It is the middle of the month, which means I’m less late than usual in reviewing and writing about my alternative income for the last month. Many bloggers publish their monthly updates a few days after the month is over. One blogger recently shocked me by publishing his report before the month was over. (My crystal ball is in the shop, but I guess his is working at full capacity.)
As a landlord, I have to get all the checks and have them deposited before I can start to compile the numbers. That usually takes about a week. Then there’s usually a couple of days to get my wife’s numbers due to her schedule. (Yes we keep some accounts separate, simply because it is logistically tough to combine/share.)
This month’s excuse for an additional delay is that Monday was Victory Day. Most people haven’t heard of Victory Day, because Rhode Island is last state to officially celebrate it. My understanding is that it was a national holiday to celebrate winning WWII. Time appears to have healed many of those wounds and we don’t talk about it much anymore. I’m personally rebranding it as victory over MLM/pyramid schemes.
The Victory Day holiday didn’t mean much to you, but to me it meant that daycare was closed. I traded a day of writing and working for a day of cheap homeschooling. I’m never prepared for Victory Day, and this year was no exception. Victory Day is undefeated like Father Time. It is obvious by the name. I don’t know why I try.
That’s enough of the history lesson, let’s move forward…
Alternative Income Update: July 2017
For those that don’t know the term, “alternative income”, I invented it 11 years ago to be purposely vague. In general, it is income that comes from passive investment and side hustles. I think of alternative income as anything where you aren’t directly trading your time for money.
This report is about all my alternative income. To work my investments into that paradigm, I have to fudge the numbers a bit. You’ll see what I mean as we go along. Or you can see a more detailed explanation back in January.
If you’ve been following this series, I wasn’t happy with the way I’d been calculating rental income. Last month, I introduced two new calculations that I like better. This month, I’m choosing one as the new standard.
Last month, June, my alternative income added up to $8,094, which was less than a hundred dollars shy of a record for the year. June was a step down for dog sitting as we went on vacation. We had 15 days off with no dogs which isn’t going help the numbers. On the flip side… YAY vacation and quality time with my family! At the end of the day, that’s why we deal with this financial malarkey anyway, right?
When I’m on vacation, I’m not writing much and I’m not working on the blog. It’s a good dry-run for what most people would think of as retirement.
Let’s get to where the title brought us: July 2017
Lazy Man’s Alternative Income July 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
Some “real world” people ask me, “What do you do?” This is my best answer. I’m not a fan of the question… it’s simply rude. I feel the question is often used to pigeonhole someone. Maybe I’m over-analyzing, but my response of “software engineer” seems to be received differently than “dog sitter.” Nonetheless, some response is required. I rotate among all the things that I do.
This month, based on my wife’s recommendation, I’m adding “male escort” to the list of the things I do. I escort some of the dogs I sit to weddings for pictures with the bride and groom. And yes, I’m paid an hourly rate for my time. However, I’m no Fred Garvin!
The best answer to the “What do you do?” question may be that I’m a stay-at-home dad. The kids go to school/camp/daycare for a few hours, but I usually have some other family errands (shopping, cooking, dishes, laundry, walking my own dog, etc.) to run during that time. It can take hours for me to just catch up on all email related to blogging. I don’t think most people grasp the concept of not having a full-time job, but still having a full slate of activity. I’m doing much, much more now than I ever did at a full-time job.
I think everyone assumes that Boss Lazy Man will tell Employee Lazy Man to take the day off from the blog to do non-blogging stuff. That’s not really how it works. People with standard jobs have a lot of insulation where they can say, “See, my boss says that I’m not available.”
Getting back to alternative income, 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 too many dogs to sit.
You may be asking right now, “Isn’t alternative income about NOT trading time for money?” This IS trading time for money. However, I don’t do it directly. Let me explain:
Sitting dogs itself isn’t a time-intensive job… at least with the number of dogs I have. However, 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. It’s different than being an Uber driver… the police tend to frown on blogging and driving. (Hmmm, maybe if I had a voice recorder and translation software I could compose some rough drafts.)
If you are interested in dog sitting, this month I wrote a very detailed article on the subject: Pros and Cons of Dog Sitting on Rover
Blogging is much more time-intensive. However, it isn’t directly trading time for money either. 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 and a collection of nearly 2500 articles over 11 years of blogging.
July was a very good month on both fronts considering the circumstances. Even though I just finished mentioning the June vacation, we went on vacation in July as well! The June one was the kids were out of school and summer camps hadn’t started yet. This one in July was to celebrate our 10th anniversary. Sometimes the vacation times simply choose you.
Due to the vacation, dog sitting was a big zero for 8 days in the middle of the month. However, due to the July 4th holiday (yay holiday pricing!) there was a lot of demand. It was our best month dog sitting by far. Summer is always a busy time for dog sitting as many people take vacations. It’s a great fit for bloggers, because blog traffic tends to go down while those people are on vacations.
Blogging in July was a bit down. Between the summer slowdown and being on vacation, I wasn’t expecting a lot of traffic. Still it worked out to be an average month, so I can’t complain much.
In June, these two categories added up to $5,536.18. So for July it is…
… before I reveal the July number, I’d like to give a little preview of how August is going. I don’t know if it’s noticeable on the blog, but I’ve been writing less often. I’ve been doubling down on all the other to-do items to get to a point where my mental energy can be focused on projects that I want to do rather than the tedious ones I’m being forced to do. The dog sitting money is coming in fast and might challenge for the most of the year.
Total Blogging + Dog Sitting Income: $5,869.98
That’s nearly $300 more, which is remarkably consistent to June’s numbers. I’d really like to getting back to growing this number, but that growth is my 4th or 5th priority after the kids, supporting my wife’s military career, managing the rental properties, etc.
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 down those mortgages. In 10 years or so, we should be able to collect an estimated income of $38,000+ (in today’s dollars, after expenses) on them.
This is why I have to fudge the numbers. I think it doesn’t make sense to count them as zero income, because it would make me want to sell them and invest them differently to count for this. If someone offered you a million dollars in 10 years or $10 a year now, you’d probably wait for the million. It’s an extreme example, but waiting has value.
So how do I fudge the numbers? Here’s how:
I add up all the properties equity and values. (Zillow is very accurate for these condos as it has a lot of data points to work with.) I then calculate an equity-to-value ratio (which is the opposite of loan-to-value ratio). In short this is the percentage of the property value that we own. I then calculate the rents of all the properties if they were own free and clear.
Here are the numbers for July. We have around 42.1% of equity of properties with an estimated rent of $3200. That comes out to $1,359.33. At the beginning of the year, we only had a ratio of 36.4% which lead to $1174.74. As the years march on, this ratio will grow to 100% the rent, which should be more than $3200 (due to inflation). That’s what gets us to that $38,000 I mentioned above.
Last month the rental property income was $1323.88. At $1,359.33, we’re $35 better off this month in alternative income
Total Rental Property Income: $1,359.33
3. Dividend Income
Like the rental property “income”, I’m going to play a game with the numbers.
We don’t focus on putting our money in dividend stocks, but I’m going to imagine that we do. Instead we have it in index funds (for the most part). Though the index funds do pay dividends, it’s not the core goal. Also, the money I’m talking about here is in our 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.
The stock market has been doing very well, so the pretend income here has gone up a bit.
Total Dividend Income: $1,259.31
Final Alternative Income
This month I had $8,489 in monthly “alternative” income. That would be $101,863.44 a year. Last month, I had $8,094, which would be $97,128 a year. It’s kind of nice to imagine giving myself a $4 raise. It’s also nice to think this is with taking a vacation and focusing on the other priorities.
I’m still working on writing a book to boost my alternative income. I had always planned it to be an eBook, but if any readers out there know a publisher, I’d appreciate the hook-up. I think I can make a compelling argument for a book that you’d see in a bookstore… that is if bookstores still exist by the time I’m done writing it.
Net Worth Update
I had been calling this a bonus feature, but I’m going to make it a standard footnote to this report.
Since I don’t share real numbers of our net worth, this may not be very exciting. That stated, net worth is one of the most important numbers in personal finance. Showing relative growth should be of some value.
In July, our net worth grew exactly 1.12% which is still great for a single month. From the beginning of the year to now, we have increased our net worth around 12.29%%. That’s largely due to the stock market, real estate appreciation, and paying off debt. We live frugally as well.
These gains can’t go on forever. They why I recommend you read: Why (and When) You SHOULD Try to Time the Market. We’ll let the market forces roller coaster do it’s thing and enjoy the ride.
Until next month, think long-term my friends.