The start of a NEW YEAR is always a great opportunity to look back and make new plans.

Our family of four is well on the way towards Financial Independence by 2024, but 2020 put us back in terms of building reliable and ever growing Passive Income Streams which are supposed to sustain our living costs in future.

A Big Earning Miss

The COVID-19 pandemic clearly had a strong impact on cash revenues from our investments.

While in 2019, our Dividend Paying Stock Portfolio plus our Peer to Peer and Crowdlending investments (P2P/CL) through plaforms like Mintos, Bondora, TWINO etc. generated over USD 14’000 in passive income, 2020 showed a different picture: in fact, Total Passive Income has been significantly lower with under USD 10’000. Initially, my wife and I had targeted USD 20’000 in passive income for 2020.

So, which factors led to that Huge Earning Miss of over 50 %?

• Amid the COVID-19 pandemic and the economic effects of lockdowns worldwide, several company elimintaed their dividend payments in order to preserve cash (e.g. in the case of The Walt Disney Company, HSBC, GLENCORE etc.). Other businesses reduced their shareholder distributions signifcantly (e.g. in the case of UK soft drink producers Nichols, BRITVIC, AG Barr). So, dividend eliminations and cuts led to a 13 % lower total Net Dividend Income compared to the previous year DESPITE the fact that in March and April 2020 we had added several strong dividend payers such as Swiss Life, Fevertree etc.
• The largest adverse impact came tho from our P2P and Crowlending investments. These generated roughly USD 3’500 in interest income through 2020, but on the other hand, an equal amount had to be written down due to the collapse of the two platforms Kuetzal and Envestio early in 2020, as well as due the failure of Grupeer. So, in 2020, all in all a zero sum game in terms of Passive Income Generation.
• Another factor was the adaption of our investment strategy. We made significant cash withdrawals (more than USD 40’000 in the last few months alone) from our P2P/CL platforms and invested these funds into Tech Companies such us Amazon, Apple, Facebook, Fiverr, Etsy etc. In terms of wealth building, this has shown to be a good move, looking at very nice book gains of almost 30 % in total, but on the other hand withdrawals weakened interest generating capabilites of our P2P/CL platforms (by beginning of 2020, more than USD 60’000 were invested, by the end of that year, this has been reduced to less than USD 20’000).

Financial priority shift amid the pandemic

We made several changes in 2020, a year full of uncertainties.

We took the decision to boost our cash pile and slash spendings in order to increase our savings rate .
We also wanted to become more diversified in terms of investments, that’s also one reason, why we built our Tech Portfolio while reducing P2P/CL investments.
Initially, we had planned to buy real estates in France, we would then rent out and generate passive income. Well, COVID-19 put that plan on a hold. We will of course stick to our plan to buy properties abroad and are quite confident that 2021 we will be successful.

So, a lot of things going on in terms of our financials and there were definitively a couple of bright spots:

Our Savings Rate trough 2020 was very robust. In fact, we went through the year on a Savings Rate of 66 % on average. That’s a very nice chunk of cash we have been able to extract from our salaries and income streams in form of savings.

Despite the fact, that our dividend stock portfolio generated 13 % less in 2020 compared to 2019, the book value of these investments recoverd from a huge fall in March 2020. It had fallen from USD 310’000 to USD 220’000 in a couple of just a few weeks and steadily climbed back to around USD 275’000 by the end of 2020. Still a book loss of over 10 %, but in combination with nice book gains of over 30 % on our Tech Portfolio, the overall result is quite acceptable. In particual considering the fact, that still, almost USD 10’000 in Passive Income had been generated on top of that book value performance.

So, all in all, we came through the pandemic financially stronger and more flexible, with almost USD 400’000 in investments (dividend stocks, tech holdings, Peer to Peer lending etc.), which represents around 40 % of our total wealth.

Roughly 60 % of our total wealth is kept in cash (in Swiss francs) to remain flexible to seize interesting investment opportunities anytime they arise. A big chunk will be used to acquire real estates abroad, once we can travel again.

A brief look at December 2020 Passive Income

December performed poorly on a Year over Year basis with Passive Income roughly two third lower than in the same month in 2019 (2020: 358 versus 2019: 1’242).

Several changes in terms of dividend payment dates make it hard to compare with December 2019, e.g. the traditionally strong dividend payer Imperial Brands transferred its shareholder payments in January instead of December.

P2P/ CLinvestments generated USD 116 which is a quite decent monthly income from the roughly USD 20’000 but still, if you compare with USD 727 in December 2019, significantly lower. But again, the P2P and Crowdlending Porfolio is now much smaller (20’000 versus almost 70’000 by end 2019).

Looking ahead to 2021

So, all in all 2020 hit our Passive Income Generators quite hard. But the world economy will recover from the COVID-10 pandemic, and so will our Dividend Stock Portfolio.

We withdrew tens of thousands from P2P and Crowdlending platforms, so clearly this Passive Income Machine will generate reduced revenues, and our Tech Portfolio consists of businesses which don’t pay any dividends (with the exemption of Microsoft, Apple and Prosus).

But we will continue adding Dividend Paying Stocks here and there and several traditionally strong Contributors will resume their shareholder distributions this year.

So, we plan for Total Passive Income for 2021 to be at least USD 15’000 in total, which is roughly 50 % higher than in 2020, and roughly 7 % on top of what our total investments generated in 2019.

What about you, fellow Reader, how was your 2020 in terms of passive income? Which goals did you set for the New Year?

Thanks for reading my post and for sharing your thoughts.

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.

WOW! 2020 is almost over! It has been a very tough and challenging year.

It’s just amazing how time’s been running super fast, and my monthly passive income update is more than due.

Let’s get very briefly into the numbers, shall we?

Compared to November 2019, there has been a hefty passive income slump of roughly 50 %. Ouch! 🙂

Dividend income in November was more or less in the same range as in the previous year (2019: CHF 379 vs. CHF 346). Two dividend cancellations – one of the world largest beer producer AB Inv and the other one of UK bank giant HSBC – have almost been offset by new Passive Income Contributors Tate & Lyle, British Petroleum, Apple and Prosus. Banco Santander has resumed shareholder distributions after having stopped them for several quarters, but dividends are still significantly lower than in the previous year.

Cash flows from Peer to Peer and Crowdlending Platforms came in 70 % lower than in November 2019 which was due to my significant cash withdrawals over the last months in order to make investments into Tech Companies and diversify our portfolio further.

How was your November in terms of Passive Income?

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.

Shifting our financial priorities amid the Global Pandemic

It’s just amazing, how time passes fast. We are already going through the last quarter of the year which amid the COVID-19 pandemic is extremely challenging, dynamic and unusual.

The pandemic changed a lot in our societies, our economies and has huge implications for people and businesses around the world.

My wife and I remain committed our Journey towards our Big Goal of Achievieving Financial Independence by the End of 2024 by establishing and growing passive income streams which are true compounding machines and will cover 100 % of all the spendings of our family of four in a matter of just a few years.

In the short run though (with regard to the next couple of months), we have taken a much more careful investment approach than usual (compared to the years before) with a very strong focus on preserving cash, continuously working on a very robust savings rate and keeping as much as possible from our day job incomes as possible.

We have postponed larger projects such as the acquisition of rental properties in France (Haute Saône, near the Swiss border) to 2021. We had initially reserved a big chunk of our cash pile to buy several studios and one larger object in Mulhouse and Luxeuil-les Bains in France.

But the pandemic has changed a lot. For instance, it’s complicated – to some extent merely impossible – to travel and meet people and visit buildings abroad. Our investment case also changed completely amid huge business pressure, demand disruptions and uncertainties.

So, as the pandemic just “froze” or even smashed millions of projects around the world, so it did with some of our plans.

We are okay and very fortunate. We keep patient and will preserve our financial flexibility.

What we are doing meanwhile in terms of investing is setting our focus on building and strengthening our Tech Portfolio while at the same time selectively adding positions to our Dividend Stock Portfolio.

An overall strong September with USD 1’200 in cash income from investments

Let’s dive into some numbers.

The total amount of CHF 1’205 (USD 1’325) was received in September. As you can see above, the main contributor have been dividend paying stocks with also nice inflows from Peer to Peer and Clowdlending investments.

Note: all numbers are in Swiss francs (CHF). One Swiss francs (CHF 1) corresponds to around CHF 1.10. The numbers are net after taxes (e.g. dividends are AFTER the deduction of witholding taxes etc.)!

Compared to September 2019, our total passive Income has been roughly 20 % lower (CHF 1’459 in September 2019 vs. CHF 1’205 September 2020).

While dividend income from our stock holdings (despite a few dividend cuts) was pretty the same amount as in the same month of the previous year (CHF 1’085 in September 2019 vs. CHF 1’001 in September 2020), interest income from our P2P and Crowdlending Investments was 50 % lower than in the previous year.

This was due to cash withdrawals from our P2P and CL platforms.

As I’ve shared in previous blog posts, we withdrew significant amounts from our P2P/CL platforms to become more diversified and use the funds to take stakes in growth companies by investing quite heavily into our “Mini Tech Portfolio” we started to build in April this year. We have so far invested more than USD 30’000 into fifteen Tech companies such as Amazon, Alphabet, Facebook, Shopify, Microsoft, Netflix etc..

Early in September, we bought shares of Apple for the amount of roughly CHF 2’000 (USD 2’200) and also took a stake in fitness equipment maker Peloton for around CHF 400 (USD 440).

You can find all our Tech Holdings, a Snapshot on these businesses and a list with buying time and invested amounts on the Tech Portfolio site.

The market value of our Tech Stocks has grown quite nicely by 30 % to well over CHF 40’000 in the last few months.

Currently, we have three kind of investments:

• First comes our dividend portolio (market value over CHF 260’000) with around 80 positions such as Nestlé, Coca Cola, PepsiCo, Altria, Unilever etc. This portfolio is set to churn out at least USD 16’000 annually in form of dividends and mainly grows through dividend reinvestments (into existing or new positions), while from time to time, we make selective additions. In September for instance, we added rougly CHF 1’500 by investing into Mc Cormick (a US food company producing spices, seasoning mixes, condiments and other flavoured products).
• Second comes our P2P/CL portfolio where around CHF 20’000 are put into following six platforms: Mintos, Bondora, TWINO and Iuvo, which all four focus on consumer loans and EvoEstate as well as Crowdestate which both letting you investing into loans in connection with real estate projects.
• Then comes our new Tech Portfolio. Our holding in growth stocks don’t pay dividends with a few exceptions like Microsoft and Apple. These fiften companies in our Tech Portfolio have each the potential to be true sector disruptors with massive growth potential. As long term oriented investors, we want to have stakes in these companies that are having a huge influence on our way of life.

What about you, fellow reader, how was your September in terms of Passive Income? Did you buy some interesting new stocks or other income producing assets?

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.

Hey there, fellow reader, glad you are stopping by for another monthly financial update, sharing our progress with regards to our savings rate, wealth accumulation and passive income generation as well as our latest moves and decisions we made on our Journey towards Financial Independence.

Note: all numbers an in Swiss francs (CHF). CHF 1 corresponds to around USD 1.10.

Snapshot on the financial highlights in August

• Our savings rate was slightly higher than in the previous month with 62 % (compared to 60 % in July). My wife and I want to keep our savings rate above 60 %, which will be a real turbo on our Path towards Financial Independence by 2024.
• Wealth climbed by CHF 15’000 in August, driven by stock market performance in August and strong savings from our day jobs
• Our dividend income (numbers always net after taxes) was lower compared to the same month in the previous year (USD 363 versus USD 422) as following three of our August passive income contributors have scrapped their shareholder payouts for the year: beer producer Heineken, Spanish Banco Santander and UK defense company Babcock International. On the positive side, UK soft drink maker Nichols informed that they will reinstate their dividend and pay it out later in September (by the way the same with UK insurance giant Aviva, which is one of our largest dividend contributors). So there are definitively bright spots.
• Income from Peer to Peer (P2P) and Crowdlending platforms was a bit lower than in the previous month (CHF 186 versus CHF 210) due to cash withdrawals we made in July in the total amount of CHF 2’000. Currently we have roughly CHF 22’000 invested on six platforms: Bondora, Mintos, Iuvo, Twino, EvoEstate and Crowdestate.
• We used cash withdrawals from P2P and Crowdlending platforms (in the amount of CHF 2’000) to further strengthen our Tech Portfolio, adding shares of US tech-base payment services company Square and streaming company Netflix.
• Furthermore, I sold stocks of oil supermajor Exxon Mobil which was a long time holding in our Dividend Stock Portfolio to take a stake in electric car maker Tesla (see my stock snapshot on Tesla).
• While our August dividend income was lower compared to the previous year, our Total Passive income was very strong with over CHF 1’000, almost double the amount which was generated in the same month in the previous year. This is in essence due to reimbursements from witholding taxes on Swiss shares like Nestlé, Novartis, Roche etc. I portion of witholding taxes can be reimbursed on the basis of tax treaties. I wrote about that important aspect here.
• We are still targeting CHF 20’000 in Passive Income for the year, which is very ambitious given the challenges several businesses in our stock portfolio face and can be seen in several dividend cuts and even some complete elimination of payouts for the year. Last year, we hit CHF 14’000 and we are very confident that Passive Income for 2020 will be significantly higher than that.
• In June, I started my Passive Income Challenge with the goal to work adding new passive income sources to diversify our cash flow streams. So far, I’ve been able to add Cashback Credit Card (in June). All I have to do, is using my credit card to pay things I would have to pay anyway and receive 1 % or 2 % in cashback. Most of the time I pay in cash or via bank transfer but using credit card more regularily can make sense. I am still very careful and want to keep full control on our spending habits.
• As shared in several of my blogposts, my wife and I are looking to acquiring real estate in France (several appartments/studios to rent out and also a residential property). Unfortunately, due to the COVID-19 pandemic, we had to postpone that project. It’s on hold, but of course we can still prepare some aspects of the due diligence online (legal aspects, “virtual visits” of some real estates etc.).

What about you, fellow reader, how was your August in terms of Passive Income? Did you buy some interesting new stocks or other income producing assets?

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.

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