Zero Passive Income

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This month is a special month. Not only does it mark 9 months into the Zero Passive Income Experiment - it also marks 1 years since Jill and I have been married.  We’ve done a lot of changes to our finances sine we got married. See how far we’ve come in this month’s wealth report!

We we broke as a joke when we got married. Then in January of this year we decided to make a change. We tightened up our belts. Learned to be content. And started being responsible with our money.

Check out our September 2011 wealth report and get the details of how what we did with our money and what made the difference:

Earned Income - I’m a forensic accountant and my wife is a registered nurse. We both have great jobs and decent incomes. But we’re slowly chipping away at our dependance on earned income. Don’t get me wrong, earned income is great and having a good job is key to building wealth. But a job will keep you J.O.B. (Just Over Broke). The problem with earned income is that it ceases to come in if you cease to work. Worse yet, what if you loose your job? Expenses keep coming every month but the paycheck stops.

Passive Income – The answer for our earned income dependancy was passive income. Since the inception of the Zero Passive Income, it’s been our goal to build quality, lasting, passive income sources. In the 9 months that we’ve been at this, we finally reached a milestone where our passive income coming in to cover the mortgage on our primary residence! Woot woot!

Other Earned Income – Early this month, my HR rep asked me if my mailing address was current. “That was an odd question”, I thought. A couple days later I received a letter in the mail from my employer. “Great… what did I do this time?” I wondered. Did I break some company policy? Was the company going putting me on notice? What could this letter be?

When I opened the letter, I was pleasently surprised to find a bonus check for $1,000. No letter. No correspondance. Nothing else. Just a check. That was it. Appearently, the company just wanted to show its appreciation for all my hard work! Awesome… =]

Google AdSense - Did nothing. Made money. Adsense is grrrrreat!

Last month we earned $437.67 this month we made $438.52 which is just about what we made last month. Considering I didn’t put any time into this project this month - I’m more than pleased. (For more information about how I make money with Adsense check out my adsense story and my niche site update)

Net Worth - Just 9 short months ago, Jill and I were “insolvent”. We had negative net worth. Worse yet, 1 year ago we got married and were worth exactly -$5,212.85 (yes, that’s a negative)

With some accountability, transparency, and radical changes to our spending habits we’ve come a long way from where we were. Our net worth sits at $53,262.90. That’s a $2,253.16 increase over last month and $58,475.75over 12 months ago.

Our Focus Change – We started the Zero Passive Income experiment with the intention of building passive income streams. And while that remains a goal for us. We’ve changed or focus. Instead of focusing of aquiring assets that produce passive income we’re focusing on paying off debt. Why?

We reailzed early on that assets that produce income and increase in value add to our networth every month. It’s like building muscle. What we didn’t realize is that we were try to build muscle when we were grossly overweight. We were financially flabby. We had $30,000 of flabby debt that we needed to loose. Every month we were pouring money into those debts and making the banks rich. We had the debt blanket pulled over our eyes.

I rationalized keeping the debt around because we were using our extra funds to put into investment vehicles that yielded gains that were larger than the interest rates on our debts. Made sense to keep them around right?

Wrong! When I started to analyze how much of my payments were composed of interest and adjusting these investments for inflation and risk – the yields were about the same.

So no more keeping these debts around! We’ve started our Total Money Makeover and from here on out we’re getting intense about paying them off.

Change In The Report Presentation - Along with the change in focus comes a change in the way I’m presenting this report. The old report doesn’t adequately illustrate our debt reduction efforts. I was inspired after posting about the Big Payment to the Timeshare Loan we made. So I’ve added graphs to show total assets and total liabilities over time and a “Monthly Change” column.

The graphs will show that we’ve gone from a philosphy of aquiring assets to a philosophy of paying down debt. The monthly change column will quantify our efforts for the month.

Checking and Savings - Because we started our Total Money Makeover and have been intensely paying off debt, we decided to take out some of the money in our savings account and use it to reduce the principle of debt. That’s why you’ll see a dip in our accounts.

Typically, we would be accumulating cash so that we can roll it into another investment. But our focus has changed. Instead of buying assets we’re getting rid of debt.

Retirement Accounts – Employer administered retirement plans are a gold mine! That’s why we’ve been structuring our contributions to Jill’s 403-b account so that we can maximize her employer’s dollar for dollar matching program.  But since we’re trying to pay off debt, we’ll be putting our contributions on pause. We’re scraping every available dollar to pay off debt. Deferring our contributions until we’ve paid off our debts will free up over $500 per month!

Real Estate Partnerships – You’ll notice that I added new line items for “RE Parthership 1 – Cash” and “RE Parthership 2 – Cash”. These represent 50% (my share) of the balances for the bank accounts for each partnership. These are the profits after mortage payments, insurance, taxes, utilities, and management feess. While I’m entitled to these funds, I do not have them available to me because they are being accumulated as emergency funds for each respective property.

Timeshare – Everyone knows that I’ve been complaining about this time share from day one. It feels like I’m throwing away money. This month I talked to a broker who specializes in selling used time shares to see if I could sell this thing off and free up some cash. He told me that if I’m desperate to sell I could price it anywhere between $1-2 per point and get it sold within 30 days. That means that the value of this timeshare is about $3,500 – $7,000 which is lower than I suspected. I’ve adjusted the value of the timeshare to $1.50 per point or $5,250. It sickens me that we paid $13,000 for it.

For now, I’m going to do more research before deciding to unload this toxic asset.

Student Loan 2 – We’re proud to annouce that this month we made a huge-ungo payment to student loan 2 and paid if off in full! Getting this debt completely out of the way frees up about $61.00 per month that we can put towards our debt snowball.

Timeshare Loan – When we started our Total Money Makeover I was torn between following the plan that Dave Ramsey prescribes and paying down the smallest balance first orrrr following through with what we’d committed to do in the past and pay down the timeshare with the highest interest rate.

It was a tough call, but we decided to….

Do BOTH! We paid off student loan 2 and took money out of our savings to make a whopping $3,500 payment to the timeshare. Doing that made the timeshare loan the next smallest balance and thereby the next debt on our list to tackle.

Other Debts - All other debts received the minimum monthly payments.

Goals Completed This Month

I publish all our goals here. These are the goals that we completed this month:

• Make enough passive income to cover the mortgage payment on primary residence (completed 9/30/2011)
• Passive income of +15% of total monthly income (completed 9/30/2011)
• Reduce total student loan debt to less than $20,000 (completed 9/26/2011)
• Pay off student loan 2 (completed 9/26/2011)
• Reduce loan on timeshare to less than $8,000 (completed 9/30/2011)
• Reduce total debt to less than $285,000 (completed 9/30/2011)
• Have more than 12,500 Twitter followers (completed 9/19/2011)

See last month’s August 2011 wealth report!

Related posts:

1. January 2011 Wealth Reports
2. April 2011 Wealth Reports
3. May 2011 Wealth Reports
4. June 2011 Wealth Reports
5. February 2011 Wealth Reports