It’s almost the middle of the month, so that means that I have the final alternative income numbers for last month. It can take awhile for the tenants to have their rent checks in and for us to have the mortgages paid.
May was the first month in a long time where I didn’t feel overwhelmed and overbooked. Although that wasn’t true for the beginning of the month. My wife had a week of work travel and we did a lot of cleaning for Mother’s Day.
The kids’ obsession with Pokemon continues in its 11th month. I continue to leverage that to teach them (and myself) new things. For example, they wanted to learn Japanese, and they got a 20-day streak on Duolingo. We’re taking a little break and getting back to our normal bedtime reading of books. I’m still moving forward myself with Japanese with a streak of 40+ days. I’m doing the smallest amount possible each night, so I’m not good at all, but I find it uplifting to see the consistent growth from the steady habit.
I’ll mix in some pictures from the month throughout the financial update, because some people find numbers boring. (But not you or you wouldn’t be here!)
If you are a new reader, you’re going to want to refer to my Alternative Income FAQ as you’ll have a lot of questions.
Lazy Man’s Alternative Income – May 2019
In looking at our alternative income, I break it down to 3 main sources… each with their own caveats.
1. Blogging + Dog Sitting Income
The last month I reported, April, had us sitting almost all the dogs imaginable. May was a 33% drop-off, but it was still a top month for the year. That’s because Memorial Day is a big travel day and holiday pay kicks in.
Blogging income for May was significantly below average. For some reason, advertisers stayed away. Maybe it’s the start of the blogging summer slowdown.
Our son’s Kindergarten class had a field trip to a pond to investigate the life in that habitat. Parents were invited and my wife and I made up around a quarter of those attendees.
In April, we were on vacation and these combined for a total of $4,971.13. In May, it was:
Total Blogging + Dog Sitting Income: $3,428.60
I knew I wasn’t going to keep up with the record-breaking April performance, but I’ll take an above average number. It’s still moving in the right direction.
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 1% more than last month. As with every month, we paid off a couple thousand of mortgage debt. It is boring, but in a great, slow and steady way.
We now have 55.93% of the equity in our properties with an estimated combined rent of $3,325. The rent number is after insurance, property taxes, and condo fees. That’s so we can estimate what we’d really be taking home after expenses.
If you multiply $3,325 by 55.93% you get $1,860 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 28 months, we’ve seen the number grow $686/mo. That’s like giving ourselves an annual $8,232 raise until the end of time from where we were nearly 2.5+ years ago.
A year ago, I had to ask on Twitter what Pokemon was. This month, we went to the premier of Detective Pikachu and brought some friends. I’ve been a fan of the Marvel Cinematic Universe for a long time, but, in my opinion, Detective Pikachu was an objectively better movie than Endgame.
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.
In the previous report, the rental property income was $1,835. 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. Later this year, we should be able to raise the rents a bit.
Total Rental Property Income: $1,860
3. Dividend Income
For the third straight month May did little for our portfolios. For the April report, I took the numbers a little late on May 11th due to the beginning of the month rush. That was after Trump escalated the trade war with China. A few days ago, when it was time to get the numbers for all of May, the Tariff Man was back with Mexico in his sights.
Homemade S’mores aren’t just delicious. They are a reminder that some of life’s best little pleasures can be very cheap. (There’s no hiding the Pokemon shirt. And the shoes are “more comfortable” on the wrong feet.)
These incidents temporarily scared the market, but the timing happened to be when I was taking the numbers. Just how boring were the numbers this month? Take a look:
Total Dividend Income: $1,651
Last month, it was $1,659, so we lost $8 of theoretical monthly money from theoretical dividends. That’s the third month it was between $1650 and $1660 after being up from $1372 earlier this year.
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 residual income from books, movies, or music, we’d include that here (but we don’t have that).
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.
The kids’ school had a huge gala outside in a tent. I thought it was incredible, but my wife thought it was just “meh.” It was great to talk with the teachers (and even other parents) in a much more relaxed setting.
Having both types of income working together for us is 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 there are futher tariff fears. We’ll still get dividend checks if a tenant is late paying one month.
Very Close to Passive Income: $3,511
Last month it was $3,511, so it’s up $17. Last month was an all-time high, so we continue breaking records. 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 $42,128. It’s worth noting that, once again, these are fudged numbers that aren’t “real” yet. However, I’m looking forward to 9 years from now when the mortgages on the investment properties are paid off. Add in stock market growth (of a conservative 4%) and this number could reach $85K/year or more.
Final Alternative Income
When you add up “dogs and blogs” to the “very close to passive income” you get:
May’s Alternative Income: $6,939.60
That would be $83,275.20 for a whole year. I had been trying to get this number over $100,000. I made it in the previous report, but it’s dropped back down.
That largely hypothetical annual income for writing on a blog, taking care of dogs, and investments feels a little like a dream. In the long term, that 100K+ would be a lot more income than we’d need. Here’s what our expenses for the next 45 years looks like.
These numbers don’t include any of my wife’s bread-winning pharmacist income, her NOW VESTED military pension or some of the freelance work I’ve been doing over the last several months.
We had our first visit from the tooth fairy this month. It went so well that we had another visit in early June. (Yes that’s Pikachu’s ears on the shirt.)
As always, I’m still hoping to write a book someday. I’m probably going to tip my toe into self-publishing soon. 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? (Let me know in the comments.)
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.
The stock market was down, but it was just a small amount. Our real estate, including our own home, was up around 1% across the board. Our net worth overall went up 0.73%. For the year it’s up 21.63%, a large percentage of that was based on a website sale that I had at the beginning of the year.
I always have to remember that percentages can be weird due to the law of large numbers. Imagine someone with a net worth of $100 finds a $100 bill on the ground. Instantly it doubles his/her net worth. As our net worth grows larger, the percentage of growth will come down too. You’d rather have 10% growth of a million dollars ($100,000 gain) than 20% growth of a $100K ($20,000 gain), right?
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 all the money mentioned in this article, it isn’t immediately spendable cash.
However, because that would ridiculously dominate our net worth, I think I’ll include it as two separate numbers in our spreadsheet. Since I don’t share the numbers anyway, except for these hints, it shouldn’t matter much.
How was your May? Let me know in the comments.
Hi – the pyramid is a really interesting way of thinking about your income. Hopefully one day it reverses with the job income on top!
Yes, that was one of the main complaints, that I had reversed it. The goal should be to have the more passive income at the bottom. I went with what I think is more common.