Building Passive Income In The UK:
An Interview with Tuppenny
Welcome to this interview series focusing on UK-based passive income builders. We are now on the seventh interview of the series. I have seen commonalities between all the interviewees so far. The strive to have multiple income streams and a long term outlook.
Some ventures, naturally, have been more successful than others. And passive income, I think, is often misrepresented. It is not income that requires no work. Instead, it is simply income from work you have done in the past.
I hope you find this series enlightening and encouraging, opening your eyes to the multitude of ways you can reach your financial goals. Talking to passive income entrepreneurs has definitely inspired me.
Today, I’m talking to Tuppenny.
Please introduce yourself
I'm Tuppenny and I run a frugal living and money saving blog over at Tuppenny’s FIREplace. My husband and I have been saving hard and investing our money to help us achieve our goal of financial independence. We hope to be giving up our jobs next year and can't wait!
What Does Passive Income Mean To You?
Passive income for me is earning money without having to work for it. Nothing is truly 100% passive as you will always have to do things like choose the shares to invest in which produce dividends or the right Peer to Peer lending platform to put your money in. But the less work you have to do to earn an income the better.
What passive income sources do you have? Are all of these UK-Based?
I currently receive passive income from bank current accounts which pay a reasonable rate of interest along with a couple of regular savers. These regular savers pay 5% which is a great rate for a savings account. The downside is they're only for 12 months after which I have to start again. Not truly passive but then nothing really is!
I also have money invested in four Peer to Peer lending platforms partly via IFISAs and partly in taxable accounts. Two of these I choose the loans I invest in and two are automated so all I have to do is put my money into the account and it is invested for me. I earn a much better rate of interest on my P2P investments but have had losses so it's not for the faint-hearted.
I've also got money in stocks and shares ISAs. I invest via tracker funds as I do not have the skill or confidence to pick my own shares. Research shows that tracker funds beat managed funds anyway so that's good enough for me. All income/dividends is automatically reinvested for me so these are very passive.
All of these are UK based. The stocks and shares are invested in global funds via a UK based provider.
How does your passive income compare to your active income and your expenses?
My passive income is low in comparison to what I earn but I am a very cautious investor and I started investing late in life. I don't have a high income and I am not looking to replace my salary with passive income - my pension will cover the majority of what I need.
My plan for passive income is to be able to pay my monthly basic bills including utility bills and council tax. I'm not there yet especially since banks have reduced the interest on their current accounts.
What are your short and long term goals with passive income?
My short term goal was to try and earn more than the 1% interest on offer with most savings accounts. Long term I want to be able to pay for my basic bills via passive income.
What are your most passive and most active income sources?
Active income would have to be my job - I spend many hours at work to earn that wage but it would be great if I didn't have to!
My most passive income is currently my stocks and shares ISAs as I am not contributing to them at the moment and they are slowly increasing in value (the dividends/income is reinvested).
What is your favourite passive income source and why?
I'm not sure I have a favourite these days. When I first started out with peer to peer lending I loved it. Choosing what I was going to invest in, checking out why people were borrowing money.
The shine got taken off P2P when one of the platforms I had money with went into administration. There's nothing like the prospect of losing your money to concentrate your mind and stop thinking everything is rosy.
My other P2P platforms are dong well and the administrators are doing what they need to do to recover my money but I am unlikely to see any interest on those funds.
Which passive income source has been the most challenging to build? And did you expect this when you started building it?
Peer to Peer lending was a real learning curve. If you are manually investing your funds by choosing the loans to invest in there is an awful lot of reading and research to do.
I hadn't expected to have to get into researching things like companies house when I initially read up on P2P. I spent many hours in the early months building my knowledge and doing my research but reached a point where I decide to invest more in the automated P2P funds. Less interest but much less work.
Do you think your passive income sources will provide consistent income over the long term?
Yes I am reasonably confident I'll get an income from my investments. It won't necessarily be the same every month but knowing this I can plan for it.
What passive income sources would you like to have in the future? Do you see any areas of growth?
I'm a very cautious investor even though I'm in P2P so I don't intend to continually seek other passive income sources. I am lucky in that I have a final salary pension to look forward to so I am not trying to replicate the whole of my active income through passive income means.
Has passive income-building changed how you save, spend and invest? If so, how?
Chasing a passive income has meant I have ventured into investments I would never have considered before. Peer to Peer lending is very much out of my comfort zone but does offer high rewards (for a higher risk).
I've also had to think longer term, not just look at what interest you receive every month or year. Investments offering higher rewards tend to be over a much longer time frame. I've had to learn not to constantly look at my statements, with the stock market going up and down it's best to invest and forget!
What advice would you give to someone looking to build passive income in the UK?
Be prepared to get a little uncomfortable. Keeping within your comfort zone you are unlikely to earn enough passive income for what you want to do. Look at all the costs involved and consider the unexpected.
I don't consider investing in property through buy to let to be a passive income stream as you are likely to have to work for that money through repairs and the like. Your money is also tied up long term and you have the potential for big losses through bad tenants and large repair bills.
And finally, where can people find you?
You can find me over on my blog where I write about being frugal, saving money and our plans for early retirement.
My Blog: Tuppenny’sFIREplace
P2P is an interesting one. Although I wouldn’t personally invest in P2P myself, I think there is an important lesson here. Expand your comfort zone by stepping outside of it and learning something new. Tuppenny clearly put the research in up front, before any investment was made. We money bloggers often talk about some passive income streams like they’re something we just discover and jump into. The reality is quite the opposite.
Take my experience with long term index investing as an example. I didn’t just discover index investing and invest there and then. I was intrigued, so I did my homework. Be skeptical of your own point of view, until you convince yourself. The number one rule of investing? Don’t invest in something you don’t understand, so go and understand it.
What do you think of Tuppenny’s passive income? Remember to smash that like button and leave your comments down below.