The decade is rapidly coming to a close. After this month’s report, I’ll have just one more, coming after the new year.
November started with a great friends’ son’s Bar Mitzvah party. Before the party started, my wife and I spotted Massachusetts Senator Ed Markey in the lobby of the hotel we were staying at. The party was even more interesting. There was a moment (which I can’t tell you about in full detail) that was about as jaw-dropping as Taylor Swift writing a custom song to congratulate the young man. Everyone in the audience was like, “Did we really see what we think we saw? That couldn’t have been real?” It was.
My wife took some time away with her friends over Veterans Day. That left me with the kids for a couple of days. They got to explore their first computer (a Kano that they built – pictures below). We had Happy Meals and Applebees dinners. We put together Pokemon Mega Construx. We watched classic Japanese Anime (My Neighbor Tortoro). We visited a nearly 100 year old tower that is a national landmark (also pictures below). We did a lot more as I tried to cram everything I could into the weekend.
November was also eventful because we vacationed in Aruba, using the timeshare that my wife bought long, long ago.
We originally booked the trip around Thanksgiving to limit the days the kids miss at school, but flights got too expensive. It was around $2000 more. We changed our trip go from Wednesday to Wednesday to save a lot of money. It’s probably obvious to nearly every reader that Thanksgiving travel is more expensive. We’ve never done it, so it didn’t occur to us. We are learning all the time.
We closed out the month with a Thanksgiving dinner with family… and me spending way too much money on Black Friday/Cyber Monday shopping.
That’s enough lead-in… let’s get to the Alternative Income report. I’ll mix in some pictures from the month throughout this financial update, because some people find numbers boring. (But not you or you wouldn’t be here!) Usually, I have more pictures, but it was a light month with not a lot of variety.
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. They way I calculate these numbers does require some explanation.
Lazy Man’s Alternative Income – November 2019
I categorize our alternative income into 3 main sources that are largely represented in my passive income pyramid. I ignore the bottom section of career/job – that’s not passive or alternative. 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, October, was the worst blogging and dog sitting month I’ve had since the start of the year. Between the start of school, my travel for FinCon, my wife’s travel for work, we were busy.
November’s dog sitting was terrible – far, far below what it usually is. Last year’s November was one of our best months due to a busy Thanksgiving holiday. This year, we were traveling, so we missed almost the month’s entire business.
Blogging income for November was also down, but just a tiny bit. I can’t complain because it seems like half the month was preparing for vacation, having vacation, or recovering from vacation.
In October, these combined for a total of $2,476.44. In November, it was:
Total Blogging + Dog Sitting Income: $1,570.39
The months of June and July at $5000 are looking really good now. Fortunately December is looking better. We’ll have to see how it ends up though, because I’m not sure if we’ll sit dogs over Christmas and I know Internet traffic will be down then.
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 less than last month. We’ve seen a lot of appreciation this year, so it’s not surprising to give back some of those gains. As with every month, we paid off a few thousand dollars of mortgage debt. That helped us keep about the same of equity.
We now have 59.65% of the equity in our properties with a combined rent of $3,325 after insurance, property taxes, condo fees, and estimated maintenance. I use that number because it represents our net gain.
If you multiply $3,325 by 59.65% you get $1,983 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 34 months, we’ve seen the number grow $809/mo. That’s like giving ourselves an annual $9,708 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 $1,978. 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’ve got a change of tenant soon, and we’ll be raising rents to match that. In January, I’ll revisit all the assumptions that go into that $3,325 estimate after insurance, property taxes, condo fees, and estimated maintenance.
Total Rental Property Income: $1,983
3. Dividend Income
The stocks markets have been pretty volatile over the last month. However, by the time was all said and done our investments were worth almost exactly what they were the month before.
For this section, I assume we will earn 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.
In November, we continued to get a profit sharing check since I bought (a lot of) a company. This investment income is essentially the same as dividend income. It is taxed differently, but for the purposes of this report, it makes sense to group together all stock ownership in this bucket.
Total Dividend Income: $2,813.00
Last month, it was $2,789. So at $2813, we’ve got a modest jump of $24. The stock market seems to hit new highs all the time. I was briefly scared that the Tariff Man was going to temporarily torpedo this report like he did 4-5 times before this year. Fortunately, things recovered quickly and so far the tariff stuff has just been temporary fluctuations.
If this stayed steady it would be $33,756 in investment income a year. If our mortgage was paid off, this may cover our necessary expenses alone. Of course, because most of our investments are in retirement accounts, we can’t simply use this income right now. It will have to keep on compounding another 15 years or so.
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.
It is great to have both types of income working together for us. The diversification gives me great confidence that we’ll be better prepared than most people in the case of an unfortunate economic 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, but that’s what an emergency fund is for.
Very Close to Passive Income: $4,796
Last month it was $3,767, so it’s up $32. That may not seem like much, but slow and steay wins the race. That $32 erases some of our smaller bills. This passive income now consistently over the average of my dog sitting and blogging. That’s the goal as more and more income moves to the top of the passive income pyramid. However, it would be better if dog sitting and blogging challenged it more.
This very close to passive income has grown from $2,354 in January 2017 – or an annual income of $28,252. Our passive income is now more than double that at $57,522. 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 should be real/non-fudged $100K/year.
Final Alternative Income
When you add up “dogs and blogs” to the “very close to passive income” you get:
November’s Alternative Income: $6,366.39
In October it was nearly $7250, so this is a step backwards. Annualized, the $6,366.39 in monthly income would be $76,396.66. I have been trying to get this number consistently over $100,000. It doesn’t look it’s going to happen this year. If I can finish above $80K, I’ll consider that a win. It’s going to be close and perhaps come down to the last month. Maybe 2020 is the year I can get that average over $100,000.
That largely hypothetical annual income for writing on a blog, taking care of dogs, and investments feels like a dream. In the long term, $80K+ would be a lot more income than we’d need. Here’s what our necessary expenses for the next 45 years roughly look 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). That’s the fuel that drives the passive income engine.
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 next year. I would love to talk to a real a publisher, but I don’t want to take on the “job” of writing. That’s probably a deal breaker. 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.
Our net worth jumped 1.21%. The big reason? The stock market has been hitting new highs almost every day. Also, Zillow gave our primary residence a big boost in value. If that sounds familiar, that was exactly the same reason last month. Our primary residence has jumped 5% in the last couple of months. Some people don’t count primary residence value much in net worth, but I believe it has value. We can always downsize or move to a cheaper place and pocket the difference and get real cash.
Over the entire year our net worth is up 30.92%, which is crazy. At that rate we’d nearly double our net worth every 2.5 years. And in 25 years, we’d be billionaires. This is probably a once-in-a-lifetime year though. Also, at age 43, I’m expecting to live long enough to witness more than a few crashes. When those crashes come, please remind me about 2019.
Finally, 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. We naturally may be further along in that journey than some younger readers who may be beginning their 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 my internal spreadsheet. Since I don’t share the numbers anyway, except for these hints, it shouldn’t matter much to you.
How was your November? Let me know in the comments.
Wow, you’re doing so well financially. Congratulations on a great year.
You really should include your wife’s pension in the net worth.
Can she take a lump sum payout? That’s an easy way to add it to your spreadsheet. $2.3 million is a ton of money.
Next year, I’ll really try pet sitting. It sounds like an easy lucrative side gig.
Also, Aruba looks really nice. We’ll have to visit someday.
Have a great holiday!
Lazy Man says
There is a lump sum for newer military members. My wife stuck with the traditional pension that I believe is much better.
Our net worth, without my wife’s pension, doesn’t match our lifestyle… it feels uncomfortable to me. We’re the proverbial “millionaires next door” that don’t look like anything special. If I started to add the pension to the numbers, it’s even more uncomfortable. I like keeping two logs it’s easy enough for now.
So jealous of your AirBnB! Looks absolutely stunning!
David Gonzalez says
Now this is a subject I can speak about. Real estate investments are always some of the best investments that anyone can do. There are lots of different ways to profit using real estate investments. My real estate partner and I are going to do many single family flips starting in January 2020. Rentals are also great investments.