Monday 10th December 2018 –
Over the last few months I have been toying with the concept of passive income. It seems like every single website, book, video is just a straight up scam. So I wanted to document my struggle and my thoughts on the idea so that people can follow me. I have to be honest, I still want to work – the goal for me is to generate a significant passive income that I can reduce the number of days that I have to work. Ideally 4 days a week would be excellent and then I can attribute the other 3 days of the week to my side hustles. A lot of people out there only want passive income so they can lie on a beach somewhere and drink cocktails. That is fair enough, I can’t be telling people what they can and cant do – all I am saying is that is not the motivation for me. I have always had this idea in my mind of working multiple jobs. I would love to work a day as a week as a barista, work a part time accounting job for say 3 days a week, and then work the other 3 days in a week on my passive income.
Age 26 – passive income $100 a month (bank interest only).
I started my desire to become a passive boss back in July 2017 as a 26-year-old accountant working at a job, which at the time was thoroughly challenging and enjoyable. For the previous 4 years I had never even thought of investing money and my parents certainly did not push it. The goal was to always save money and increase my deposit in anticipation for when I could try putting down as a deposit on a house. At this stage I had been working a full time job since February 2013 slowly increasing up the small pay scales of being a public accountant. The role was very comfortable and never really pushed me to far out of my comfort zone. There was at times an instance where I was really challenged but the lifestyle of a public accountant certainly wasn’t for me.
During my time there I learnt a lot of valuable skills, which will come very important later in my life and on the journey to becoming a passive boss. There are three pivotal movements of this job where I clearly remember having a direct effect on my desire to become a passive boss.
- Two colleagues of mine were talking – one was bragging about how he spends every single cent he earns each week going out drinking and going clubbing. I had no issue with how he spent his money, I knew it was not a wise decision but didn’t mention anything to him. One day those two colleagues were then discussing the share market specifically the shares they had both invested into. I couldn’t believe it, there were these financial dropkicks getting ahead of the financial game before me. From that point on I knew I had to invest, if they could do it, so could I.
- The next occasion I was catching a tram back from a client in Flemington to the city with a colleague. It was a cold night and we were both rugged up from the cold and miserable Melbourne weather. When the conversation died off, he pulled out this square bright and interesting looking book. I asked him what it was and he told me it was the barefoot investor a scott pape book on investments and making strong financial decisions for your future. I was very interested by the book and the couple of brief pages, which I looked at as he handed me the book. I gave it back to him, as he hopped off the tram to get onto his train. By the time I saw that colleague the next morning, I had already been to Dymocks in the city, stayed up all night and read the entire thing cover to cover.
- Over a two year period I always spoke to a current and then an ex employee of the companies about various investment opportunities etc. I would always love talking about companies, how the markets are going, overall economic conditions etc. It felt as if I could spend hours talking about these things with out even stopping for breath. At this stage I knew my limitations, I had never been a great person at remembering things, for example total sales figures or ratio’s etc. Despite being an excellent accountant I always struggled to remember numbers. I don’t have learning disability or anything it was just something I was never good at.
“I was worried about making money because it would make my tax return harder to do”
So after these three items happened in a rather short period of time to each other and I received small amount of money from my tax return I finally had the courage to invest in the stock exchange. I was always worried about the effect it would have on my tax return, and making it a more difficult process. When I look back, this was such a silly thing to worry about. I was worried about making money because it would make my tax return harder to do… haha when you think about it, I am glad I made a decision to take that risk.
The first stock I invested into with little to no research was Telstra. Throughout my childhood Telstra was always referenced to as being the golden egg of many mum and dad investors, as Telstra always seemed to have some a dominant grasp on the market. It was such a large and dominant player that it was simply to big to fail. I did my research and found out what the minimum parcel of shares was on the ASX – it turned out to be $500. I opened up a comsec account (one of my first problems given the exorbitant trade costs $30 per trade) and set up the link with my account holding the small tax return. A couple days passed and then I finally bit the bullet and invested on 13thJuly 2017 114 TLS shares costing me a total of ~ $560. I was over the moon, I had finally put my big boy pants on and taken one giant for my financial future. The very next day Telstra was forced to cancel the Dividend Reinvestment Plan as it was hemorrhaging cash, the share price pretty much tanked 25% within one day of investing. I couldn’t believe it haha – what are the chances – welcome to the wild word of stock investing.
I was never really upset given such small exposure I had into the market, but I sure knew how to pick them. To this day I have still not recovered the losses I made, but I will always hold those shares to remind me of the valuable lessons I learnt that day. Over the next couple weeks I made several similar purchases into the stock market. WAM, WBC and SUN were the next few investments. I had never been a fan about buying large blocks of shares, for me there was this enjoyment factor about owning shares in the different companies available. I always likened this to Pokemon – I wanted to catch them all, I didn’t care how much I had invested in any company. As long as I could say I owned some stock in the company that would keep me happy. I knew how stupid this was as I was getting seriously destroyed by the $30 fee CBA were charging me each trade.
Over this time I had continued to read some interesting and highly influential books on investing. Rich Dad Poor Dad is one that stands out a lot. The book is incredibly repetitive and really deteriorates towards the end, however the overall message of the book was well worth it. Spoiler alert – in summary Robert introduces the idea that rich people buy assets, poor people buy expenses. A rich person uses every single dollar they earn or have to invest, which generates more dollars, which they reinvest. Soon enough they have a large collection of dollars who are working for them event though they never had that many to begin with. I learn my lesson there and wrote up my balance sheet.
Assets included – a bank account of my life savings, a small superannuation balance, and around $4K in shares.
Liabilities included – a car $15K, 2 bikes worth $3K, a guitar $1K, and around $20K in HECS debt from my university degree.
It was an interesting way of looking at things, but it was just one of those things which I will always remember.
For the next few months I continued to invest in the share market, buying shares which include Bendigo Bank, Charter Hall Group, Vanguard ETF, Bank of Queensland, Macquare Group.
Age 27 – passive income $126 a month (interest $100, shares $26)
By the time I was 27 I had a share portfolio of 11 shares that were ranging between $550 – $1500 each. My investment strategy was likened to Warren Buffet, buy and hold for 20+ years. This whole time of acquiring shares I never wanted to sell them. They were such little investments that it would not be worthwhile to sell them. Over the next couple months the investing slowed down a little, however I was always putting money away through an automatic transfer system into an account that I called “$500 batch”. Any dividends I received were either put into DRP or were paid into my $500 batch account and were added to the next bunch of investments.
So by the age of 27% I had lost roughly 8% in my portfolio ($1,200), but had generated $428.55 of passive income. Now I know that the losses incurred here were not great, however I learnt a lot of lessons in the last couple months and had not blown a lot of money. Again I was never worried here of the money which I had lost up till this point in time, I knew in the long term 20+ years, that these shares were only going to go up in value. This was all a valuable learning experience.
I continued to increase my share portfolio buying CBA this time whilst the share price was relatively low due to the Royal banking commission which was going on at the time.
I was really struggling at work the past few months, the hours were in difficult and not in line with my moderate salary. Every single night I was going home and opening up my laptop and working. My bosses who knew I had been working insanely hard showed minimal recognition. It became expected and at that point I decided to pull the plug and I put in my resignation. It was an incredibly difficult decision, not only because I really enjoyed the staff who I worked with but because I did not have anything lined up. For the first time I was going to become unemployed and had no substantial sources of income to support me.
I had kept note books for work and had started to notice that more and more of the note book became about passive income ideas. When you google Passive income on youtube or on any podcast app there seems to be a plethora of scams to get intangled into. Pyramid schemes, ponzi schemes you name it, it is out there.
When I look back at these note books, I had the following passive income ideas written down. Now I was trying to think of as many passive income ideas and different sources as I could think of, these weren’t like dropshipping or affiliate marketing as they were a bit to advanced for me at that time. They were easy ideas, which I could tick of relatively easily within a few months of saving and investment.
I came up with the following:
- Dividends from shares
- Dividends from Exchange Traded Funds (ETF’s)
- Dividends from Listed Investment Companies (LIC’s)
- Interest from high yield saving accounts
- Interest from term deposits ($5,000 minimum)
- Coupons from government bonds
- Sales from redbubble online print demand
- Interest from True Pillars P2P facilities
- Creating an ebook
Now some of the ideas above are very similar, like there is 4 different items, which can be purchased on the share market but are technically different forms of investment all facilitated through the same intermediary. At the time I had 4 of these 9 ideas generating me passive income – it wasn’t enough though.
I became fascinated with generating passive income. I drew this graph of all the different sources of passive income I could generate, and all of the proceeds were going back into the share portfolio, to continue to grow over the next 20 years. It began to consume every moment of my thoughts.
This was at the same time as me starting to finish up at work, and when I really didn’t give a shit about any of the jobs which I could have been working on for them. I started to put myself first and focus on what I needed to do.
I then began to try quantifying some balances and challenging myself to increase my passive income. At this point I quantified my current passive income to be the following:
$2,045 TOTAL per annum or $170 per month.
So that is my story over the last couple years, and to where I am at today.
The next goal, which I want, is to achieve a passive income of $180 per month, a $10 increase on a monthly basis or $120 on a yearly basis. In order to get another $120 income per year if you take some of the higher paying bank stocks on the share market which generate ~ 6% returns you would need to invest around $2,000 to make that. I currently have $750 in small share investment account and will be able to increase that to around $2,000 when my annual leave entitlements are paid out on my final date of employment.
I am concurrently taking on two side projects as well, I am pursuing red bubble – I really want to try and start generating some sales through this. However my designs really are hopeless at the current moment and I haven’t really found anything that has been popular yet. The other project I am taking on is to develop a VCE Study Guide for students completing VCE Accounting. I started writing Unit 1 guide and will continue on to Unit 2,3 and 4. Additionally this week I put my advertisement up on gumtree to start tutoring for VCE Accounting as well. I am thinking around $50 per hour and hope to get at least 1 student a week, starting Feb next year.
So this just happened, working away in my second last week of work and I get an email on my private email saying congratulations I made my first RedBubble sale.
I could not believe it!! The previous night I was really stressing over the whole financial situation that I am in, I thought to myself in the morning as I ran the dog Gary V says you have to love the process of the hustle. And I started to realize that, its not about making money its about trying to make money. The money will come and when it does you wont be expecting it. When I got home I re-read the email as I was rushed at work and couldn’t spend long reading it fully. I thought it was that I just made one sale, but the person actually bought 3 of my t-shirts! That is $11 AUD!!!
This is the first time in my life I have made something out of nothing… Feeling invincible and limitless. Never stop hustling.
Want to read more?
If you are like me and want to read all there is one generation of passive income, then follow this link through to my Top 30 Passive Income Ideas. Here I list out similar ideas to the one above, and go into detail explaining how to generate passive income through them.
I also have my Top 10 Passive Income Book list that I save you hours and hours of reading and take the very best lessons I learnt from each book.