Alternative Income: February 2017

Happy Ides of March! Is it callous if I have a Caesar salad to in remembrance? Is so, is it fair to have a Caesar salad simply because they are delicious?

Err, happy Pi Day, 3/14. (I had intended this article to go out on 3/15, but due to the blizzard, I bumped it up.)

Last month, I resurrected my alternative income tracking. This is income that comes from passive investment and side hustles. Last month all that added up to $4,439.62.

I have to “fudge” the numbers a bit to get them to fit into this paradigm. You’ll see what I mean as we go along.

Lazy Man’s Alternative Income February 2017

It’s hard to define what alternative income is. That’s why I came up with such vague name for it. I like to think of alternative income as anything where you aren’t directly trading your time for money.

In looking at our alternative income, I think I can break it down to 4 main sources… each with their own caveats.

1. Blogging + Dog Sitting Income

This is the best answer to the question “What do you actually do?” However, it ignores that I’m mostly a stay-at-home dad. The kids do go to school for a few hours, but I usually have some other family errands (shopping, cooking, dishes, laundry, etc.) to run during that time. It can take hours for me to just catch up on mail. So the dog sitting and blogging side hustles fall between listing some items on Ebay to make some extra dollars and working a full-time job. I think it’s hard for people to grasp not having a full-time job, but still having a full slate of activity.

I don’t break out the blogging income vs. the dog sitting income. I find that one impacts the other. When I have a lot of dogs, I don’t have as much time or the focus to blog. When I’m blogging a lot, it’s usually because I don’t have many dogs to sit.

And while this area is trading time for money, I don’t view it as a “directly” doing so.

Sitting dogs itself isn’t a time-intensive job. There is considerably more overhead than you might think between booking dogs and meeting dogs for suitability. The important differentiation with dog sitting is that I can “double-dip” and earn money from another side hustle at the same time. If it were active dog-walking that might be a deal-breaker, but even then I might consider that my exercise, which would be a different kind of “double-dip.”

Blogging is much more time-intensive. However, it still isn’t directly trading time for money. I write an article for the blog today, I don’t necessarily get money for it. The money I make from blogging now is a direct result of having built a reputation over 10 years of blogging.

That was a long explanation, so let’s move on. Last month, January, was a rare month where I didn’t make much from blogging or from dog sitting. January is always low for dog sitting as people tend to not travel as much. Blogging income was low as I didn’t have much advertising set up from my redesign.

February was a different story. The alternative income from this area went from $2,476 to $4,093.

This was to be expected. February is usually a very busy for dog sitting. Due to school vacations it is a heavy travel month. This was no exception.

Blogging income really jumped up in the middle of the month when the advertising got in place. I had a lot of direct advertisers as well… more than I typically have.

Side note: I highly recommend pesonal finance blogging. It helped me stay accountable. Here’s how to get started blogging with any blog you might want.

Looking ahead to March, it seems tempting to expect a big month. However, as I write this a few days in (I’m publishing it later in the month), it might be a little disappointing. On one hand there is a full month of the new advertising. On the other hand, my 4 year old is on break for 2 weeks and we are traveling for one. It means that I’ll be trying to do two weeks of work in 2 days. March is usually a down month for dog sitting. It only gets worse when I’m traveling and can’t be available to sit dogs.

Total Blogging + Dog Sitting Income: $4,093

2. Rental Property Income

Here is where I start to play games with the numbers. Sorry, but it’s necessary.

We have three rental properties in our real estate accidental “empire”. (“Empire” is in quotes for a reason – it is a joke.) They are on 15-year fixed mortgages. This means that we don’t make money on them now, but we are quickly paying off the mortgages and enjoying some appreciation (not a lot).

However, if we wanted to, we could refinance those mortgages to 30-year fixed. I’d refinance through LendingTree to get the best rates. We would then be paying less each month and earning alternative income from them.

Fortunately, we don’t need to refinance the properties. For the sake of this report, I am going to pretend that I refinanced them all to 30-year fixed mortgages. Zillow has a very good refinance calculator that allows me to see how much money we’d make each month if I refinanced. Fortunately, I have all this information easily available in my free Personal Capital dashboard

I made some assumptions and the result is: $672.

Last month the same exercise lead to $712. So why would I earn $40 less this month than last month?

I had expected that I’d grow this every month. I had (at least) two fundamental miscalculations. As we pay off the mortgage, the savings in refinancing are smaller. Also interest rates fluctuate, so it is a big disadvantage going from my current (15-y) 3.5% rates to the (30-y) 4.30% rates that I see today.

I might have to rethink how this works. The idea would be to show incremental increases as the mortgages are getting paid down. Any thoughts? Let me know in the comments.

Total Rental Property Income: $672

3. P2P Lending income

I still have money in both Prosper and Lending Club. Both companies are operating much, much better than Prosper did in 2006. I have barely more than $5000 in the two combined accounts. I’m leaving what I do have to see how it goes. If I had enough spare money to max out my IRAs and 401ks (small businesses can withhold a lot more), I would look into adding money here as it has been doing better for year.

Taking a conservative estimate of what I could pull out without losing money, it appears we could bring a little more than a Jackson each month. I might eliminate this in the future because it is essentially a round-off error, but I’ll take free Netflix and Amazon Prime.

This month, I’d have 8 cents more than January. At this rate, I’ll make about an extra dollar in alternative each year. Can this get any more boring?

Total P2P Lending income: $22.90

4. Dividend Income

Like the rental property “income”, I’m going to play a game with the numbers.

We don’t have our money in dividend stocks. Instead we have it in index funds (for the most part). More importantly, the money is in retirement accounts, so it isn’t something that we would tap as “income” anyway.

However, nearly 20 years of nearly maxing out retirement contributions is significant.

Just like the rental income, we can “pretend” what the portfolio would earn if we moved all the money into dividend stocks or indexes. For the sake of pretending, I estimated that we could earn between 2.20% and and 2.80% in dividends on the portfolio.

I am purposely keeping a wide range because I honestly don’t know what kind of dividends to expect. Also, it conveniently makes it difficult for people to reverse engineer and figure out our retirement portfolios (not that it is a big secret).

Each month, I’ll pick a random number in that range to derive this number. Since it’s “pretend” dividends anyway, there’s nothing lost in being a little vague. The focus is on calculating something that could be accurate if we needed it to be.

Last month we had $1232.14, and this month it looks like we could have $1,257.82. That’s a gain of $20 passive dollars. Happy to see things going in the right direction.

Total Dividend Income: $1,257.82

Final Alternative Income

Adding up all the numbers it looks like we’d have 6,045.72 in monthly alternative income. That’s a nice bump up from last month’s $4,439.62. If I could keep this annual rate (and realizing that some of the numbers are fudged) it would be $75,548 in alternative income. That’s great for a short month of blogging, dog sitting, and living frugally to make those investments grow.

For the year, I’m averaging around a $65,000 income using this, but I’d love to push that beyond $80,000. It would take a lot of work, because I’d have to do a lot more to push that average so high given the two months already in the books.

Roughly, 2/3rds of the incomes comes from the least passive area, the blog and dog sitting. This means that we couldn’t hike through the mountains quite yet as the income would drop to close to zero (the blog would bring in some money still). It’s simply different than investment gains.

Like last month, I’m also looking at adding more streams of income to this list. I’ve been looking to write a book, do some money coaching on the side, or try some travel hacking through credit cards. Given the rocky month of March, I’ll work on maximizing on what I have.

Bonus! Net Worth Update

Last month, I asked the readers if it is helpful for me to post net worth updates when they don’t include the raw numbers. As I feared, it was hard for people to get much out a 0.8% net worth gain that month.

It’s also terribly boring to read about how the market went up and as a result my accounts did as well. (It’s boring AND depressing if they go down!) It’s boring to read that car loans were paid off. It’s boring to read that renters sent in the checks as planned. Overall, our net worth growth seems to be mostly about the passage of time

So I’m going to something mostly the same, but just a little different. Our net worth after two full months of 2017 is up 6.29% for the year. When I reviewed how much our net worth grew over the last few years it was around 18%, meaning that it doubled due to the rule of 72. So 6+% after a couple of months is even more than those generous gains. As always, it is a small sample size and it would be shocking if the market kept this pace this whole year.

In the meantime, the bottom line looks great.