My Passive Income Has Reached Almost $500/Month- Here’s How
Now, I know that that isn’t particularly impressive to most of you.
In fact- I’m sure that many will scroll right past my story to read about how someone made $11,000 last month selling NFT’s or trading crypto, but I’m not into that.
A slow and steady increase in sustainable passive income is much more up my street.
So, without blabbering on anymore, let me talk you through how I hit, what I believe anyway, to be a major milestone in my quest for financial freedom.
First thing’s first- I live in the UK, so I will be converting my GBP into USD for the purposes of this story.
My main passive income source is a property that I own and rent out.
Now, for and in-depth breakdown of my return on that investment, you can read it here, but for the purposes of this story, I’ll just use the headline numbers.
I bought the 1-bedroom flat for £60,000 back in 2020, with a £15,000 deposit and a £45,000 loan from a High-Street bank.
The loan is secured for 5 years at a rate of 1.78%- meaning that my monthly expense on this repayment (not interest only) mortgage is exactly £147/month.
The rental value of the property is £400 per month, but I pay a local estate agent to manage the property for me.
For a fee of 10% plus VAT they manage everything from rent collection to general repairs, electrical certificates and general phone calls from the tenant- I really don’t have to do anything at all.
The estate agent therefore receives the rent of £400, subtracts £48 (£40 management fee plus £8 in VAT at 20%) and sends me the remaining £352.
Thus, I make a profit of £205 per calendar month- which at today’s exchange rate is just over $251.
So, what about the other $250?
The second source of income is my dividend stock and REIT portfolio.
I have 7 individual income producing holdings (and one that doesn’t, which you can read about here if you like), that collectively pay dividends into a stocks and shares ISA that I’ve had since I was 18.
I’m not going to explain why I own each of these, I’m just going to reel them off and state what each holding generates in annual income.
The first is Apple ($AAPL), I have 34 shares paying $0.92/share in annual dividends, that’s a total of $31.28 or $2.60/month.
Secondly is The Coca-Cola Company ($KO), I have 10 shares paying $1.76/share in dividends, or $1.47/month.
Next is Lloyd’s Banking Group- a LSE listed stock under the ticker LLOY. I own 1,000 shares, and each share pays £0.02/year in dividends (the LSE is listed in pence, not pounds, so that's a yield of just over 4%). That means my £20/ year in dividends is worth $24.53- or $2.04/month in income.
Next is Proctor and Gamble ($PG), a stock that I’ve added in this current bear market. I bought 6 shares, which generates $21.90 in dividends, or $1.825/month.
My single largest holding, Realty Income Corp ($O), provides a significant portion of my overall portfolio income. I own 58 shares that pay $2.97 annually, meaning $172.26/year or $14.36/month. Unlike any other company in my portfolio, Realty is a REIT, and therefore does actually pay monthly, rather that quarterly or twice a year like everything else. It’s great to see that money trickle into the account on the 16th of every month.
Next is Starbucks ($SBUX), I own 8 shares that pay $1.96/year, for a total income of $15.68 or $1.31/month.
Finally, we have the Vanguard S&P 500 ETF, which I currently have £1,500 in at a yield of 1.25%. This totals $18.75 US or $1.56 per month.
So, in total, we have $25.17/month in income from these 7 holdings, taking my total passive income to $276.17/month.
I’m still quite a bit short of my claimed $500 total, so where is the other $225/month coming from?
The answer to that question, like many others in life, is coffee.
I’m just off to go get one, I’ll be right back.
No seriously, my day job is managing a coffee shop, and I know I titled this story as ‘passive income’, but bear with me a sec.
As an incentive, I receive a 10% profit share at the end of each financial year, but as I don’t have to ‘work’ for that- it’s not part of my annual salary, I see it as passive income.
Of course, if I left the shop or got fired I’d lose this stream of income, which is unlike the other two, but as it’s not part of my general pay, and as I try to invest all of it and not spend it, I don’t see it as part of my wages.
Therefore, I’m classifying it as passive income, even if you don’t agree.
Last year I received £2,000, which is $2,453.08- or $204.42/month in passive income.
We can therefore add up my $251 property income, $25.17 dividend income and $204.42 profit share to see that I make $480.59/month in passive income.
Now, hopefully, I’ll be back in the Medium Partnership Program before long (I need some more followers, please), and that’ll boost my income to and beyond the $500/month mark.
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