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Passive Income

Passive Income: Make Money While You RelaxPassive income is one of the keys to a successful early retirement. If you can generate enough passive income to cover your cost of living, then you’re financial independent! I retired before our passive income was that high, but I had an alternate source of income – blogging*. Luckily, early retirement worked out very well for me over the last 6 years. However, we are still striving to reach 100% FI ratio. I’m sure we’ll get there at some point, but it will take time. On this page, I’ll show you how we generate our passive and update it with real numbers every month.

*Starting a blog is a great way to build your brand and generate some extra income. You can see my tutorial – How to Start A Blog and Why You Should. Check it out if you’re thinking about starting a blog.

Currently, we support our moderate lifestyle with a combination of these income streams:

  • Mrs. RB40 works full-time. She plans to retire in 2020.
  • I blog a few hours per day and generate some online income.
  • We have passive income from the stock market, rental properties, and other investments.

*FI ratio = passive income / expense

FI Ratio

The FI ratio is a simple way to measure progress toward total financial independence. Once we reach 100%, then it may give Mrs. RB40 enough financial security to stop working full-time. Currently, she’s not quite ready to retire yet. Personally, I think 100% FI ratio is overkill, but it’s better to err on the side of caution. Normally, financial independence means accumulating about 25-30x your annual expenses, which we already achieved in 2012.

  • 2019 Passive Income = $5,431
  • 2019 Expense = $7,763
  • 2019 FI ratio = 70%

2019 isn’t looking too good so far. Our expense looks fine, but our passive income is dropping. We moved to our duplex so our expense should be lower for the rest of 2019. Our FI ratio should keep improving throughout the year.

2019 Passive Income

2019 is going to be a tough year for us. We’re consolidating our properties so our rental income will decrease. However, our real estate crowdfunding and dividend income should increase. We’ll have to wait and see how it plays out.

Here is my passive income spreadsheet for 2019.

Passive Income 2019

How We Generate Passive Income

Alright, here is the good stuff. I’ll summarize each passive income streams here and also keep a separate page for the details. These pages will be updated monthly. Click through the links below to see the details.

2019 passive income

  • Real estate crowdfunding – My goal is to increase our investment in real estate crowdfunding to $50,000 this year. I’d like to generate about 8% of passive income from this investment.
  • Rental properties – Currently, we have 3 rental units. My goal is to consolidate down to just one property. We’ll move into our rental duplex because we need more space. I will reinvest the money into real estate crowdfunding and stocks. After consolidating, we should have only one unit left. This will help keep our cost of living low for a while.
  • Dividend stocks – Currently, we receive about $12,000 in dividend per year. My goal for 2019 is to increase it to $15,000. We’ll have some cash infusion from the home sales. I’ll invest when the market drops a bit.
  • Interest – This is just interest from our bank accounts.
  • Tax-advantaged accounts – Lastly, I count the dividend from our retirement accounts as a part of our passive income as well. Once Mrs. RB40 retires, we will be able to access these accounts via the Roth conversion aka. building a Roth IRA ladder. Our earned income would decrease and it will make sense to convert our 401k and traditional IRA to Roth.

Somewhat Passive Income

Blogging isn’t very passive for me at this point. I spend 20-30 hours per week writing, networking, responding to comments, and maintaining Retire by 40. At some point, I’d like to cut it down to around 10 hours per week. That goal is a few years off, though.

  • Blog income – I’ll include my blogging income here for completeness sake. In 2018, our revenue was $81,135 (before taxes.) I’m not done with taxes yet and I estimate the 2019 revenue will be less than $40,000. 2018 was a really good year. The blog income is slowing down a lot.

Let me know if you’d like to see anything else on this page. Lastly, please share this page on social media if you enjoy it. Thanks a bunch!

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Joe started Retire by 40 in 2010 to figure out how to retire early. He spent 16 years working in computer design and enjoyed the technical work immensely. However, he couldn't stomach the corporate BS.

Joe left his engineering career behind to become a stay-at-home dad/blogger at 38. Today, he blogs about financial independence, early retirement, investing, and living a frugal lifestyle. See how he generates Passive Income here.

Joe highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help DIY investors analyze their portfolio and plan for retirement.