Success = Passive Recurring Income

Success in life is a product of passive recurring income.

Let that soak in for a minute. I'm not the kind of guy who usually dishes out advice, but whenever someone asks me what I have done to get to where I am today, I always tell them: passive recurring income.

Every month my 6 rental properties bring in $4,136. Sure, I have obligations such as mortgages, insurance and taxes that I pay out of that, but I use much of what's left to do with as I please (right now "as I please" has been "paying off debt", but still...).

Passive recurring income is the type of income that arrives with minimal effort and on a regular cycle. It includes rent, dividends, interest and any other inflow that is on auto-pilot. I think it is Ben Franklin who called compound interest the "eighth wonder of the world". Passive recurring income is a close cousin to compound interest.

If you always live below your means, meaning you spend less than you earn on a consistent basis, you will have money you can put to work. Deploy that money towards investments that earn you passive recurring income. It becomes a snowball of more money, until eventually you reach financial independence, which is the point in your life when you no longer have to worry about making ends meet.

A Week in the Life of a Mystery Shopper

August 22nd - August 28th...

Last week started out great... after Sunday, anyway. Monday-Thursday I made decent money and didn't have to do too many shops since many of them came with bonuses. For example, I did two easy gas station shops and made $50 plus $12 in reimbursements.

Unfortunately, Friday and Saturday were really slow. Being the end of the month, I usually pick up a handful of shops with decent bonuses. On Friday I only completed two shops, but that was fine. My partner is off on Friday's so we went to the state park and went hiking, then to the Botanical Gardens. It was a fun day. Saturday, on the other hand, I only completed one shop. This did give me the chance to catch up on things. I went to the house I am selling and cut the grass and tended to the flowers. I also repaired a plumbing issue one of my tenants was having. It's always fulfilling to repair something myself and avoid calling a repairman.

I earned $472 in fees and $222 in reimbursements. This week should be okay, but not stellar. I have several gas stations already lined up and a couple other mystery shops.

A Week in the Life of a Mystery Shopper

August 15th - August 21st...

I didn't make as much last week. Instead, I hung out in Vegas for a few days attending a mystery shopping conference. It was enjoyable. I met some interesting shoppers and representatives of companies. The most tangible benefit is that I learned about a few companies I didn't know about and will hopefully get some new work from these.

I earned $239 in fees and $86 in reimbursements. As this week is half over (I know...late post), I already know I will earn more, but not as much as I'd like to. One company I normally do a lot of work for has been slow to offer acceptable rates for their jobs this month.

Cutting the Electric Bill - August Bill

In August I was an electricity glutton. In June I set a goal of reducing my electric usage by 20% over the next 6 months. I just received my August bill, and it's ugly.

My August 2010 usage was almost twice the amount from August 2009. This is the second consecutive month where I failed to reduce my usage. It isn't that I did not try. My thermostat is set to 80 and is turned off completely when no one is home.

For my August power bill, I used 582 kWh of electricity, and my bill was $77.55. In August, 2009 I used 314 kWh ($51.82). What happened? Last August was my last full month at the corporate sales job, and I know I did some traveling that month. My gut tells me the weather was cooler as well.

Here's the September goal: In 2009 I used 290 kWh, so to "make the month" I need to reduce usage to 232 kWh, or just under 8 kWh per day... that's a challenge!

Contract on the Rental House

Good news (at least, I hope!). Late last week someone submitted a contract for the house I have for sale. This came just 11 days after I listed it and the offer was just shy of 95% of my asking price - an asking price which my agent suggested might be too high.

I know not to count my chickens before they hatch, but with closing scheduled before September 22nd and a buyer with pre-approved financing, I am very optimistic. How'd I do it?

• The house was immaculate. Even though it was just four years old, I had new carpet installed and personally repainted most of the house. I also detail-cleaned the place, all the way down to scrubbing the grout between the tiles in the kitchen and bathrooms.
• I made a good first impression. I invested a fair amount in new landscaping, fertilizer and sweat equity to make the front yard look inviting. I also bought a nice welcome mat.
• I did a few small things inside to spruce the house up. I bought new white towels for the bathrooms, a new shower curtain for the shower, and obtained expensive soap from the Hyatt (that's a picture of it above...it's my favorite).
• My agent was extra aggressive for me. She called agents she worked with before (which ultimately lead to the sale), sent a mailer out to the neighborhood, and created a unique website for my house.

With luck, I'll be out from under this place and on my way to buying my next, albeit more modest, rental property by the end of September.

Live from Las Vegas... Final Update

Farewell IMSC Conference, and farewell to Vegas. I'm waiting for my flight to depart now. Things didn't go as planned as far as keeping the site updated while I was here. I couldn't find a free wireless area close enough to post.

Needless to say it was a blast, particularly the networking with other shoppers as well as reps from the companies I shop (or, even better, the companies I now plan to shop!). I had a great time and learned a thing or two. Unfortunately I wasn't so lucky at the blackjack tables. Let's not go there!

Live from Las Vegas... Update #2 (IMSC Conference)

I'm not staying at the Suncoast during the conference. One might argue that snagging such a nice room at $39 per night would be a bargain too good to resist. Unfortunately there's this side of me that always has to get a better bargain than everyone else. I'm staying at Arizona Charlie's Boulder Highway, for $17 a night. True, it's not a posh playground for the rich and famous (but I guess Suncoast isn't quite that, right?). Okay, okay, let's be honest. It's a little rough.

The Good

• It's a suite, and it's huge. Probably 600 square feet or so. There are two rooms, each with a TV, a walk-in closet and a kitchen table.
• The bathroom amenities are nicer than I expected. They don't have the cool massaging soap bar like you get at the Hyatt, but they also don't have the little Motel 6 bars that are hold to hold onto.

The Bad

• The room didn't pass my "white sock" test. Rather than gross you out, I'll let your imagination run wild on this one.
• The shower's base makes this scary creaking sound as you bathe. I imagine a bunch of rotted wooden beams beneath me exhaling their last breath, waiting to plunge me 10 feet into the room below.

The Ugly

• Actually, there's nothing too scary. I did see what I assume was a male prostitute dressed like a woman hanging out in front of the hotel. He didn't ask me if I was looking "for business" so maybe it was his off day.
  

Live from Las Vegas... Update #1 (IMSC Conference)

Conference starts at 8 AM this morning. I found a McDonald's down the street from the casino which gives me free wireless and a $1 sausage biscuit. Speaking of value, WOW living on the cheap in Vegas would be so easy. For dinner yesterday I had 4 $.39 tacos from Del Taco. How the heck can they sell a taco for so cheap?

Yesterday was registration for the IMSC. It was cool to meet some of the shopping companies who are sponsoring the event. The one I wanted to see most was not there yet. They are home to the famous $3 gas station shop. I'm not knocking them for their audacity; rather, I think it would be fascinating to learn more about the psychology behind there strategy, which is to start out with a ridiculously low rate but steadily increase it as the deadline approaches. One side of me thinks this is a brilliant display of supply and demand at work. Another side wonders if quality suffers at the lower end.

A Week in the Life of a Mystery Shopper

August 8th - August 14th...

Greetings from Las Vegas! This week I am attending the IMSC (mystery shoppers' conference) in Las Vegas. I am leading a round table on Tuesday morning about incorporating frugal habits in your mystery shopping adventures. Unfortunately, I won't be able to shop while I'm here: Nevada requires shoppers to be employees (versus contractors) and the companies to have some sort of private detective license.

Last week was going great until Saturday. Somehow my phone and I got separated. I'm pretty sure it was taken from me but not sure how. I was exhausted at the time from a long day of audits and imagine I got careless and either left the car unlocked while I was doing an audit or might have laid it down on the counter and forgot about it. Lesson learned.

I earned $746 in fees and $154 in fees and $402 in reimbursements. The largest portion of the reimbursement was a hotel I shopped Thursday night. I love earning points towards free hotels while doing a little work. The fees mostly came from auditing gas stations. I picked up a last minute bonused route in another town Saturday, plus several other regular pay audits closer to home. I did a few restaurants including a reimbursement-only steakhouse. All in all it was a satisfying week.

Attending the Independent Mystery Shoppers’ Conference

Just a quick note to let everyone know about my plans for next week. I will be attending the Independent Mystery Shoppers' Conference (IMSC) in Las Vegas beginning Sunday. I plan to post as frequently as possible with (hopefully) live updates. Visit this blog often if you want to learn more about what's happening at the conference. A range of topics will be covered - I can't wait to learn more about mystery shopping opportunities and share them via My Frugal Miser.

Scratching the Itch

Do you have an itch? Doesn't everyone? By itch, I mean, do you have a bad habit? It may be so habitual that you don't even realize it's not a good thing to be doing. Smoking, overeating, gambling, day trading, video game-playing... these are the vices either I or my close friends engage in. I tried smoking - it's not for me. I definitely eat too much, but I also know I've really made some progress on improving my eating habits in the last two years (as in, I might eat red meat 3 or 4 times a month versus once or twice a day in the past).

One bad habit I see in most people these days is also something no one realizes is so bad. That habit is the need for activity or change. Why are we, as a society, so caught up in "new and improved" when "old and it works" really does work just fine? Here are a few examples of areas I've struggled with:

• Excessive stock trading. When you buy shares of a company, you are buying a piece of that company. It's just plain dumb to constantly buy and sell shares. I really want to move to a total buy and hold strategy where the only trades I make are purchases with new funds.
• Sweating the small stuff. I'm a Type A personality, which means I'm really anal when it comes to things like managing clutter, having a lingering item on my to-do list, or wanting to do some research on the Internet. That last one is ridiculous: I'll be busy reading when an idea comes to me. Rather than write it down and wait until later, I often find myself jumping onto my computer to look something up. That wouldn't be a problem except I always end up at the computer much longer than I intended.
• Never sticking to plan. I thought this blog would help hold me accountable to my goals, and it certainly has made a difference. Still, I set goals at the end of each year but often change them. Wouldn't I be more effective if I set my goals and stayed on course until I achieved them?

I say all this because I've been wondering if it wouldn't be better to give in - just a bit - to some of these cravings in a controlled way. For example, what if I set up a small brokerage account and bought and sold to my heart's desire? Then I would leave the assets in my retirement account alone (buy and hold). Or what if I set aside a small amount of money each month as "Mad Money" that I could use at the Blackjack table, guilt-free? This is something I'm still thinking about. I just wonder if controlling those urges might be more productive than trying to ignore them altogether.

August Goals

I expect to make a small advance forward in August. I won't earn as much from mystery shopping since I am attending a mystery shopping conference in Las Vegas for half of next week. I have an empty house for sale, which means I'm not earning rental income but still have a mortgage to pay, plus I'll be buying new carpet for the house this month. My car tags must be renewed in August. That's nearly a $500 expense. Even with all these mini-obstacles I remain optimistic.

August Goals:

• earn $2,000 from mystery shopping (last month I earned $3,085)
  
• reduce credit card debt and car loan to $37,000 (7/31/2010: $39,064)
  
• fund the rest of my 2010 IRA contribution ($2,000 left to fund)
  

Since I plan to fully fund my IRA this month, I also want to outline a plan for the rest of my free cash flow through 2010 and maybe even into 2011. I haven't been a big fan of opening separate accounts for each "bucket" like some people do, but I'm thinking about doing that just to make each of my goals that much more quantifiable. For example, I need to have a fund for large expenses for my rental properties (taxes, insurance and major repairs would fall into this category). I'd also like to pre-fund my 2011 IRA contribution, begin funding my next rental property purchase, set aside funds for my next car, and maybe even establish an account for crazy, ridiculously irresponsible spending. More on that one later...

Does this go against my rule of always looking to simplify my life?

A Week in the Life of a Mystery Shopper

August 1st - August 7th...

Last week was okay but a little slow by choice. On Thursday I went to Tunica to hang out with a friend from Pennsylvania... no worries, I only lost $20 and my dinner was free. I also finally listed the house for sale. I spent a lot of time at that house getting it ready for its Glamor Shots aka MLS listing. Other than an amateur paint job, I'm happy with the work I did getting it ready to sell. Now let's see how fast I can get it sold!

Last week I earned $419 in fees and $290 in reimbursements from shopping and merchandising.

• I did my first "extensive" business verification. This required me to use a surveyor's wheel and take a number of photos (I took 83 in all). I was at the property for an hour and the paperwork took an hour. I was paid $50 for the job.
• I did several July carryover shops that had really nice bonuses. For example, I completed a fast food job for $25 (normally pays $8), a gas station audit for $50 ($10), and a retail shop for $50 which normally pays $5.
  
• I shopped several reimbursement-only gas stations. Now I have about 20 gallons of gas in reserve for later.
  

This week looks good. I have several gas station audits and merchandising jobs lined up - probably enough for 3 full days. I'm also shopping a reimbursement only hotel. It's a local hotel so I'm really shopping it for the loyalty points as I work towards my next (as yet unplanned) vacation.

Reviewing my July Goals

I did well in July even though I only achieved one of my three goals. I made solid progress on the other two goals.

July Goals:

• I earned $3,085 from mystery shopping. My goal was to earn $3,000.
• I ended the month with my credit card debt and car loan balance at $39,064. My goal was $38,000.
• I finished 90% of the rehab work for the rental property I am selling, and after this week it will be listed for sell. The only work I did not get done in July was installing new carpet, which was intentional. I realized later in the month that I should "spend" the carpet money in August to help me reach a spending goal on my Discover card that will earn me a $500 reward. Since I easily covered the spending requirement in July, I decided to push this expense into August.
  

Even though I only achieved one of the three goals I set for July, I am happy with my progress. For example, I reduced my credit card and car loan balance by more than $3,000 in June and by about $19,000 since the beginning of the year.

My Frugal Miser - July Expenses: $3,801

I kept expenses just north of a reasonable amount in July, though I had a couple of larger than normal expenses. I'm speaking at the Independent Mystery Shoppers' Conference later this month. Since my travel expenses are not reimbursed, I decided to include them under "vacation" since the conference is being held in Las Vegas. When they move it to Des Moines, I might reconsider the category (no offense to all those Iowans out there!).



July Expenses

$655 Auto ($18 for service, $194 for fuel, $443 Depreciation)
$39 Bank Fee
$31 Clothing
$152 Food (both groceries and eating out)
$155 Entertainment (movies, gambling, alcohol)
$0 Home Repair
$52 Household (pest control, fire dues, cleaning supplies, etc.)
$107 Health Insurance
$418 Medical
$426 Vacation
$219 Interest on Debt (not including Mortgage Interest)
$0 Miscellaneous
$441 Mortgage Interest (primary residence)
$827 Mortgage Interest (rental properties)
$0 Personal Care
$77 Taxes
$203 Utilities
$426 Vacation

Total July Expenses : $3,801

Notes

• Thanks to mystery shopping, I spent $194 for fuel even though I drove over 5,000 miles.
  
• I separate my mortgage interest by personal residence versus rental properties. I think this is an important distinction: the personal residence interest is an expense I should exercise control over moving forward when looking at ways to be frugal; the other is an expense that generates income.
• I spent more on alcohol than normal. This is because I did several bar shops in July and took my partner with me. We spent more than the reimbursable amount.
  
• I spent $31 on clothing, which is pretty high for me. A couple pair of khaki pants that I wear for merchandising/audit jobs had holes in them. I had been wearing them anyway, but found two pair at K-Mart that were my size and we marked down less than $10 each. The rest of the clothing was spending above the reimbursable amount for a mystery shop I did.
• Spending on food was right where I want it to be at roughly $5 per day.
• Medical bills were high because I had to crown one of my teeth.
  

My Frugal Miser - July Income: $8,274

After subtracting out insurance costs from my income, June was an unspectacular month (I earned just under $4,000). I'm happy to see July was much better.




July Income
$1,665 Mystery Shopping*
$5,324 Rental Income
$1,285 Other Sources
$8,274 Total Income for July
*note that the mystery shopping income will always vary from the monthly summary amounts I post. Here I report actual payments received (cash basis accounting) whereas in my monthly mystery shopping update I report the amount I earned for that month.

Notes:

• My most expensive rental property is now vacant. I received the last rental payment and the damage deposit, which I am not refunding. This helped boost July's income by nearly $2,000.
  
• The category "Other Sources" includes non-recurring (or semi-recurring) income since I always seem to have a little something that doesn't fall into the other buckets.
  

Vehicles and the True Cost of Ownership: How Much is My Car Really Costing Me?

I started July with 26,277 miles on the odometer and ended the month with 31,389 miles.

Each mile costs $.0867 in depreciation, and I drove 5,112 miles. For July, my vehicle depreciation expense was $443.21.

I did very well with mystery shopping in July, and I've got the odometer reading to prove it.

A Week in the Life of a Mystery Shopper

July 25th - July 31st...

What a week. All I can say is... I'M FREAKIN' EXHAUSTED! Last week mystery shopping earned me $1009 in fees and $175 in reimbursements.

• Over half of my earnings came in just two days: Thursday and Saturday, when I earned $271 and $289, respectively. On Thursday I completed 18 shops - a buffet of everything from restaurants to gas stations to business verifications. On Saturday I took a road trip of 500+ miles to do five highly bonused (4 of the 5 paid $50 each) gas station audits.
  
• On Friday I nearly had a day off, as I just completed two gas station shops.
  
• Once again, my "last week of the month" strategy of keeping my schedule flexible for bonused shops paid off. Going into the week I wasn't sure how busy it would be.
  

I don't expect to earn over $1,000 a week by mystery shopping. This was certainly the exception and not the rule. This week should be much slower.