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!

Internship Finances Overview

I wrote an article titled “Personal Finance Overview 7/17/18” reviewing my expenses and spending through my internship this summer. Today I will wrap up how the summer went in terms of my spending and earning. Below is a master picture of the expenses.

finances2

If you haven’t read the previous post mentioned take 5 minutes to catch up and get familiar, the link is above. In term of the food column we brought the average down from $300 to around $265 ish this comes out to $60 a week or so. This has been very inline with my previous tracking throughout the summers. For those of you who are wondering how in the hell can I eat on $60 a week the answer is eggs, milk, brown rice, oats, chicken, ground beef, protein bars. That is pretty much all I ate all summer. Very simple very cheap. I also rarely eat out, and normally don’t purchase coffee while I’m out.

Gas money remained the same. Slightly under $200 a month, ~$45 a week. I never tracked mileage this summer, but I believe I drove over 5,000 and a decent portion of that was city driving. Not much I could have done about that, but I do plan to write off about half of my mileage for work.

Fun money! I mentioned last post about a party I was throwing and how this column was going to shoot up and it did. Landing at $260 a month or about $60 a week, which is inline with last summer. If you take out the party $115 a month in fun money. I plan to use a number around there as my benchmark for my budget for the school year. I’m sure this past week and all the drinking and partying we did we’ve already passed it but you can try your best.

For the gym I mentioned before that I had a large upfront cost and it would slowly work its way down and it has. It made it down to $65 a month. Not too bad considering the gym membership with tax came out to $35+ and going through tons of mass gainer all summer.

Girlfriend column came down as expected finishing at $200 and change. Not sure if this is an accurate number considering the plane tickets included and being further away from her this summer (aka not seeing her as often). I’m sure Christmas, birthdays and little surprises will keep this averaged somewhere around there.

Bullshit: Managed to bring this one down a bit, from $1150/month, to $1,000/month. Again had 2 rents being paid for a short period, utilities, speeding ticket and other essentials for my job. As of right now I still have not paid August electric nor have I received any money back from my deposit. I do go home Labor Day weekend so I may have a small check waiting for me when I get back.

finances3

I stopped tracking this spreadsheet on August 11th, the day after my last day on the job. I have since still worked a little in terms of answering phone calls, emails. Text messages and finishing up my last deal (got that one done today!). My cost of living came out to be $1993/month. I don’t pay for my insurance (thanks mom and dad) or anything like that so naturally its going to be lower than most other people. I don’t think that’s too terrible considering the average cost of living in the U.S is about $45k. I was at $2135 in the prior article. Now there is some skewed data, I try to finish the internship with little to no food left, usually no gas left, etc. it doesn’t account for the continuity of living and the average cost of living. However around $2,000/month wouldn’t be a bad guess.

finances4

My monthly conversion for what I was paid comes out to $3,700 a month. I do still have more money on the way and I should be able to finish out at a total of $17,000 made. A little bit of math later (13 weeks of work * 4 = 52 weeks, $17k * 4 = $68k year equivalent). My goal was to make over $60k salary equivalent and I should achieve my goal assuming all the deals go through and I get the bonus I was promised.

A little bit more math real quick to look at Grant Cardone’s 40% rule:

$68,000 * 0.78 = $53,040       (22% tax for single person 2018)

$53,040 * 0.6 = $31,824         (40% of your after-tax income goes to “saving to invest”)

Live on $31k a year, put $21k in the sacred accounts, 5 years till $100k the minimum Mr. Cardone advises to invest.

I’ve proven I can live at $24,000 a year or there abouts with my frugal living, and I have the willpower to stick to the goal. Now the average pay coming out of my school with my degree is around $65,000 but I am sure we can do a little bit better than that. Hopefully with a good job or a side hustle or two, perhaps passive income that I’ve been building we can accelerate the 40% rule and build real wealth!

If you’re curious I ran some more numbers with the 40% rule and the current tax brackets for a single person.

40 rule.JPG

As always let me know what you think and what you want to see more of!