Income Report Oct 2018 – First Passive Income Steps

Welcome to my income report for October 2018

In October I earned only $60, even less than the previous month; hence I didn't achieve my goal of earning $100 per month of side income yet.

I know it is only a second month, so it's early to make any conclusions, but with decreasing monthly income, the goal seems to move further and further away.

But I am not giving up.

On the bright side, I finally built my first passive income stream, which I will describe down below. There is no better feeling than letting the money make more money.

Income Breakdown

Sell Items Online

This category groups all my efforts of selling physical stuff online.

There is nothing much to brag about.

I sold two items in October. An alarm clock and a bike rear light, both for a ridiculously low price.

I bought a bike rear light like 20 years ago at a flea market and since I don't own any bike, there was no use for it. I am glad someone found this useful.

An alarm clock was a big fail.

First, it was an unwanted Christmas present. Not because it was ugly as toilet paper, but because it wasn't user friendly at all.

Second I was too lazy to take real-world photos of this crap and used photoshopped product photos instead. It backfired me like a Crocodile Dundee's boomerang.

The day after the buyer received the package, he sent me an angry letter, that the product doesn't look as advertised and demanded a full refund including the shipping fee.

Of course, it doesn't look as new, you bought it for half of the original price on Craiglist and there is no claim about the product being unused.

So I sent a polite email explaining the facts above and I even offered a full refund minus shipping cost.

Then he tried to be smart and copy-pasted the whole paragraph citing civil rights between buyers and an e-shop.

Nice try.

I replied with something like "Yo dude, you cited the wrong paragraph. You watched too many episodes of Matlock so you think you can out-lawyer me. I am not an e-shop, but an ordinary seller, and because the product is still functional, you can demand a discount at max. So be nice and take my generous offer."

Fortunately, he agreed. So I accounted for a zero income.

Lessons learned.

Always use real-world images in your ad and never polish them with photoshop or any Instagram filter.

Always put in the description, that product is not new but used and you provide no guarantees.

Savings Accounts

As mentioned in the previous income report, the first step to build a passive income stream is to put money into fixed income financial products.

So I did it.

Here is a list of financial products I researched, sorted by risk.

Requirements were simple, denominated in Czech crowns, available for retail clients, have regular predictable cash flow with low or no management fees.

Saving accounts

- Insured
- Low yield
- 1-2 days to open an account
- No fees
- Liquid. Can withdraw anytime without penalty.

Time Deposits

- Insured
- Low yield
- 1-5 days to open an account
- No fees
- Not liquid. You lock your capital for a predefined period.

Government bonds

- Not insured, but safe if you trust your government
- Low yield
- 5-10 days to open an account
- No fees
- Not liquid. You lock your capital for a predefined period.

Pension funds

- Risk of losing capital
- Low to moderate yield depending on the chosen strategy
- Government and tax benefits
- 5-10 days to open an account
- High management and performance fees
- Not liquid. You lock your capital until your retirement.

Life insurance

- Risk of losing capital
- Low to moderate yield depending on the chosen strategy
- Tax benefits
- 5-10 days to open an account
- High management and performance fees
- Not liquid. You lock your capital until your retirement.

Construction saving plans

- Insured
- Low yield
- Government benefits
- 1-2 days to open an account
- Low management fee
- Not liquid. You lock your capital for 6 years.

P2P Lending

- Risk of losing capital
- Moderate yield
- 5-10 days to open an account
- Moderate management fee
- Low liquidity. There are loans with buyback guarantees or with the possibility to sell on the secondary market.

Corporate debt crowdfunding

- Risk of losing capital
- Moderate yield
- 10 days to open an account
- No management fee
- Not liquid. You lock your capital for a predefined period.

From these choices, I settled on saving accounts, time deposits, construction saving plans, P2P Lending, and Corporate debt crowdfunding.

So in October, I managed to open an account for all the mentioned products.

Now the question is. How much money should I put into each product?

For this purpose, I made an optimization framework using Google spreadsheets, which calculates optimal money allocation intending to achieve the shortest duration (for how long is my whole capital locked) and maximum yield. The process is manually intensive so I hope to code this framework in python using solver libraries in the distant future.

There was one more programming exercise to do. Make a bot for the P2P lending platform, which will invest automatically based on my scoring framework.

The thing with P2P Lending platforms is that they are very competitive. There is excess demand oversupply. Attractive loans with a duration shorter than 2 years and riskier ratings are completely invested in few seconds. I couldn't keep up with the competition even by hanging out on platforms all the time and investing manually.

Now I am satisfied with my bot. So far my bot caught all attractive loans so I can sit back, relax, and deposit more money when the bot needs it.

At the end of October, I was fully allocated in saving accounts and construction saving plan. As for P2P Lending, I finished my bot at the end of the month so there are no results to show yet.

In the end, I ditched time deposits because of low yield and long locking period and I decided to not invest in Corporate debt crowdfunding as they stole 1 Crown from me. I am looking at you, Fundlift.

They required me to send testing payment so they can pair my new investor account in their systems, but to this day I still see 0 in my investor wallet.

Most of their offers are not worth it anyway. 5% for 4-5 years? Forget my money.

Why I didn't reach my goal yet.

Free time is limited to only nights after work and weekends.

I Spent 1 week on P2P bot and Google spreadsheet fixed income optimization framework, 2 weeks blogging, and 1-week coding.

My fixed income portfolio is not optimal yet. So there is a lot of room for improvement.

Better be safe and deploy capital as carefully than be sorry and put all money into riskier assets just to reach my goal.

What can be improved next month?

Invest in higher yield fixed-income assets. Mainly allocate more capital in P2P Lending. My fixed income framework tells me to risk more to reach my goal. My maximum duration threshold is 6 months.

Business development

Now since I exhausted almost all fixed income products, the next natural step would be to diversify into stock markets e.g. stocks and ETFs.

But the exploration of stock markets has to wait until I find reliable free public API for stock data.

So in November, I will focus more on product development and less on finance.

Content development

1 blog post a week was a too optimistic plan. Instead, now I will write at least one paragraph a day.

Writing takes soo much time, which I could dedicate to coding, but I think creating content is worth it in the long term.

Project development

Learning React is much harder than I thought. While creating layouts in React is fast and fun, making React components interactive is painful.

But I have to keep going no matter what.

Shipping my first product is priority numero uno and is critical if I want to scale my income.

In November I would like to finish the basic user interface and start to learn how to make React components interactive with states, props, maps, and Redux.

That would be all for this month. See ya in the next income report!