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Passive Income Portfolio

[UPDATED 6/17/2015]

The core of my financial plan is to cut expenses and increase passive income (also read this post). By doing this, I minimize the amount of money that I have to actively make by working, which makes my life better. The purpose of investing isn’t to make money, and it isn’t to get rich. The purpose of investing is to make life better (tip of the hat to Tim Ferriss, who elucidated this concept beautifully in a recent podcast when he talked about how the investment strategy he employed isn’t the one that makes him the most money, but the one that makes his life better with the least stress).

I am an income investor, meaning that I don’t really care what the capital (principal) value of my portfolio is. Because I never want to spend my principal, the capital value is irrelevant, but the monthly income is what is life changing.

I primarily rely on my after-tax accounts to provide income for today’s bills, but amazingly, even taking income from retirement accounts and paying the early withdrawal penalty is still completely feasible and you still come out ahead compared to not putting the money in those retirement accounts in the first place. This is a MUST READ post on the topic of using retirement account income pre-retirement.

Below, I’ll show you my investing income progress. 

TAXABLE (non-retirement) investments

Investment Annual Income
Duplex $2400
Stock Portfolio $1800
Hard Money Fund #1 $2340
5 Year CD $1140
TOTAL $7680

Retirement accounts (read this first…)

Investment Annual Income
Stock Portfolio $1800
Hard Money Note $3996
Hard Money Fund #2 $4620
Hard Money Fund #3 $2100
TOTAL $12516


Adding up the income from retirement + after tax accounts yields $20,196/yr. This income can be spent today without touching principal, which means I can use the income and not “eat into my savings.” The income can also be re-invested if I don’t need it now. 

I’ve always felt that growing income is a much more important goal than growing principal, or at least, more predictable and easily attainable.

As an aside, I still feel that owning your primary home is essential, and while it won’t help your cash flow situation now, it is one of the most important investment decisions you can make EVEN in a falling market and EVEN if you don’t “love” real estate. Read an article I wrote on this topic here.

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