It’s (close enough to) the middle of the month. That means it is time to review my alternative income.
For those that don’t know the term, “alternative income”, it’s purposely vague. In general, it is income that comes from passive investment and side hustles. I like to think of alternative income as anything where you aren’t directly trading your time for money.
Last month all that added up to $5,678, which was a step back as March isn’t a big dog sitting month (no big holiday or school vacations) and we went on vacation.
I have to “fudge” the numbers a bit to get them to fit into this paradigm of alternative income. You’ll see what I mean as we go along. I gave a more detailed explanation back in January.
Lazy Man’s Alternative Income April 2017
In looking at our alternative income, I break it down to 4 main sources… each with their own caveats.
1. Blogging + Dog Sitting Income
This my best answer to the question “What do you actually do?” I’m not a fan of the question. I feel it is often used to pigeonhole someone. Maybe I’m over-analyzing, but my response of “software engineer” seem to be received differently than “dog sitter.” Nonetheless, some response is required. I rotate among all the things that I do. I’m tempted make something else up to add to the rotation… any suggestions?
The best answer to the question may be that I’m 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 email related to blogging. 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. 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.
I said that alternative income is about not trading time for money. This IS trading time for money. However, I don’t do it directly.
Sitting dogs itself isn’t a time-intensive job… at least at the number of dogs I have. 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, such as blogging, 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. If I write an article for the blog today, I don’t necessarily get any money for it. The money I make from blogging now is a direct result of having built a reputation over 10 years of blogging.
April was a good month on both fronts. With school vacations, we had plenty of dog sitting business. We had 54 “dog days”, which means essentially means 1.8 dogs a day on average. Fortunately, no one brought us 80% of a dog on any day.
Blogging in April also went very well as well. I think it might have had to do with tax season. It also helped that I wasn’t on a vacation or anything like that.
Last month, I speculated that I should do over $5,000, but I was hoping for $6,000 in this category.
Before I reveal the April number, I like to give a little preview of how May is shaping up. We have had a lot of dogs for day boarding and no overnight boarders. It’s usually 90% overnight boarders. It’s also strange that there’s almost no interest in Memorial Day… usually on of the biggest days of the year. Blogging has been stronger this month, so that evens out the lack of dog sitting income. I’m going to push again for $6,000.
Total Blogging + Dog Sitting Income: $5,341.28
2. Rental Property Income
Here is where I need to fudge 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. I noticed that they aren’t appreciating at all this year, but they did well last year. In 10 years or so, we should be able to collect an estimated income of $30,000 (in today’s dollars, after expenses) on them.
We could refinance those mortgages at a 30-year fixed rate. I’d refinance through LendingTree to get the best rates. Since we’d be taking the remaining 10 years and spreading it out over 30, our payments would drop. We’d then be earning alternative income from them. However, we don’t do this because I want to be closer to that $30,000… and interest rates are not particularly good.
For the sake of this section, 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.
Yes, this section is alternative facts and fake news (except that I’m telling you it is fake).
Fortunately, I have all this information easily available in my free Personal Capital dashboard
I made some assumptions and the result is: $702. Last month the same exercise lead to $709.
This doesn’t change from month to month as I thought it would. The big flaw in this exercise is that interest rates are more now than they were 5 years ago. Also refinancing from a 15-year to a 30-year term is a higher interest rate on top of that. Finally, as the mortgages get paid off there’s less to be gained from refinancing. Imagine if I had only $1000 left on each mortgage. Refinancing that, even if refinancing was free, would lead to minimal gains.
As I’ve said for many months now, this really needs to be reworked. I just have to figure out how and still make sense. I’d appreciate any suggestions.
Total Rental Property Income: $702
3. P2P Lending income
This amounted to $22.96 because I don’t continue to put money into this. I feel it is better to max out my retirement contributions. I may eliminate this in future reports. The $22 isn’t exciting and I don’t want to waste words on it. I still believe that P2P lending can give you a good return on your investment. I just don’t have the spare cash to pour into it.
Total P2P Lending income: $22.96
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. It will be counted some day, right?
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 2.30% and and 2.70% 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.
Since I watch too much Sesame Street with the kids, I will present this as: “The number (*stomp*, *stomp*) of the month is… $1,292.42. That’s a sizable $40 more than last month.
Total Dividend Income: $1,292.42
Final Alternative Income
Adding up all the numbers it looks like we’d have $7,358 in monthly alternative income. That’s the highest number yet, by a pretty good margin. That’s very exciting, but I want to break through $8,000 for next month. Stay tuned and see if I can do it.
Bonus! Net Worth Update
Since I don’t share real numbers of net worth, it’s not very exciting. However, I like to include it as a nice bonus footnote.
Our net worth grew 1.59% which is great for a single month. For the year, our net worth is up 7.43%. That’s pretty good through April. Interestingly, it is all stock market based. The gains in our rental properties are from simply paying off the mortgages. I was surprised when I realized there has been no appreciation of them. We might have had an 8% or 9% increase in net worth if there were appreciation. I obviously can’t complain overall.
Of course earning money and saving it is a significant factor in our net worth growth as well.
Until next month, think long-term my friends.