Passive Income Update 4-11-19

Disclaimer Been trying my best on bring content to everyone this week unfortunately the ground I’ve made up in writing and posting I have lost in reading so I may be silent these next couple days while I catch up on my reading goal for 2019.

Haven’t updated my passive income in quite awhile so I’ll let you know where I am at now and where I am heading. I finished 2018 off with $830 in passive income for the year which translates to just shy of $70/month. My goal for 2019 is to earn $2500 in passive income which equates to $208/month earned. I’m sure you all know that passive income is critical to reaching financial freedom and I would like my passive income to exceed my active or earned income sometime in the future. If you are unfamiliar refer to this article. Until then we’ll be growing the passive income incrementally and aggressively. I calculate my passive income currently as my dividend income, interest earned through savings accounts, and interest earned through Lending Club. As of today, I have earned $101.25 in dividend/stock interest/savings account interest and $205.90 in Lending Club interest, add that together and we are sitting at $307.15. I’ll be conservative and say we have completed 3.5 months of the year which brings the monthly average to $87.75.

divs 4.11.19

LC 4.11.19

 

That’s not too shabby and I’ll explain why. It’s obviously not the $208/month I’m shooting for and I wouldn’t expect it to be, most of my passive income will be made up in the fall after I start working full-time this summer. With aggressive savings my emergency fund (also my sacred account) will be paying out 2.1% monthly and any other funds I can spare will go into Stash (for my ETF’s), Robinhood (for my stocks), or Lending Club (for my interest payments). I won’t have to pull any more money from my profits in my various accounts so I can get back to compounding my money.

While it isn’t very exciting now these next few months should become more interesting and passive income should start pouring in. My Lending Club performance peaked in November and has been steadily declining ever since which has hurt the passive income performance significantly. I have also sold off several large dividend payers and one being my go-to monthly dividend stock, Realty Income. Pending market conditions, I’ll pick up more dividend stocks as I see fit and as my income warrants.

As always, I am looking towards the future and pending how everything goes in 2019 and pending if I buy real estate before 2020, I’ll be looking at $500-$750 in monthly passive income for 2020 which is $6,000-$9,000 for the year. Not quite a 10X goal but aggressive, nonetheless.

Thanks for reading along, I’d love to hear what you guys are doing to generate passive income, how many passive income streams you have, and what your goals are! If anyone has a suggestion for a side hustle let me know as well, I’ll be working towards that here soon.

Thanks, B^2

The 40% Rule

As many of you know I am a fan of Grant Cardone with a lot of his stuff and one of the key takeaways I look forward to applying to my life is the 40% rule. The 40% rule was documented in the Great Depression where the wealthy were saving 40% of their income, and its just that simple.  The 40% rule is saving 40% of your income before taxes, so if you make $10,000 a month that would require you to save $4,000 a month. If you start looking at the math you’ll realize after taxes and expenses that it is very difficult to achieve the 40% rule, and it is. Income is a priority for the 40% rule, you can’t save what you don’t make, and you must pay yourself first. I will show you a real example using my actual projected salary for my full-time job starting in June.

For my full-time job I have a $57,600 salary ($4800 monthly), a $5,000 signing bonus paid in first month, and a $500-month stipend for the first 18 months. It is a salary and commission pay plan however I will only account for the salary part since I don’t know how much I will sell yet.

Because I start mid-June, I calculated my gross income as half of my monthly salary ($2,400) + $5,000 bonus + $500 stipend = $7,900

June July August September October November December Total
4800 $7,900 $5,300 $5,300 $5,300 $5,300 $5,300 $5,300 $39,700
save 40% $3,160 $2,120 $2,120 $2,120 $2,120 $2,120 $2,120 $15,880
tax $1,738 $1,166 $1,166 $1,166 $1,166 $1,166 $1,166 $8,734
budget $3,002 $2,014 $2,014 $2,014 $2,014 $2,014 $2,014 $15,086

Looking at the table you can see my budget is around $2,000 and it will be less than that when you consider my 401k will also be pulled out of my income. I did assign a tax rate of 22% which is the bracket you would be in for this income however your marginal tax rate is less than that, either way I prefer to be conservative with my estimates. (I calculated my marginal tax rate to be 11.5% which would add $570 to my budget every month or $570 more to invest every month) For reference, I take data on my spending habits every summer when I am on internship or co-op. This summer I had no living stipend and was completely on my own, my monthly spending came out right at $2,000, though that includes some extraneous cost that most likely will not happen in the first 6-months of my full-time job. I also will be living at home or my girlfriend’s house during the first 6 months of my full-time job as I will be traveling 90% of the time during training.

Realistically looking at the first 6-months I will have extremely low expenses and may be able to save even more aggressively than what I have shown. Any extra income I can save will be put into my other investing accounts (Robinhood, Lending Club, and Stash). Ideally, I would like to save around $20,000 from my full-time job in 2019, which will help me achieve my $75,000 net worth goal. I would also like to try and purchase a 4-plex or duplex at the end of 2019 assuming all goes according to plan.

Looking at 2020, the saving and income numbers look the same as the later half of 2018. Commission will be included assuming I make sales and as my commissions come in, I plan to add those additional funds to my investment accounts as stated above. Looking at 2019 and 2020 I plan to save $40,000 with the 40% rule and invest additional income in my investing accounts. I plan to save in my Discover Savings account which earns 2.10% APY, which will add to my saving goals as well.

2020 will be difficult to keep in budget, I will then be paying rent and will be living full time in St. Louis. The $2,000 I lived on during internship was living like a poor college student for the most part, as I enter the real world, I expect my standard of living from the food I eat to the activities I participate in to be more expensive as well. However, I at least have an idea of what I spend monthly in preparation, I suggest to everyone to start documenting your spending to get an idea of your habits. If you need help or would like to look at how I do it, I cover it in THIS article.

As I mentioned earlier in the article, income is critical to achieving this aggressive saving plan, for your convenience I will run an example with a salary of $40,000, and I will use a marginal tax rate to ensure accuracy. I included above my actual budget above when marginal tax rate is considered ($2570/month).

June July August September October November December Total
$40,000 $3,333 $3,333 $3,333 $3,333 $3,333 $3,333 $3,333 $23,331
save 40% $1,333 $1,333 $1,333 $1,333 $1,333 $1,333 $1,333 $9,332
tax $283.31 $283.31 $283.31 $283.31 $283.31 $283.31 $283.31 $1,983
budget $1,716 $1,716 $1,716 $1,716 $1,716 $1,716 $1,716 $12,015

As you can see with $850 less a month in your budget that makes things considerably more difficult depending on your life style and where you live.

I hope you learned some valuable information about budgeting and saving money, I’d love to hear about how you save and what your targets are!

Thanks, B^2

2019 Goals

Looking into 2019 I have some goals and aspirations and I plan to look at them closer than I did last year. After all, it’s critical to know where you are going and remind yourself what your targets are. I mentioned previously that I graduate in May and begin my full-time job in Mid-June. I’ve calculated potential income with my salary and decided to shoot a little higher than that. I would like to have a net worth of $75,000 up from my current net worth of $26,500. While building up my net worth I plan to put at least $10,000 to my emergency fund in my discover savings account. I make a nice 2.10% APY on that account leading to a $210 yearly passive income generated from that account alone. Overall making money while I sleep is nice and I would like to make $2500 in passive income this year. On average that is $200 a month and from there we’ll keep bumping that number up. With the eventual goal of surpassing my active income. To help get that income up so I can invest more I aim to have a side hustle that will generate $5000 this year. With all of that in mind I plan to buy income generating real estate at the end of 2019 or invest significantly with a syndicator.

Money isn’t everything so on the note of building my personal brand and learning more I have several goals related to this. I would first and foremost like to have 150 blog posts in total by the end of 2019. This comes out to writing about 1.5 posts a week. In addition, I would like to have 1500 visitors and 2500 views on my blog in 2019 organically. My other large platform is Instagram and is probably how you are reading this article. I would like to finish 2019 with 750 Instagram posts and 3000 followers. The blog goals and Instagram goals will go hand in hand as they both stimulate each other. The last of my goals involve learning, I aim to read a book every month of 2019, 12 books in total. I’m aware this isn’t a whole lot however I will be learning and studying for school as well as work for most of the year and you can only cram so much into your brain at once.

I know this is very late to be talking about 2019 goals however it took me awhile to decide what I really wanted to go for this year as well as taking the time to sit down and write this out. Feel free to leave a comment below about your 2019 goals or post your comments on Instagram!

B^2

Lending Club Update 9/17/18

Hope everyone is doing well, I’ve been getting some questions about lending club here lately with how much I’ve been talking about it and posting about it. Hopefully today I can answer all those questions and give you an update on where I am at with this investing platform.

In case you weren’t around when I first talked about this, I started using lending club in April of 2017. Lending club is a peer to peer lending and borrowing platform. Where individual investors fund individual borrowers for various loans. These loans can range quite a bit in size from $4,000 to $35,000 or so, 36 months or 60 months in length, and of various ratings and interest rates. Now I’m not going all in on $30k loans or anything like that, I’m not rolling that deep by any stretch of the imagination. The loans are bought in notes from an investor perspective, these notes are in $25 increments. Now you could go and fund an entire loan yourself I like to diversify, and I currently fund over 200 different loans over the course of a year and a half.  Much like a car payment or a house payment the borrower pays the loan off every month so as an investor you get paid out every month in principal and interest. Of course, the house takes a cut as well and that’s generally around 1-2% depending on the loan. The rate on the loans are usually between 5%-30% interest rates based on the borrower’s credit score, previous lines of credit, income etc. etc. Obviously the higher the interest rate the higher the risk of defaulting the loan, and the lower the interest rate the less likely the borrower is to default. Below is a quick snapshot of how my portfolio looks in terms of active notes, defaults, late notes, and fully paid notes.

lending club notes

Now generally I take a rather aggressive approach to my notes and my average interest rate is around 15-18% overall. That can explain some of the defaults I’ve had as they are a higher risk loan, per usual with investing the greater the risk the greater the reward.

What really turned me on to Lending Club and this platform of investing (peer to peer lending) is the monthly payments. Dividend stocks are great, and I have quite a bit of cash flow from them (currently $275/year as we speak) however only a few of them pay me monthly. Having a monthly cash flow allows me to compound my gains 4x faster than a quarterly dividend stock which most of them are quarterly. I also am more fluid with withdrawing money with this platform which leads into my next point. I am investing heavily in this platform to passively pay my rent in the spring semester. You heard that right while it won’t be all interest based (in fact its mostly principal based) I will attempt to use this platform to make a nice 6% or more return while being able to pull my money out and pay rent every month. This obviously has lots of risk and I have back up plans in place in the event most of my loans default however from what I’ve learned in the last year and a half this has been a pretty reliable strategy, and of course I make passive income while I am doing this with a decent return.

Now let’s back up a minute. Most of you are probably thinking I’ve got to be pulling in some big bucks to pay rent with this right! If any of you rent out there you’re probably thinking this is quite a stretch. If you didn’t see in any of my previous posts my rent here in my college town is dirt cheap I’m talking $275 a month + utilities which generally rounds out to $350/month. As of my last monthly payment update I am currently bringing in $195 in principal and interest a month! I’m not done yet either, the snowball has started to roll, I dumped in almost $3,000 this summer into my portfolio and when I get my bonus here soon another $1,000+ will go in + I’m starting to get monthly payments from the loans I purchased this summer. Come October/November I will be approaching that first tier of rent ($275). Not too shabby considering a 6% return on a passive income and its monthly.

With this next small deposit coming in this week I will be at ~230 notes and I am estimating I will need 315 or so to cover the $275 a month. Let’s take a quick look at my account summary, this first picture is adjusted account value which includes the defaults and the late notes.

lending club adjusted

This second picture does not account for late notes and shows a higher rate of return.

lending club no adjust

My account is out of whack at the moment, with the large influx of new notes there is quite a few that haven’t started paying out yet because they are so new. Like I said come October/November that should all get settled in and the returns will be coming up as the monthly payment number starts ringing true and all my loans start paying out.

As a disclaimer I am not a financial consultant and all investments carry risk. I am simply showing you all what I am doing and why I think it will work. Of course, I’d like to hear what you have to say. I know quite a few of my followers have been asking questions about this platform and the pros and cons of it. I have another post from way long ago on why I like this platform so much and you can read that post right Lending Club Review.

Have a great day and I can’t wait to hear from you guys!

Summer Plans Review

On May 1st I wrote a post titled “Summer Plans” today I will review what steps I took to achieve these goals and aspirations and how you can too. First and foremost, to achieve these goals and aspirations you of course have to have these goals and aspirations and not just in your head but somewhere written down where you will see it often. If you follow me on Instagram @bsquared.website you can see I write my goals down in my notes and I post and look at them constantly. If you have good goals that are designed to get you to your end goal you will be in good shape.

  1. I am going to absolutely crush this internship/sales position. I mean crush it! This is the first time in my life that I will get paid on commission meaning every minute I am not working or trying to sell is a wasted minute. That goes beyond the job as well, I also have this blog and an Instagram, and I will continue to expand my social media presence and further build my personal brand.

In terms of Instagram and this blog I build my Instagram presence from 142 posts to 266 currently. I went from 39 blog posts to now 59. I wish I could’ve bumped up the blog post number quite a bit but it’s a process and takes some time. As far as the internship is concerned we will highlight later as I am still collecting checks and making sure everything goes as planned. How did I do this? I kept setting goals to increase these two metrics. Not the best strategy ever but I wanted more content, I will build on this content later and add more value for my viewers, that will be in the goals for the first half of September. 

2. I want to move away from the umbrella of financial security of my parents. They have done a fantastic job providing for me all my life and I feel obligated to lighten their load. I am making it a goal of mine to work harder than ever before to obtain scholarships and other means to provide for my schooling. My parents have also paid for my housing during college and pending the results of my friend meeting with his landlord tomorrow I should be moving out the fraternity house and plan to pay my rent and all necessary living expenses. I also came up with my method to do so. I have talked about Lending Club before on this blog but for those of you who haven’t read about it yet you can reference this post about it “Lending Club Review”.

 I was unsuccessful in obtaining scholarships, I realized I missed the time frame for most scholarships that would cover the 2018-2019 school year. I am living with a roommate and am no longer in the fraternity house. I am still working toward using lending club as my vehicle for funding my rent and utilities. I am currently making about $165/month from this method and I am still funneling money towards it. I mentioned in an IG post that approx. 31% of my portfolio I have not collected payments from because they are so new. This just goes to show that this takes time for it to materialize. Ideally by October we will be near the target and will let the monthly cash flow pay for my rent. How did I do this? I had a problem – paying $350 for rent and utilities a month ( I know some of you wish you had this problem cause Rolla is dirt cheap) . I wanted to find a solution that would make paying this easier and be able to make money while still paying. I was already using the vehicle (Lending Club) and I just had to commit to it. It had to have certain criteria (safe, familiar with it, monthly cash flow, easily withdraw-able etc.) then I put the money into it and I am still putting money into it. 

  1. I have also began looking at investment properties in my college town, with the hopeful influx of money I make this summer this may finally become a reality and I have also explained some of those plans in a previous post linked here.

This is just a little bit out of my reach, with a 20% down payment we are looking at $20,000 or so and I just don’t have that unless I were to liquidate all my funds. I also didn’t make the stock gains and investment gains that I planned to. I am focusing most of my money and energy into other forms of passive income like Lending Club and dividends. This will keep paying me over the school year and keep making money and fund all my activities. How did I do this? I didn’t sometimes you just need to know when to much is too much. I’m all about pushing hard for your goals and what will bring you closer to success but there’s just not enough to go around. 

  1. This will also be the first summer where I will be relatively free while I have been this interested in improving my life for the years to come. On my co-op I did not start investing until very late and then I returned to school and was again very busy with my other obligations. While on my internship I was taking 9 credit hours of summer class which took a very large toll on my time and extracurricular efforts. I lived an endless cycle of work, working out, and then studying and doing homework during the 5-day work week and then my Sunday’s were typically consumed in school work as well. This is another very exciting aspect of this summer that I can hopefully take advantage of.

This did not happen as planned. In theory when you are only door knocking 5 hours a day that doesn’t sound too bad. However, all the time I spent on returning phone calls, text messages, emails, keeping everything updated and documented was sizeable. I didn’t push myself as hard as I should have and I did my fair share of sleeping in and slacking off.  Why do I do this? Because knowledge is power. The more I know the better decisions I can make. The better chance I have of succeeding. 

  1. I intend to learn more than I ever have this summer as well. I have an ambitious reading goal this summer of 10 books which is crazy to think about since I have not read for leisure in years but the value that it has been bring to my life is incredible and I have learned so much already and I can’t wait to learn more. If you have any suggestions I am open to them all but I will most likely need to focus in on something related to what I would like to pursue later in my life, namely entrepreneurship, business, investment property and real estate, and investing.

I did learn quite a bit this summer from my internship, podcasts and books I read. The numbers won’t show it in terms of books I’ve read but I continue to learn and I am putting more effort into that during the school year. Refer to above italic text.

  1. I would like to make a strong effort to help my fraternities recruitment efforts this summer. Due to the new structure of our recruitment and pledgeship process this summer will be the ultimate factor to our future success and I would like to give my time, effort and talent to this endeavor. Not that I haven’t helped in the past, but I see the high importance of this task, but it will also give a chance to develop my new skills.

Unfortunately, I did not put as much effort into this as I should have during the summer and during the fall. I did a lot behind the scenes in terms of creative thinking and problem solving. I also set up events, but I did not really kill it like I did the year before in terms of actual recruiting. I believe this was just me getting older and wanting to have some fun for occasionally. Why did I do this? Because I feel obligated to share my knowledge and experience in this position to help out the current Recruitment Chair. I also think the ROI on the time and effort is well worth it. 

  1. I believe this summer will also allow me to network more than I have in the past and I have given up some of those opportunities for my other obligations in the past. Again, with all that I have learned this school year I believe this will be a key aspect in my ultimate success later in life and the more I can network and connect with the others the more opportunities will present themselves.

I did network when I could with my fellow interns, coworkers, and customers. Again, with my work schedule and other obligations it wasn’t as much as I wanted to. I do have 2 great references for my resume which will be key in my job hunting here to come, my immediate supervisor and my sales manager. Two of the best references I have had so far all created by networking. Why did I do this? Its not what you know its who you know. Ever hear that saying before? While I think what you know is important the message is clear and my references I listed in my resume will help me out dramatically and all the connections I have made will help me in the future. 

We are still pushing hard towards the end of the month. Keep your eyes open for more blog posts, more Instagram posts, more money and hopefully no problems. I’ll keep you guys updated!

As always, I would love to hear all your comments!

B^2

 

Status Update 3/12/2018

Hey how’s it going everyone hope you all are well.  I just wanted to give a quick update on what is going on with my life right now. If you’ve been keeping up with the biweekly goal analysis you know it’s been a crazy couple week and I’ve been super busy.  I can say nothing has changed on that front, I am in the middle of our big St. Pat’s party week right now, followed by a hard week of school with tests and then spring break. From then on, it’s still going to be a wild ride to the end of the semester. Because of this I’ve been putting the blog and Instagram on the back burner for a little bit. I was consistently working 16-18 hours a day between school, fraternity, philanthropy, rugby, and my personal endeavors and it was slowly killing me. Soon I plan to refocus my Instagram efforts and get the blog some better tools retain my audience (mailing list, email newsletters, more Facebook ads etc.) but I simply do not have the time to make that commitment all the way. On a positive note I have an internship more or less locked down for this upcoming summer its actually a sales position which is very different from what I am use to or expected to do, but the experience and income should be very beneficial. I think the unique schedule I will be working will also help with this blog, and my other endeavors so hopefully that leads to some explosive growth this summer. I was also considering changing the focus of the blog entirely, as it sits now its me sharing my financial journey, but I guess it’s boring right now to be frank. I’m not making many moves right now since I haven’t had any income since August. I am reading books and learning about successful people and how to be successful and am reading a lot of motivational content so maybe that may be a temporary route I go. As I said above its been busy and we are in a holding pattern right now so hold tight while I get my life together.

If you have any suggestions, ideas, content to talk about, or products to aid in some of my problems stated above let me know!

B^2