Alternative Income Update: May 2017

It is a little past the middle of the month. That means I’m a little later than I’d like in reviewing my alternative income for the last month. Many bloggers publish their monthly updates a few days after the month is over. As a landlord, I have to get all the checks and have them deposited before I start to compile the numbers. That usually takes about a week.

For those that don’t know the term, “alternative income”, I invented it to be 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, April, my alternative income added up to $7,358, which was a huge step forward. April was a big step forward for dog sitting (school vacation!) and the blog had a lot of other advertisements.

However as my back in January.

Lazy Man’s Alternative Income May 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, probably because it is difficult to answer. I also feel it 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.

The shortest answer to the question may be that I’m a stay-at-home dad. The kids do go to school/camp/daycare 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 all email related to blogging. I don’t think most people don’t grasp the concept of not having a full-time job, but still having a full slate of activity. In a lot of ways, I’m doing a lot more now. It seems everyone assumes that Boss Lazy Man and tell Employee Lazy Man to take the day off from the blog to do non-blogging stuff. It may be hard to believe it, but people with standard jobs have some 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 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 at 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 because 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.)

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 over 10 years of blogging.

May was a great month on both fronts. Dog sitting was quiet for the first half of the month. However, Memorial Day is a big travel weekend. We maxed out capacity and I actually had to refer a couple of dogs to some fellow sitters.

Blogging in May also went extremely well. It seems that the industry was willing to pay more for display advertising. Also I had more advertisers than usual contact me directly about putting an ad on my site.

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.

In April, the two categories added up to $5,341.28.

Before I reveal the May number, I like to give a little preview of how June is shaping up. For the first two weeks I’ve been on nearly 100% childcare as school was out and camp hadn’t started. We used some of that time for a family vacation. While on vacation I obviously can’t do any dog sitting. I couldn’t even break away to do work as our hotel room lacked an internet connection (the wifi didn’t reach). Hopefully, I can cram a month’s worth of work into 10 days. If not, June may be a decent test of how passive this type of income is (or isn’t).

Total Blogging + Dog Sitting Income: $6,267.72

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. (I may be paid a few dollars if you click through that link and refinance.) 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. (Again, I may be paid a few dollars if you click through and sign up for their free service.)

I made some assumptions and the result is: $644. Last month the same exercise lead to $702.

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.

Around 2027 all the mortgages will be paid off. The properties should then earn $36,000 a year or $3000 a month after expenses. Since real estate is relatively inflation-proof (rents will rise over time), I can think of it as $3000 in today’s dollars, which is about half of the blogging/dog sitting income, but typically a bit more passive. I wish I could just count that $3000/mo. right now.

Total Rental Property Income: $664

3. P2P Lending income

I’m discontinuing counting P2P income as it is less than $25 a month. I still believe you can get a good interest rate with P2P… I just don’t don’t have the money to put into it at this point. I’d rather max out retirement accounts.

4. 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. Instead we have it in index funds (for the most part). Though they do pay dividends, it’s not the core goal. More importantly, 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.

We took out a sizable TSP loan this last month to pay off our solar panels and our surprisingly big condo assessments. Due to the loan, the number that I use to put in here is lower.

Total Dividend Income: $1,213.50

Final Alternative Income

Last month, I said that I was hoping to hit more than $8000. Adding up all the numbers, it looks like we’d have $8,145 in monthly alternative income. WIN!!!

Bonus! Net Worth Update

(Can I still call this a “Bonus” when I’ve done it for a few months now?)

Since I don’t share real numbers of our net worth, this may not be very exciting. It’s still one of the most important numbers in personal finance. Showing relative growth should be of some value.

In May, our net worth grew exactly 2.00% which is tremendous for a single month. Annualized that’s 24% a year, which using the rule of 72 means we’d double our net worth in just 3 years. There’s always a danger in extrapolating one month’s gains to 3 or more years.

However, by the beginning of June, our net worth was up 9.58%! We are not too far off of that 24% pace. This can’t go on forever, and we’ve already started to see the stock market show some weakness with some tech stocks selling off. However, they seemed to bounce back as quickly as they dropped. We’ll let the roller coaster do it’s thing and enjoy the ride for now.

Until next month, think long-term my friends.