Challenge "Cash flow" update September 2018

Today I hit $100,000 in cash flow from the investments for this year so far.
And with that I reached Level 2 of my "Cash flow challenge" - "Sailing".

With $100,000 the yearly expenses are more than covered. Anything above that will be just fun.  

Below is my cash flow per month compared to the S&P 500 performance. 

my cash flow

S&P500 returns in % to date (September non included yet)

Having multiple cash flows - is this the ultimate goal?

M. asked me: Should having multiple cash flows be the ultimate goal? Some say that this defines the level of wealth.


Multiple cash flows are nice to have. If they are multiple, at least some of them should be passive or you will work yourself tired.
This goes along with not keeping all eggs in the same basket. But maybe instead of juggling multiple small baskets one can get a single really sturdy basket with a lid and with a low upkeep and have all the eggs in it?

How will that define the level of wealth? It depends on how much return those eggs will bring.

Articles about generating passive income are very popular right now. The suggestions focus mostly on something like creating an online course, writing an e-book or some other side hustle.
If you are a high income earner, you will not bother with anything like that. A super successful online course or an e-book are "zebras".

I prefer 'horses".  "Horses" in this case will be using your saved money to produce additional income. Some people buy timber land and get income from timber, some buy farms and rent them out, some buy rental property. This requires work and dealing with people.

I was looking for something like a business that produces income but has no customers to deal with. And I found it in investing.

I see my investments as a business which I bootstrapped with my savings. The trading fees and expense ratios are business expenses. The realized gains and dividends are income (which is taxed). The stocks and other investment vehicles are your "clients" and you can be very selective with which clients you work. The good thing, those clients never complain.

This business is brutally honest. Any mistake in investing is your own mistake due to lack of knowledge or experience. The more you know the better you get.  

The percentage value of your return is the profit margin. You can get down your business expenses by picking a broker with lower fees. There is not much tweaking on taxes. But you can select your clients and you can fire your clients too. You can follow up with the statistics and see how your business is doing.

You also an choose the degree of involvement into this business. You can put it onto the slow burner and just buy ETFs and dividend paying stocks long term. Or you can choose to be more active.

Like every business it will have seasons. And they are called "bear" and "bull".  They vary in length but those are just seasons, and after a bear there will always be a bull. And after a bull there will always be a bear. I know, the previous sentence sounds like I am unconcerned about the bear markets. I am actually concerned a bit, but I am not close to retirement and if one will happen tomorrow, there is still time to recover. Also the dividend paying stocks give you some protection during the bear markets. I am curious to see how I will deal with the next bear.

I would separate 4 levels of risk in this business:
Risk level 1: Very low risk - CDs, government bonds, money market accounts
Risk level 2: Medium risk - ETFs, dividend paying stocks with good track record
Risk level 3: High risk - Non-dividend paying stocks or stocks of troubled companies, junk bonds
Risk level 4: Very high risk - Penney stocks, options

Many might disagree with this classification and it will be just an opinion against another opinion. Only results will matter and show who is right.

Since I have a very big fear of loss, my risk level is level 2. I might move slower, but at least I will move forward.

A good thing about this type of business - investing doesn't take much time. Any other side hustle feels like a second job with very low pay compared to my main job.

By the way, this blog is not a side hustle. It only qualifies as a hobby. It costs $12 a year to maintain and has brought in $1.5 trough advertisements this year (there were 2 clicks on the ad banner sometime 2 months ago). That is it. 
I am writing just for fun and education. $12 per year is really not a big deal. I am not doing anything to promote it. Mainly because I want to stay anonymous but also because that requires to post comments on popular blogs so people can click on your name and see what blog do you come from, but I am too introvert for that. 

In elementary, middle and high school my school jobs were "class nurse" and "stengaseta" - Russian word for school wall poster/news paper. That is almost the same I do now. Physician and blogger, hahaha. But at home I had a different job. I was "the money keeper". My father was giving me the money from his side hustles to hide from my mother. I kept it well. Mostly I didn't give it back to him, because many times he forgot to ask back for it. I had a good stash. I still do the same thing today. Of course I don't keep my father's money, now I keep my own. I use this Warren Buffet's rule: Never loose your money. So I keep it.

If some strange star constellation will move me to write an e-book, writing it shouldn't feel like a second job. If that will be fun, like this blog, I might. I just don't know what about...  

Challenge "cash flow" update 2017

Challenge "cash flow" update 2017

For the year 2017 the overall investment income (realized gains, dividends and interest) were slightly over $49,000.
This almost covers the calculated yearly expenses of $50,000 (which I calculated with a nice comfort margin) and my number of $49,000 comes close to the challenge status "swimming". 

Below is the graph with income per month for 2017.

      2017

Below here is the SPY monthly return in %. 

SPY 2017

Since I didn't reach $50,000 in 2017 I didn't reach the "swimming" status of my challenge. Maybe next year. But it is nice to know that in 2017 I have basically covered my expenses with non-work income.

The numbers are pre-tax and will be taxed at the highest % bracket. But if I was not having any other income, the taxes would be much lower and that still should have covered my bare-bone expenses (if I take out all the margin for entertainment, dining and travel).