by the end of 2017, and up to $100,000+ by 2020.

    Onward & Upward!


    • retirebyforty January 10, 2017, 8:15 pm

      Wow, that’s great income. Excellent job. With that kind of income, I’m sure you’d be able to grow your passive income very quickly.

  • Trip January 10, 2017, 10:43 am


    I love the level of detail you went into in this post on your passive income and the FI ratio. Does your 54k of expenses include or exclude the expenses on your rental properties?

    My wife and I hit 30k in passive income in 2016 for the first time. This provides us with an FI ratio of 0.75. We feel we can easily and reasonably reach 35k in passive income in 2017 and we may exceed that depending upon how much RE investing we do this year. Currently, RE investments are only 11% of our portfolio and we’d like to increase that percentage going forward to:
    – increase our cash flow
    – increase our average yield on our total portfolio
    – reduce our sensitivity to stock market fluctuations

    Your approach of exceeding well past 30x annual expenses does seem very conservative to me.

    • retirebyforty January 10, 2017, 8:18 pm

      That includes the rental expenses. It was cash flow positive in 2016 so it didn’t impact the expense column.
      Great job with your FI ratio. You’re almost there!
      Good luck with more RE. Some markets are doing quite well.
      I’m comfortable with 30x annual expenses, but Mrs. RB40 is more conservative.

  • Rich v January 10, 2017, 1:24 pm

    I agree with your assessment of the P2P lending. I tried Lending Club and am currently pulling money out. The returns aren’t that great, I don’t want to spend the time to hand-pick loans, and there is no tax advantage there. Actually, I was fooled momentarily by the NAR return values which are lower than your actual internal rate of return. After I figured this difference out, it was a no-brainer to get out.

  • Fiscally Free January 10, 2017, 4:42 pm

    It seems like Mrs. RB40 is being a little over-cautious. Unless she loves her job, it seems like she should go ahead and retire, or at least dial back her hours or something.

  • Crispin January 10, 2017, 5:05 pm

    Since the returns on your rental property seem to be low, have you considered selling the property? I’m assuming it’s appreciated since you bought it, but I haven’t followed the Portland market closely.

    • retirebyforty January 10, 2017, 8:23 pm

      We’ll probably move into our rental in a year or 2. The return is low. Mostly because it is an old house (1895) and needs more repair and maintenance.

  • Mr. Need2Save January 10, 2017, 5:52 pm

    You may have covered this in another post, but how much time to you spend researching your portfolio of dividend companies? I’ve been taking the easy way out by investing in Vanguard High Dividend Yield (VHDYX) and Vanguard Dividend Growth (VDIGX).

    Eventually, I think we will get into the real estate rental market, but I feel like we don’t have enough time to commit right now… not to mention home prices in the DC metro area are just too high.

    • retirebyforty January 11, 2017, 7:48 am

      I spend a little time every week checking on the stocks on my list. Once I have a good list, then I pick the one that look the best. I’ll write about the process more soon.
      I like Vanguard too.
      Real estate is tough in Portland. The price is too high and you can’t make any income. We’ll make some money when we sell.

  • Preston Hunt January 13, 2017, 5:19 pm

    I like the FI ratio! But, did I miss it or did you not mention how you are going to deal with taxes. If the numerator (passive income) is post-tax, then everything is fine. But if it’s pre-tax, then I think there is a risk of false optimism because the FI percentage will be misleading, once the tax bill is considered.

    • retirebyforty January 14, 2017, 11:11 am

      I’m going to ignore tax until we get to 100%. 🙂
      At this level ($55,000), tax won’t be a huge piece anyway. With the current tax system, we will pay very little or no tax on dividend income. I’m pretty sure tax will be less than 10% at this level. I’ll need to run it through a tax software to make sure. Of course, we’ll have to move out of OR to minimize state income tax.

  • Dividend Diplomats January 15, 2017, 1:14 pm

    Thanks for the detailed summary here. I envy the diversity of passive income sources, especially considering that the majority of my passive income is attributable to dividend income. I guess I have to start somewhere haha I would love to get into peer to peer lending one day in the future. I’ve noticed that other commentors have commented on the low returns for your rental property, and that has been the major reason why I haven’t started investing yet. Part of me wants to start RE investing and when I do, I am thinking I have to own multiple properties to maximize the benefits. Are you planning on adding more real estate to your portfolio? Or are you holding firm with just the property and the condo?

    Best of luck in 2017!

    Bert, One of the Dividend Diplomats

    • retirebyforty January 15, 2017, 2:04 pm

      The return is low because the price is so high here. I think you get much better return in the Midwest and other more affordable locations.
      We’re just holding at this point. We’d need to invest out of state to increase our ROI.

  • Michael February 8, 2017, 4:04 pm

    Hi Joe, What is the minimum investment required to get started with Kickfurther? Do you receive a 1099 from them? How do you deal with taxes? How do you determine which product is selling well? How do you go about selecting the product you want to invest in?

    • retirebyforty February 9, 2017, 9:26 am

      The minimum investment is very small. It depends on the deal, but I’ve invested as low as $30.
      They don’t send out 1099. I’ll have to download a spreadsheet and figure it out.
      Which product? Just the one I like. For 2017, KF will only fund products with 100% purchase order.
      I’ll need to sit down and calculate the ROI for 2016. I would start very slow because I heard some investors lost some money. This is a lending model and some businesses will default.

      • Michael February 9, 2017, 2:27 pm

        Thank you, Joe! One more question – from a tax perspective, is this income considered capital gains or interest income or something else?

  • Duncan's Dividends February 14, 2017, 12:06 pm

    Wow almost $900 in one month in dividends is fantastic! Curious how you choose some of the companies on your list, such as Lloyd’s. If it’s Lloyd’s banking (LYG) I’m curious the thought process as it looks a bit riskier than the average FI investor.

    • retirebyforty February 14, 2017, 1:24 pm

      I picked up a few shares of Lloyd after Brexit last year. It was opportunistic and I only invested $2,000. Up about 17% so far, not too shabby. Yes, that one is a bit risky. I should sell it soon.

  • Your First Million February 14, 2017, 6:51 pm

    Very cool! It absolutely amazes me that this stuff is not taught in school. Just like Robert Kiyosaki says… schools teach the same old “go to school, get good grades, get a job, save in a 401k for the long term.”

    I don’t have anything against getting a good paying job… but blindly putting money into a retirement savings account in hopes that it will appreciate so that you will have enough savings to live off of when you retire is flat out irresponsible in my view.

    Building and buying assets that will generate dependable, passive income is far safer and smarter than just saving in a retirement account (especially one that doesn’t pay dividends of any kind).

    Imagine if schools taught the basic concepts of investing in real estate. Imagine if in 12th grade economics they taught “buy a rental property as soon as you get a good paying job. Once it is paid off in 15-30 years, you will have a free and clear property that will pay you a fat monthly check every month for the rest of your life. And what if you bought 2 or 3 rental properties? Do the math.” I mean come on! This stuff is so simple but because the masses don’t have access to this simple investment concept many of them will never know what true financial freedom (let alone basic financial security) really is.

    Keep spreading the word and teaching readers about passive income! I love it!

  • Mustard Seed Money February 15, 2017, 6:29 pm

    Thanks for the tip on Kickfurther. I have never heard of this and I will definitely be checking it out and seeing what’s out there. I love the passive incomes that you have created and it looks like you are well on your way to having all your expenses taken care of.

    • retirebyforty February 16, 2017, 6:48 am

      I would start slow on KickFurther. Just try a few deals and see how it works out. I heard some investors lost money last year. I did okay so far. A few businesses are late and I’m hoping they continue to pay.

  • Benjamin Davis February 16, 2017, 1:14 pm

    Joe, you are truly an inspiration. I love the detail you put into each post. Love your blog (can’t get tired of saying this). All the best.

  • Great Indian Retiree February 18, 2017, 7:23 pm

    Wonderful to see the progress you’re making joe! Keep up the good work. The only thing is that too much exposure to equities worries me to a degree. 🙂 but I Guess as an asset class over the Long run there are few substitutes.

  • Abby February 19, 2017, 2:06 pm

    Very nice and great work putting you on target to reach your goals. It is very informative to read about your journey to inspire us to work hard for FI 🙂 congrats!

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