Alternative Income Update: August 2019 ($6,368.48)

Who has two thumbs and posts his August update at the end of September? This guy (*points to self with thumbs*)

I’m in a joking mood, because it’s better than being crazy.

Why would I be crazy? I don’t do travel well (especially alone) and just came back from FinCon in D.C. My wife did everything to get the kids going for the start of the school year… while handling her busy workload. Getting the kids going is usually my role. I have systems in place (not the best ones, but systems nonetheless) to help get the kids going in the morning. You do something more than 150 times a year for 3 years and you get better at it, right? (I hesitate to say that I’m “good.”)

I got back from FinCon just in time to give my wife a high-five (literally) as she went on her own trip. That was just overnight, but we had an immediate back-to-school event to go to after that high-five… so it was straight out the door.

It’s my wife’s turn to be D.C. this week… all week. With all of this D.C. travel, you’d think we are politicians, right? At least we are almost through it. It will be great to get back to two parents for two kids.

So in short, September is a mess. Every September seems that way. Maybe I should spend my alternative income on a nanny?

That’s way too much about September, this article is supposed to be about August, right?

(This is my favorite part of the article as I get to journal the moments in life that make it worth living. It’s my personal part of “personal finance.” If you want to get straight to the money stuff just scroll down to the next title.)

August was crazy… crazier than this September, but in a different way.

My wife and I got to see the musical “Hamilton.” She’s seen it three times (twice in NYC), but this was my first time. I guess it is kind of a big deal. I loved it and if you get the chance, it’s worth the money… even though it is a lot of money. My wife was surprised that the touring version, Providence RI, was competitive with the NYC version. She’s a great judge of acting. I mostly focus on whether I was entertained. And I was!

The next couple of days we went to the beach. We made some new friends (I hope)! Actually my wife made new friends since I only know how to talk to 6-year olds or younger. Fortunately that allowed me to take the kids for a second beach day in a row. Our 5-year old decided to wear ALL the mud on the beach at the same time. He was trying to be like Muk of Pokemon fame.

A few days later we had the annual beach party from a local animal conservatory. The fire pit is always fun.

However, the next day we were in Florida. My wife did “a thing” as I think they say on social media. That thing was add an MBA in public health policy (I think) in addition to her Pharm. D. A doctor adding an MBA… I married well… especially when counting her pension.

Maybe she’ll retire soon… but let’s a pin on that for now. We’ll get to it later.

Right after that, she needed to travel. I took the opportunity to be the most productive I’ve been in years. I cleaned almost everything in the house. I even did yard work where a bee went in between my glasses and my eye. What kind of bee does that? I’m deathly afraid of bees (except when bees are currency). Fortunately, the bee decided to only sting my thumb as I ripped off my glassed and tumbled to the ground like an idiot. I like to think a neighbor was watching and good a laugh out of it.

And then we took a break… for about 30 seconds!

My wife decided that it was a good time to celebrate her new degree… and did so in style for a week. It was almost like she was testing out early retirement… and I think she liked it. There’s a reason why so many people flock to Newport, Rhode Island in the summer, so since we’re already here, we might as well take advantage of it.

The following week, we went on a trip with the kids. We drove to New York and spent a day going to the Pokemon store, the children’s museum, and a National Geographic exhibit on the ocean. We also went to the M&M store and were on the Today Show the next morning (in the crowd of course).

From there we moved on to Hershey Park. We stayed at the Hershey Lodge which is a little like a Great Wolf Lodge with an indoor water park… except much better. I can’t remember having so much fun and the kids never wanted to go sleep.

I think we got in just the right amount of mischief in that above Tweet. We cleaned when we were done.

That sums up the very, very busy month of August. Well, except for the money update. That’s why you are here right?

Well, with all the goofing off and traveling, August was not a good month for making money. It’s hard to run a successful dog sitting business when you are in Florida one weekend and New York and Pennsylvania the next. I also didn’t do much blogging.

If you are a new reader, you’re going to want to refer to my Alternative Income FAQ as you’ll likely have a lot of questions about how I do these numbers.

Lazy Man’s Alternative Income – August 2019

I categorize our alternative income into 3 main sources that are largely represented in the passive income pyramid. I ignore the bottom section of career/job – that’s not passive or alternative at all. I combine dog sitting and blogging into one section of “slightly active” income. I leave real estate and investment income as their own separate main sources of very passive income.

1. Blogging + Dog Sitting Income

The last month I reported, July, was a record-breaker. We didn’t get close in August. It would normally be a big dog sitting month due to the local summer tourist season, but we weren’t around much.

Blogging income for August was just off. Some months advertisers aren’t around. This is why I like to be diversified across all these income streams.

In July, these combined for a total of $5,713.84. In August, it was:

Total Blogging + Dog Sitting Income: $2,705.48

So while that looks like a big loss, it’s just a little below the average. September is shaping up to be worse, due to the craziness.

Here’s a historic chart with the red line being a 3-month average:

2. Rental Property Income

Zillow said our rental properties were worth a lot more than last month. As with every month, we also paid off a couple thousand of mortgage debt. That helped us gain more than $10,000 in equity. Too bad it isn’t liquid, because that would pay for a lot more vacations.

We now have 58.06% of the equity in our properties with a combined rent of $3,325 after insurance, property taxes, condo fees, and estimated maintenance. I like to use that number, because it represents our net gain.

If you multiply $3,325 by 58.06% you get $1,930 in estimated monthly alternative income. When I started tracking this (beginning of 2017), we only owned 36.4% of the properties and they had lower rents. The math worked out to $1,174 back then. So in 31 months, we’ve seen the number grow $756/mo. That’s like giving ourselves an annual $9,072 raise until the end of time from where we were nearly 3 years ago.

As the years march on, the ratio will grow to 100% of the $3,325 monthly inflation-resistant rent. That’s what gets us to that annual $40,000 income I mentioned in the FAQ mentioned at the beginning of the article.

In the previous report, the rental property income was $1,892. This number always moves slowly as it only changes if one of two things happen: 1) The properties go up in value. 2) We charge more for rent. We’re raising the rents a bit next month, but it mostly negates rising HOA fees, so I’m not going to count as increased rent.

Total Rental Property Income: $1,930

3. Dividend Income

The Tariff Man went away! Or maybe the markets just didn’t care about him. In any event, our stocks are doing well.

I had to estimate some of the numbers for my wife’s retirement plans. Things have just been to busy for me to ask her to log into her accounts. Fortunately, because they are index funds, I can usually estimate fairly well.

For this section, I generally assume we’ll be able to make a 2.5% dividend yield on our holdings. That could be from a high-dividend ETF or from simply holding strong companies that have a long history of dividend growth. For that we’ll look at making passive income with dividend kings. I’ll get Sure Dividend’s newsletter (this link has a special coupon code if you are interested) to try to get closer to a 4% average dividend yield.

I’ll have a new surprise in this section when I get to October’s results. I’m really excited about it, but I can’t spill the beans just yet. It should be a big jump though.

Total Dividend Income: $1,733

Last month, it was $1,692, so that’s a good jump. This is another all-time record (go markets!). This would be nearly $20,800 in dividends a year. If our mortgage was paid off, this could almost cover of our necessary expenses alone. We would still have to draw some money out or make more than 2.5% in dividends to be safe. Of course we wouldn’t really need to do that because of the other income streams.

Very Close to Passive Income

Our “very close to passive income” is a combination of rental property income and dividend income. If there were some royalty income from books, movies, or music, we’d include that here (but my rockstar career hasn’t taken off yet).

The stock market goes up and down fast which makes the dividends calculation fluctuate a bit. The rental property income keeps going up because the mortgages are always getting paid down every month. Unless there’s a housing market crash, this should continue to happen.

Having both types of income working together for us is going great. The diversification gives me great confidence that we’ll be better prepared than most people in the case of an unfortunate event. We’ll still likely get rent checks if the stock market crashes. We’ll still get dividend checks if a tenant is late paying for awhile. Of course a bad economy may impact both at the same time.

Very Close to Passive Income: $3,664

Last month it was $3,584, so it’s up $80. It’s another record! It’s now consistently over the average of my dog sitting and blogging.

It has grown from a combined $2,354 in January 2017. Since then, this has gone from an estimated annual income of $28,252 from these two sources to $43,965. It’s worth noting that, once again, these are fudged numbers that aren’t “real” yet. However, I’m looking forward to 8 years from now when the mortgages on the investment properties (and our primary residence) are paid off. Add in stock market growth (of a conservative 4%) and this number could reach $85K/year by then.

Final Alternative Income

When you add up “dogs and blogs” to the “very close to passive income” you get:

August’s Alternative Income: $6,368.48

That off of last month’s all-time record. The passive income of dividends and rentals didn’t quite make up for the low blog and dog income. That’s going to happen.

Annualized, the $6,368.48 in monthly income would be $76,421.80. I have been trying to get this number consistently over $100,000. After doing it twice in a row, it has come back down. However, for the year it looks like we’re closer to landing the $85-90K range for the year. Maybe we’ll have a big end of the year, but if not, that’s fine too.

That largely hypothetical annual income for writing on a blog, taking care of dogs, and investments feels like a dream. In the long term, $90K+ would be a lot more income than we’d need. Here’s what our expenses for the next 45 years looks like.

None of the numbers here include my wife’s bread-winning pharmacist income, her vested military pension (more passive income), or the freelance work I’ve been doing over the last year (which isn’t passive at all).

As always, I’m still hoping to write a book someday – just to add some more passive-ish income. I may tip my toe into self-publishing sometime in the next year. I would love to talk to a real a publisher, but I don’t want to take on the “job” of writing. If you know someone who I could talk to contact me.

Net Worth Update

My net worth updates aren’t very exciting as I don’t share the exact numbers. That’s why it’s just a footnote here.

I truly believe that net worth is one of the most important numbers in personal finance so it is worth sharing in some way. Showing relative growth can be useful, I think.

I use Personal Capital to track my net worth and it makes everything easy. It’s free and you should give it a try. For full disclosure, I might make a few dollars if you do. For more full disclosure, I haven’t made a dollar from that suggestion this year so I’m not just suggesting it because I’m getting rich off it.

With the stock market and real estate markets getting back on track, our net worth overall jumped 2.48%. Over the entire year it’s up 26.09%, which is amazing considering it is a sizeable number. About half of that growth was from a large percentage of that was based on a website sale that I had at the beginning of the year. The rest has been simply investment gains and savings.

Some of our net worth will be held back in the next report because we are tapping our HELOC for some siding repairs. Every year we seem to have one really large expense and this going to be it this year. Hard work, good planning, and very good luck has put us in a position where a $15K total job isn’t devistating. Hopefully, it’s the only big expense this year. So far we have nothing planned for the abnormal big expenses next year.

It’s important to remember that everyone is in a different place in their financial journey. I’ve been blogging about personal finance for 13 years, naturally, we may be further along in that journey. Don’t be discouraged by some of the numbers above if you are just starting out. Use it as motivation for what may be possible (depending on your circumstances).

There’s a big wild card in calculating our net worth. Now that my wife’s pension is vested, it’s reasonable to ask Should I Include a Pension in Our Net Worth?. I decided that it does make sense to do it. It’s not easy, but I came up with some ways to figure out what a pension is worth. In the end, it seems my wife’s may be worth $2.3 million. However, like most of the money mentioned in this article, it isn’t immediately spendable cash.

That pension would ridiculously dominate our net worth, so I’ll note two separate numbers in our spreadsheet. Since I don’t share the numbers anyway, except for these hints, it shouldn’t matter much to you.

How was your August? Do you even remember it? Let me know in the comments.