Non-Wage Income – Q1 2012 Update

I am now tracking my passive income versus my expenses each month, towards financial independence. This only includes income in taxable investment accounts (not in my 401(k) or in my Roth IRA), rounded to the nearest dollar. I also track my W-2 income to compare to the passive income and my expenses. Watching that income / expenses percentage get higher is really fun as well :)

Since the amounts are so low right now, I’m going to do this update only once per quarter.

Definitions

  • Interest income = the sum of all interest earned in my savings accounts, rounded to the nearest $5-10
  • Dividend income = the sum of all dividends posted in my taxable investment accounts, rounded to the nearest $5-10
  • Expenses are rounded to the nearest $100
January February March Q1 2012 2011 2010
Interest income $50 $55 $80 $185 $550 $515
Credit card dividends $40 $10 $5 $55 $65 $40
Dividends none $0 $0 $0 $60 none
Total passive income $90 $65 $85 $240 $675 $555
Expenses $3,400 $6,100 $5,200 $14,700 $39,600 $43,300
Passive income / expenses 2.6% 1.1% 1.6% 1.6% 1.7% 1.2%

I didn’t have any taxable investments in 2010. I had a very small amount in 2011. I have more in 2012 and my savings accounts have higher balances, so I should see much more in passive income this year. My goal for passive income (i.e. interest and dividends) for the 2012 year is $1,000, which would cover 2.3% of my estimated expenses for the year.

Readers, do you track your non-wage income? If so, how are you doing? Do you have a goal for the year so far?

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20 thoughts on “Non-Wage Income – Q1 2012 Update

  1. I’m earning quite a good amount of extra income (mainly from my sites) but our passive income is still low at around £40 a month – interest and cash back. My first target is £500 a month which would be half of our basic living expenses minus mortgage payment.

    Love your blog :)

    • Thanks, Laura! :)

      This is my first look at comparing my expenses to my passive income, so I’ll see how it goes this year and then set a far more aggressive goal for next year.

  2. No….I don’t. Mainly because I don’t really have a whole lot of it. Looks like you’re doing great, though! The numbers may be small to you, but they’re big compared to my 0.

  3. I don’t have any non-wage incomes for now but we’re planning to buy a rental property soon which should give us a good start with our passive income.

  4. Passive income is fun! We basically only track it separately at tax time when we get the forms from our stock companies. I do always smile when I get the DRIP announcements. Or the quarterly dividend from our single taxable stock that we don’t DRIP.

    I would feel so much more secure about the immediate future if we had the possibility for greater passive income in our non-retirement accounts, but rationally I know we don’t need that money right now (while we’re both employed) and it should go in our retirement accounts in order to maximize earnings. So I keep funneling money into our retirement accounts where it’s silly to do anything other than DRIP.

    • :) It definitely is fun! DRIP’ing is fun too!

      You guys are “lucky” in how much tax-deferred room you have. I definitely feel you on the security on having more money in non-retirement accounts. My mom thought I had way too much in cash reserves and should use more of them as a down payment, which totally freaked me out :P

      On the other hand, I’m pretty confident that I will surpass the Roth IRA eligibility limit this year, even with maxing out my 401(k) (boo, but really, yay) and I’m not sure if backdooring it makes sense for other reasons. So I might just have $17,000 of retirement account room for 2012, which is far less than my 20% of gross income invested goal. This does mean that I will have more “now” security since a large portion of my investments will eventually end up in taxable, not retirement accounts.

    • Thanks! I used to see around $5/month when I was in college too. I’m seeing so much now because of how much I have in cash savings, with the plans to purchase a condo.

  5. I started doing this last year by looking at our tax returns and comparing total dividend and interest income to our monthly expenses. I think you know now much I love the idea of one’s ‘crossover point’. Right now things are really skewed for us as we have a big chunk of money earning (minimal) interest that will be used for an upcoming downpayment.

    Once we buy a house and get to a more steady state, I hope to start tracking our passive income more than just once a year.

    Looking at this number really motivates me to save more in our taxable accounts. Ideally we’ll reach our crossover point before we can have access to our retirement accounts so I would like to have money saved outside our retirement accounts.

    Thanks for the motivation to start tracking this more often!

    • You’re the one who got me hooked on the idea! (Well and nicoleandmaggie.)

      I’ve always loved watching the interest go up each month, but now it’s going up even more each month :) I’m curious to see how the (taxable) index funds turn out dividends as well once I reach more than $8,000 in my taxable account and start investing in index funds there – that will definitely be far more key to reaching my crossover point than interest at under 1%…

      Good luck with reaching your crossover point!

  6. Congrat on the continued growth of your non-wage income. Last year was the first year I had non-wage income. $90 came from interest and $1200.00 from dividends. This year it should be between 3-5k. That is a big gap; mostly due to the fact that I have held off buying stocks while the market has been moving ahead. You can’t earn the dividends if you don’t invest, but I’m not excited about most of the stock prices right now.

    • Thanks! Wow, an increase from $1,300 to $3-5k is pretty awesome!! You are doing pretty well :) I don’t think I’ll see that much of an improvement YOY this year since it’s going to take a bit before I make some purchases in my taxable account, but I will get there, slowly but surely.

  7. How fast or how slow we all arrive at our goal doesn’t matter. What matters is that you do arrive. I think you’re doing wonderful and love seeing how detailed you are with your tracking and forecasting. It’s inspirational :-)

    • Agreed! It is really cool to start to see my savings and investments start to compound finally. If I earn $45 in interest in a month and the interest rate is 0.84% (Ally’s rate when I last checked), I would actually earn $0.03 the following month on just that interest! I know that’s small, but it’s still progress! When I was a kid, interest rates were so low on my brick and mortar bank savings accounts, that I didn’t really understand compound interest.

      Thanks, Stoic! That means a lot :)

  8. i think the best part is seeing those numbers increase month after month. Once you get some dividend payouts, you should be good to go! Good luck on the $1K goal!

    • Agreed! Even seeing them increase by pennies excites me, haha. I’m definitely looking forward to the dividend payouts, but right now my taxable investment account is earning pennies since it’s waiting for enough money to invest in an index fund. Good thing I’m patient :)

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