Monday, March 19, 2018

2017 Passive Income Coverage

As another year has passed by, I'm one more year closer to financial independence and retirement.  It feels like time just keeps flying by faster and faster... and I feel it especially so because I can see my children growing up.  I still remember bringing my firstborn back from the hospital and now he's talking with his own personality.  Looking back at his baby pictures and looking at him now just reminds me of how fast time flew by.

I mention financial independence and retirement as if they are two different things, and to me, they are.  Financial independence is the point in which I no longer need to work to survive since my investments can cover my living expenses.  With financial independence, I can still choose to work if I want to; it also gives me the independence to do work that I'm passionate about, without having to worry whether my salary can support my family.  On the other hand, retirement is quitting the workforce and no longer working.

For me, my goal is to reach financial independence ASAP and aim to retire by the age of 56 in 2041.  I still have a while to go before retirement, but I'm hoping to quickly get to the point where my passive income can cover all my expenses so that I don't need to worry about supporting my family in case I get laid off (God forbid).

For purposes of my "Passive Income Coverage" posts, I will only consider my dividend income and rental income.

Below are my dividends and rental income for 2017:
  • Dividends From Taxable Brokerage Account = $3,298.46
  • Dividends From Roth IRA Account = $4,048.49
  • Rental Income = $18,000.00
    • Total Passive Income = $25,346.95
My total living expenses for 2017 is $61,087.16.  This does not include money spent on charitable contributions and investing.  The reason I did not include these amounts into my living expenses is because they are not costs that are necessary in retirement.  I do not have to make charitable contributions nor do I have to have money to invest with when I am in retirement.  My total living expenses for 2017 is $19,138 more than 2016.  The main reasons are due to increased children's expenses, my accelerated real estate tax payments at the end of 2017, and car payments.  I had to buy a bigger car to accommodate my bigger family, and so I bought a new car with a 5 year loan at 0% interest with no down payment.  Now I know some frugal people will think I'm stupid for buying a new car instead of a used car, but it's psychological for me.  I like the peace of knowing that I'm buying a brand new car with no problems instead of having to worry I got tricked into buying a used car with issues I didn't identify.  So yea, that pretty much explains my increased living expenses from the prior year.

So for 2017, my passive income covered 41.49% of my living expenses.  My passive income coverage percent decreased compared to 2016, which was 54.57%.  Again, this is primarily due to my increased living expenses.  The good news though is that my passive income is increasing.  These living expenses should be significantly lower in retirement because hopefully I will no longer have to pay for any of my children's expenses and I don't plan on having any car payments to make in retirement.  Overall, I think I am still heading in the right track because my passive income is consistently growing and a 41.49% passive income coverage is still pretty good in my opinion.

I'm looking forward to what 2017 has in store for me.  Hopefully good investments, increasing dividends, and enjoying life's precious moments.

How much of your investments or passive income covers your living expenses?

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