My definition of wealth is having an abundance of time, in contrast to the rich who have abundance of money. The ultimate goal is to become wealthy and the best way to achieve this is through sufficient passive income that replaces the need for a job. After financial independence, the choice always remains whether I wish to continue full time, part time or even alternative employment but this should be out of choice rather than fear.
For Q4 2016 I’ve received £965.64 in passive income after expenses* as hundreds of companies around the world have been giving me a share of their profits whilst I’m working, sleeping or playing poker. Sustaining this approximately equates to an extra £3,862 every year. The dream is to create £2,000/month or £24,000/year but I’m still very far from this goal.
October and November
All my passive income streams worth mentioning at the moment are paid quarterly and therefore the months in between are relatively insignificant. October and November were such months with the only income received being interest from my bank’s current account. With the hike in monthly fee and halving of interest rates recently, things are becoming more grim.
December, however, contains the first quarterly payment from my new peer-to-peer (P2P) lending ISA account. I’ve invested a reasonable proportion of my wealth into this and will be your guinea pig for now. So far, I’ve received the first payment on time and the % return they promise isn’t that outrageously good I should be suspicious. Famous last words and all that though.
This month also contains the first quarterly payment from my stocks and shares (S&S) ISA. Although the net return is low single digits after investment fees, this report doesn’t take into account capital appreciation (or depreciation). UK markets have historically generated a 5% annual real return (that’s after inflation) over the past decades, but of course past performance is not always a predictor of future performance.
The surprising quarterly payment I also received in December was from an index fund I’d completely forgotten about. There are some advantages to having a memory like a goldfish.
You might be mistaken in thinking I have so much money that I forgot about some stocks but what actually happened was I bought the index fund back in October a couple of weeks before the ex-dividend date**, then changed my mind and sold the fund a few weeks before the dividend payment date**, having made a small capital gain of £100. Having completely forgotten I owned this fund means that I was pleasantly surprised by the £204.86 payment that arrived in my investment account a few weeks ago.
Essentially, I had successfully executed a dividend capture strategy without even realising it. Beginner’s luck is real. The only downside is that it’ll only make a one-off appearance on my passive income reports.
|Income||Tax / Expenses||Total Passive Income|
What will I do with £965.64? Normally if I was following my own advice I’d definitely reinvest it to produce more income for 2017. However I feel there are more pressing matters at the moment.
My mum has unfortunately developed an intractable cough which I suspect is occupational from her part time Chinese takeaway work. The kitchen hood responsible for filtering oil fumes is broken but the irresponsible owner isn’t willing to replace it. Treatment for occupational conditions is generally removal of the causative agent or personal protective equipment. I’ve advised her to start wearing masks and have given her most of the passive income from this month in the hopes she’ll take some time off work.
I was bored the other day so started looking through my Amazon history which dates all the way back to 2007. That was the year I was accepted into medical school and I remember asking my dad to buy lots of expensive medical books that ended up just gathering dust. I’ve been very impressed with their business model but never thought I’d be receiving money from Amazon.
Not really worth mentioning but I’ve not included the £5.38 I earned from sales of my MRCP book on Amazon this month because I’ve contributed all of it (and more) to Medicins San Frontieres.
That concludes the quarterly passive income report – feel free to leave your thoughts below and have a happy new year!
*Expenses include investment fees and taxes
**The ex-dividend date is the date that you have to own the fund on to get paid the dividend on the dividend payment date. So for example, if the ex-dividend date is christmas and the dividend payment date is new years and you sold the fund on boxing day, you’ll still get paid on new years.
P.S. I learned everything I know about finance from this book, this book and that one, amongst many others. For a more extensive list, don’t hesitate to drop me a line at firstname.lastname@example.org. If you prefer learning through listening use this link to earn a free audiobook of your choice by signing up to their 30-day free trial. Simply cancel with the click of a button if you decide later on that the service isn’t for you, no questions asked.