Tuesday, January 31, 2017

2016 Passive Income Coverage

With another year behind me, I'm another step closer to financial independence and retirement.  For me, there's a difference between financial independence and retirement.  Financial independence is the point in which you no longer need to work to survive since your investments can cover your living expenses.  With financial independence, I can still choose to work if I want to.  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 2016:
  • Dividends From Taxable Brokerage Account = $2,570.12
  • Dividends From Roth IRA Account = $2,571.23
  • Rental Income = $17,750.00
    • Total Passive Income = $22,891.35
My total living expenses for 2016 is $41,949.16.  This does not include money spent on charitable contributions, accelerated mortgage payments, 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.

So for 2016, my passive income covered 54.57% of my living expenses.  Awesome!  My passive income increased compared to 2015, and my living expenses decreased compared to 2015.  I would say that I'm heading in the right direction.  Based on this, I'm more than halfway to financial independence!  Woohoo!!  Hopefully with a mortgage now eliminated, my living expenses will be even lower in 2017 and my passive income will continue to grow.  Although with a second child, the extra expense of another child may offset the savings of having no mortgage.  We shall see.

I'm super pumped about what 2017 has yet to bring.  Hopefully even more progress towards early financial independence!

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

14 comments:

  1. Looks like you are well on your way. Covering more than half of your expenses is awesome. You know, for all the attention I give to my dividend stocks and passive income I never really calculated with really accuracy how much of my expenses it really covers. Do you plan on focusing more on dividend income or rental income going forward? In other words, is another rental property in your future? Thanks for sharing.

    ReplyDelete
    Replies
    1. Hi Keith,

      I'm hoping that my passive income will cover more at a faster rate with each year due to compounding. I find it's pretty useful and eye opening to know how much of your living expenses was covered by your passive income.

      That's a great question. As of right now, I plan on focusing more on dividend income going forward. I don't want to say that I never plan on investing in rental properties, but in the near future, I'm going to be focusing my efforts on building my dividend income to better diversify.

      Thanks for stopping by and commenting.

      Delete
  2. Half way there. That is fantastic. Now that tour mortgage is paid off this should accelerate your retirement super quick. Wish you all the best for 2017

    ReplyDelete
    Replies
    1. Hi Buy, Hold Long,

      That's the plan; with one huge fixed expense cut out, that frees up more cash flow for me to invest with. I'm seriously hoping that this will quickly accelerate my financial independence and retirement.

      Thanks for stopping by and commenting.

      Delete
  3. That's pretty amazing right there. Just think of where you might be in a few years if you keep it up. Onward and upward!

    ReplyDelete
    Replies
    1. Hi Chris,

      Haha... I think of where I might be in a few years quite often actually. I know some people work for many years and don't retire until they are really old because they say they would be bored to death. Not me; I know EXACTLY what I want to do when I'm retired and no longer working. I'm really hoping that with each year I'll be increasing my passive income stream at a much faster rate. Like you said, onward and upward!

      Thanks for stopping by and commenting.

      Delete
  4. I think the hardest part is the first halfway point, I think once we get there, the remaining half comes in at a much faster rate thanks in partly to the income that the portfolio is now generating.

    ReplyDelete
    Replies
    1. Hi Dividends 4 Future,

      I couldn't agree more; the hardest part is the first halfway point. In addition to the income the portfolio is now generating, it's also because the power of compounding has a more magnified effect. A 10% growth on $100 brings you to $110; the same 10% growth on $1,000 brings you to $1,100.

      That's why most people say that accumulating your first $100,000 is the hardest. Here's to hoping for a much quicker dividend snowball accumulation!

      Thanks for stopping by and commenting.

      Delete
  5. Dude, crushing it on the rental income! I would love to hear more about that! Send me an email please! :)

    ReplyDelete
    Replies
    1. Hi Passive Income Dude,

      Thanks! I will send you an email shortly. :)

      Thanks for stopping by and commenting.

      Delete
  6. Nice update. You're well on your way to retiring, probably much earlier than your target date.

    ReplyDelete
    Replies
    1. Hi Investment Hunting,

      I'm really hoping I can be financially independent as soon as possible and also to be able to retire much earlier than my target date. Then I'll have more time to do the things I enjoy.

      Thanks for stopping by and commenting.

      Delete
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    ReplyDelete
    Replies
    1. Hi Ghanshyam Panwar,

      I'm glad you like my blog and find it useful. This blog is meant to track my progress and journey towards financial independence and retirement. It's also a great way to keep me accountable and on track towards achieving my goal. I also hope that others may find it as a source of encouragement, help, or inspiration.

      Thanks for stopping by and commenting.

      Delete