I’m documenting my path towards reaching $30,000 in annual passive income by 2025 and a $1 million net worth by 2027.
For detailed numbers, you can check out my net worth tracker. I update it monthly.
We’re now 3 years into this series!
And I’m about to start a new chapter in my investing career.
Closing on My Business Purchase
Last month, I mentioned that I was under contract on a small business and that I was going to be looking to close by the end of December.
Unfortunately, the planned closing has leaked into January. But we should be closing within the next week if all goes well.
In that time, we’ve gotten past due diligence and I’ve secured the funding – it’s just a matter of getting the funds from one account to another.
Putting together the funding for the business has taken some time, especially because banking is a bit slow due to the holidays.
I was able to leverage my W2 income and solid credit to pull out personal loans to make the small business purchase.
I opted to do this over something like an SBA loan, mostly because the SBA process takes several months. This is much faster.
And I plan on paying these loans back early anyways.
On the personal loan side of things, it only took a couple of weeks to get all the funds that I needed.
Even if the loans are a bit more expensive upfront, I’m able to make that up with extra income by owning the business for what is basically a full additional quarter.
But we still have to close first!
Anyways, let’s get into the numbers.
January 2023 Net Worth Numbers
As a reminder, my net worth last month was $103,877.33.
Assets – January 2023
We have a much larger cash balance than before. Thank my new debt for that.
Much of this is sitting in a new business account. That entity is going to be the one that buys the business that I’m under contract for.
In short, I have a holding company, and underneath that holding company is the entity that will actually hold the business – it’s an LLC inside of another LLC.
I’m moving all of this money down to that business level entity which has its own bank account, separate from my personal name. I’ll include it here even though it’s technically not my personal cash.
Otherwise the stock market did not have a very good month, so a lot of my stock holdings are down a fair bit, which did not help from a net worth perspective.
Given this business purchase, I’m not really looking to invest that aggressively into publicly traded stocks right now.
I’m putting the vast amount of my time, effort, and money into this new venture, which I think will be much more lucrative, dollar for dollar.
All in all, that leaves our assets at $1,298,416.08.
Liabilities – January 2023
We have some pretty substantial changes here this month.
You’ll might notice that $15,000 credit card balance. I’m taking advantage of a 0% promo rate from my Fidelity credit card. The balance won’t start accruing interest until next December or so. I’ll aim to pay it all off before then.
By far the biggest changes in terms of liabilities were the additions of my personal loans and loan fees.
I used a funding agency to help me figure out which loans to apply for, which helped me line up all the lenders. It was a bit expensive, but it saved a ton of time and headaches for getting financing.
I’ve taken out about $180,000 in personal loans which will be used to pay for the business.
This leaves our liabilities at $1,209,991.23.
My Net Worth – January 2023
All in all, our net worth is $88,424.85.
That’s a decrease of $15,452.48 from last month.
That leaves our debt ratio at an all-time high of 93.19%.
And our passive income remains at about $1,100 per month.
Heading Into the New Year (What’s Next?)
Even though my net worth decreased from last month, I’m still quite confident going into this deal because I’m going to be buying a cash flowing asset.
The new income can be used to pay down the debt.
That said, this is about as leveraged as I am comfortable getting without a massive boost to cash flow. I don’t plan to take out more debt for now, as this is starting to get to a pretty sizable amount that’s going to be much more difficult to cover with just my personal earnings.
But, by using this debt to buy a productive asset, I should be in a much better financial position long term.
And there should be a lot less cash outflow in 2023 when compared to 2022 (we won’t be moving into a new house anytime soon!). This last year was more expensive than I would have expected, but the future still looks bright.
I’ve been talking about deleveraging in this series for quite some time.
Yet, when it comes down to it, I seem to keep increasing my debt as I try to acquire more assets.
I think now is the time to really focus more on consolidation.
Here’s to a happy new year!
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