Welcome to My Financial Shape for a new monthly update on our latest financial achievements and projects, documenting the journey of our family of four towards achieving Financial Independence by 2020.

Financial Highlights of the month

• Savings rate 48 %, down substantially compared to the previous months (pent-up spendings and first family holidays since eased lock-downs in Central Europe).
• Wealth increased by USD 12’000 to a total of USD 890’000, driven by stock market performance and savings from our day jobs (active income) plus cash flows from our investments (passive income).
• Dividend income in June was strong with USD 1’700, up 44 % compared to June 2019.
• Income from Peer to Peer – and Crowdlending Platforms (P2P/CL): USD 226, down compared to previous months due to cash withdrawals.
• Start of Passive Income Challenge (adding each month one more cash generating source). In June, a new revenue stream was added with my new Cashback Credit Card.
• Strong investment process in June, putting roughly USD 17’000 to work (six Big Tech Names were added to stock portfolio, furthermore my wife and I took a stake in a Swiss chocolate producer and a Mexican mining company).

All right, let’s dive into the Financial Update for June:

Strong cash generation partially offset by increased spendings

My wife and I both work part-time (50 % and 90%) and have always set a very strong focus on a robust savings rate which is the corner stones of one’s Financial Shape and the basis og our Investment Process.

The more cash we are able to put aside from our day-jobs, the more we are able to acquire income producing assets such as dividend paying stocks, corporate bonds, consumer – and real estate loans (through P2P platforms) etc.

We define our savings rate as the percentage we are able to “extract” as savings from all our income sources (net amounts, after taxes etc.) such as our two salaries, dividends from share positions, received interests (from corporate bonds, P2P investments etc.).

My wife and I target a savings rate of 60 % on average.

WHY?

Because it’s a turbo on our path towards Financial Independence. For each work year we are able save one and a half “freedom years”.

June was characterized by several additional spending positions. First, we took the first holiday since lock-downs in Central Europe had been lifted. We spent one week in Germany and travelled around in Switzerland. It’s just awesome to be able to travel again. But it also means over USD 2’000 in additional costs for our family of four.

Discretionary consumption in general was significantly higher June compared to the previous months, in particular when looking at March and April, which showed our best savings rate ever (75 % and 78 %) due to the lock-down, which forced us to push back and even temporarily eliminate spendings (such as dentist, opticians, gym, restaurants, cinema etc.).

With 48 %, our June savings rate was still robust, but significantly lower than in the previous months. My wife and I will work on our cost structure in the following months so that on average, our savings rate remains at around 60 %.

Our Wealth Structure in June: still overweighted in Cash

Wealth increased from USD 867’000 to almost USD 890’000. We still have ZERO DEBT but will consider to take on some leverage when it comes to building up our real estate portfolio which should provide us with an ever increasing cash flow stream from rental income.

Main drivers of June wealth increase were our savings and a very robust stock portfolio performance. In June, global capital markets clearly had a nice run. Furthermore, we invested quite heavily in June, with new stock additions in the amount of USD 17’000, bringing the total value of our stock portfolio to well above USD 323’000.

June showed some strong exchange rate fluctuations. GBP, USD and EUR weakened against the Swiss franc (denomination of our stock portfolio). As 40 % of our stock portfolio is in these foreign currencies the devaluation of almost 5 % against the Swiss franc was a strong headwind, lowering the overall positive performance for the month.

Deposits on bank accounts (our cash pile) decreased from USD 541’000 to now USD 531’000 amid strong investment process. Our cash pile is still our largest wealth position by far, with almost 60 %.

I withdrew another USD 2’000 from our P2P and crowdlending portfolio. Currently we have roughly 36’000 invested in consumer – and real estate loans on six platforms Mintos, Bondora, TWINO, Iuvo, Evoestate and Crowdestate. These investments account for around 4 % of our total wealth.

USD 1’700 from three passive income sources, a cool 70 % jump Year over Year

After two “weaker” income months in April and May (both with over USD 2’000, but still lower compared to the same months in the previous year), I am more than happy to see our two cash Machines (our dividend paying stock portfolio and our P2P- and Crowdlending Portfolio) returning to growth, churning out more money than in June 2019 (USD 1’700 versus USD 1’175). 

Compared to the same month in the previous year, P2P and Crowdlending investments now contribute nicely to our Passive Income Stream.

My wife and I are still committed to our goal of achieving USD 20’000 in Passive Income in 2020, but the economic impact of COVID-19 and the lock-downs around the world clearly make it challenging. There are several stock holdings that reduced or even cut their dividend payouts.

Furthermore, I am currently reshaping our investment portfolio to have a stronger exposure in Tech stocks, which are the clear winners in a “pandemic environment”, but most of these investments don’t pay dividends.

A large portion of our stock investments in the last weeks were funded through cash withdrawals from our P2P platforms, which further weakened their Passive Income Generation Capabilites.

Initially, we had planned to acquire real estate in 2020 and rent it out to generate nice cash flow streams. But that project had to be postponed to fall 2020 due to the Covid-19 pandemic. We are sitting on quite a large cash pile but we will need every single cent when we finally jump into real estate investing which requires to deploy significant amounts of liquidity. So, preserving our cash pile and grow it further is important.

That brought me to the idea to adding smaller cash flow sources requiring little or no capital and give us the possibility to diversify and strengthen our Passive Income Streams (see later in this blogpost).

Strong Dividend Income in June despite several payout cuts

As said, the COVID-19 pandemic and global lock-downs around the world had a huge impact on companies. 

Five of our June dividend contributors cut their  and dividends:  

• Royal Dutch Shell (previous year USD 130, now USD 38)
• Deutsche Telekom (previous year USD 265, now USD 217)
• Imperial Brands (previous year USD 59, now USD 40)
• Anheuser Bush (previous year USD 36, now USD 17)
• SIXT (previous year USD 105, now USD 2)

One business completely eliminated payouts to shareholders in 2020:  

• Nokia

Porsche Automobil Holding which is a larger and important June dividend contributor postponed its stockholder distribution.   

Compared to June 2019, there is one new dividend payer with British insurance company Admiral Group. 

For us as very long term oriented dividend growth investory, payout cuts are a huge headwind. We have been consistently saving and putting money to work by investing in dividend growth stocks to build an ever growing passive income machine. We want to take profit of the Magic of the Compound Effect.

Savings invested in dividend stocks can lead to fabulous results over years, just take a look at this calculator which lets you estimate the numbers of years required to obtain a certain wealth amount or passive dividend income.

Building a Tech-Portfolio while further strengthening our dividend portfolio

The COVID-19 pandemic clearly put even pressure even on consistent dividend paying stocks. We remain true to our long term strategy but decided to adapt our approach quite a bit.

Since April 2020, I’ve been accumulating shares of Tech Companies which have a huge advantage amid the currend COVID-19 pandemic such Alphabet, Amazon, Alibaba and Shopify.

In June, I continued to acquire Tech Positons by investing almost USD 14’000 in that sector: 

• Microsoft (ca. USD 2’000)
• Facebook (in two tranches for USD 2’000 each) 
• Slack (ca. USD 1’800) 
• Cloudflare (ca. USD 1’800)
• Prosus (ca. USD 1’800)
• Fiverr (ca. USD 1’800)  

Furthermore, I acquired stocks of Swiss chocolate producer Berry Callebaut (roughly USD 2’000 invested) and of the Mexican mining company Fresnillo (for around USD 1’800), which is the world largest silver producer.  

I will write a separate blogpost on my June stock buys and update a separate site on www.myfinancialshape.com showing all our Tech Holdings with a short presentation of theses companies, their strengths and weaknesses and my rationale behind the stock acquisitions. So, stay tuned.  

Robust P2P interest income in June

Currently, six P2P/CL platform generate a total of over USD 200 per month: Mintos, Bondora, Iuvo, TWINO, Evoestate and Crowdestate.  We started the P2P/CL-Portfolio back in summer 2019 with the purpose to build a second Passive Income Machine.  Over the last months, I withdrew substantial amounts from our P2P/CL platforms namenly to fund the build-up our stock portfolio. 

Establishing new Passive Income Sources

My wife and I have always been keen on Passive Income Generation. Receiving cash flows with little effort to earn and maintain is kind of the holy gral when it comes to Pursuing Financial Independence. Once the total of annual cash income from passive sources – such as dividends, interests etc. – match our spendings for the year, we are financially free.

Just think of that, never ever being dependent on a job. With USD 20’000 we are already 40 % on our way towards our long term goal Financial Independence. Running the numbers is awesome and extremely motivating, just have a look at that Template how much income generating assets resp. passive income you require to cover your living expenses.

As said, my wife and I are always open for interesting and feasible passive income ideas.

Income from Cashback Credit Card is an interesting way to put a new source in place with almost no effort. All I have to do is just use my credit card to pay things I would have to pay anyway. Receiving 1 % to 2 % on purchases for doing nothing, why not?  It took me some time to realize this passive income source as most of the time I pay in cash or via bank transfer. And I will certainly continue to do so but from time to time, I’ll pay with my Credit Card and collect 1 % to 2 % cashback.  

Currently, the bulk of our passive income is provided by dividend paying stocks and our P2P/CL investments. In automn, we want to acquire some real estate objects Rental properties are set to become our Third Passive Income Machine.  

But there are plenty of ways to establish passive income streams and what I will do is to establish one new position each month.

What about you, fellow reader, how was your June? Which passive income sources do you have?  

Thanks for sharing your thoughts and ideas below in the commentary section.

Disclaimer
You are responsible for your own investment and financial decisions. This article is not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action