It’s almost the middle of the month, so it’s the right time to look back on the month that was: October. I hope everyone had a great, reflective Veteran’s Day/weekend. I’d like to give a big shoutout to Applebee’s for Saturday. My wife certainly appreciated it:
— LazyManAndMoney (@LazyManAndMoney) November 11, 2017
The big story of October 2017 for us is that my wife finally went on hurricane relief deployment. She was on standby for something like 6-8 weeks. To have her finally go and get back is a great relief. I felt like I was treading water while she was gone.
There was also the annual personal finance conference, FinCon in Dallas. You should be seeing a lot of improvements on the blog over the next few months. In the short term though, things were extremely busy and this report will reflect that.
Let’s get started.
Alternative Income Update: October 2017
For those that don’t know the term, “alternative income”, I created it 11 years ago to be purposely vague*. I needed something to cover blogging income. It can be very eratic, but there’s a residual nature to it as well. It’s interesting that popular bloggers like Retire By 40 are still struggling to categorize it. I think alternative income was more passive back in 2007 before social media, podcasting, and video.
In general, I call alternative income everything that comes from passive investment and side hustles. The best way to think of it is 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.
Last month, September, my alternative income added up to $6,834, which was down nearly $500 from August. (I know I really need to set up a chart. I am terrible with graphics. Anyone want to give me some advice on Windows tools? I’m still rocking Microsoft Office 2001.) September was a very good dog sitting month due to summer vacations, but not great due to a lack of major holidays (Memorial Day, Independence Day, Labor Day, etc). September’s major distractions (read: excuses) were the kids starting up with school again and my wife being on deployment standby.
September is ancient history now, so let’s move on to more recent history… October.
Lazy Man’s Alternative Income – October 2017
In looking at our alternative income, I break it down to 3 main sources… each with their own caveats.
1. Blogging + Dog Sitting Income
Some “real world” people ask me, “What do you do?” I’m not a fan of the question… because it’s simply rude. I feel it’s used to size up or pigeonhole someone. Maybe I’m over-analyzing, but my responses of “software engineer” have been received very differently than “dog sitter.” Nonetheless, some response is required. I rotate among all the things that I do. What are those things:
I suppose the best answer is that I’m a stay-at-home dad. The kids go to school for about 6 hours a day. So my “non-Dad stuff” is 30 hours a week. That gives me time to do some basic family errands (shopping, cooking, dishes, laundry, walking my own dog, etc.) and dog sitting ad blogging fills in the gaps. And sometimes I need to deal with lawsuits such as what I’m going through for my RainSoft review right now. I think there are thousands and thousands of Amazon, Yelp, and TripAdvisor reviews written every day, but somehow I’m the lightning rod.
At blogging conventions a popular question is “Are you a full-time blogger?” I say yes, but then explain that I spend very few hours 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. If you really cared to read much more this gives you even more on that. 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.”
Sorry for the rant, getting back to alternative income, I don’t break out blogging income vs. 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… and there isn’t some other great catestrophy going on.
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 typically 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 a little different than being an Uber driver as 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. Nah… I’m sure clients wouldn’t want to climb over my kids’ seats.)
If you are interested in dog sitting, I wrote a very detailed article on the subject: Pros and Cons of Dog Sitting on Rover.
Blogging is much more time-intensive than sitting dogs. 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 significant 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.
October was a terrible month for sitting dogs. Rover seems to hate me as put me at the bottom of their search results, despite 100+ 5-star reviews. All the people above combined don’t have half as many reviews. In any case, I could have earned more by I was traveling to the personal finance convention (FinCon). Blogging didn’t do well in October either. As I mentioned in the introduction, my focus was on family with my wife away. When you go from two parents to one, there’s some adjustment. My blogging fell on the sword, but I don’t regret it one bit.
Despite all this, I’d still highly recommend pesonal finance blogging. I wouldn’t aim for creating the greatest blog in the world. Instead, I’d think of it as a way to keep yourself accountable. That’s worked for me. Here’s how to get started blogging with any type blog you might be interested in.]
In September, these two categories added up to $4,129. So for October it is…
Total Blogging + Dog Sitting Income: $3,354.63
I warned you that the trend was bad. Looking at the silver-lining, in the grand scheme of things that’s still a lot of money. I think many people would be happy with that kind of income, especially if they are focused on family during a demanding family month.
Rather than dwell on the negatives, I’d like to look forward to November. It’s still a little early, and I haven’t updated all the numbers, but it is looking like a great month. I don’t want to jinx it, but I can say that the dog sitting income is MUCH better.
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 all on 15-year fixed mortgages. This means that we don’t make money on them now, but we are paying down those mortgages more quickly than most people. In 10 years, we should be able to collect an estimated income of $38,000+ (in today’s dollars, after expenses) on them.
So here’s why I have to fudge the numbers. For the purposes of this report, I think it doesn’t make sense to count them as zero income. I don’t want this report to push me towards a bad decision. It might make me sell them and invest the money differently to make the report better. If someone offered you a million dollars in 10 years or $10 per year right now, you’d probably wait for the million. It’s an extreme example, but it shows how the short-term plan should be pushed aside for the benefit of the long-term plan. If I don’t fudge the numbers the $10 is the better deal.
Here’s how I’ve decided to fudge the numbers.
I add up all the properties equity and values. Zillow is fairly accurate for these condos as it has a lot of data points to work with. I then calculate an equity-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 owned free and clear. Thus we can say that we are “banking” (in a completely fudgy sense) a percentage of the rent that we would expect to have in the future.
If you are confused, I finally wrote an article on this.
Here are the numbers for October. We have 43.5% of equity in our properties with an estimated combined rent of $3200. That comes out to $1,401.96. At the beginning of the year, we only had a ratio of 36.4% which lead to $1,174.74. It looks like we’ll be raising rents in January and February so the numbers might take a jump *fingers crossed*. As the years march on, the ratio will grow to 100% the rent, which is moving up from $3200 a month (due to inflation). That’s what gets us to that annual $38,000 I mentioned above.
In the previous report, the rental property income was $1,389.38. It’s up something like $12, which doesn’t sound like much. However, think about it like someone buying you Netflix for life. That would be a good month, right?
Total Rental Property Income: $1,401.96
3. Dividend Income
Like the rental property “income”, I’m going to play a game with the numbers. You can decide if the game if fair. I always appreciate comments!
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.
Even though all this money is in retirement accounts, we could pull the money out and use it. We’d get tax penalties so we won’t do that, but like the mortgages on the rental property there’s real value here that needs to be accounted for. My goal here is to capture the nearly 20 years of mostly maxing out retirement contributions.
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. Most people estimate a 4% safe withdrawal rate, but withdrawal is not our plan here.
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.
Our investments have been doing very well over the last month. Go economy!
Total Dividend Income: $1,347
Are you kidding me!?!? We could have made an extra $32 each month in dividend income by just the value of our portfolio going up? Score! That would cover my cell phone bill!
Very Close to Passive Income
I’m starting a new category here, but it isn’t exactly “new.”
Most people consider rental property income fairly passive income. It’s not. However, for sake of argument, can we agree it is “more” passive than “blogs and dogs”, right? I hope so.
I’m going to combine “rental property income” with “dividend income” to create “very close to passive income.”
Very Close to Passive Income: $2,749.29
Back in January, my number for this was $2,354. In 9 months we’ve gone from an estimated annual income of $28,252 from these sources to $32,991.46. The real estate and stock markets may plumet for all I know, but for now this is exciting.
Final Alternative Income
This month I had $5,708 in monthly “alternative” income, which is a big drop from last month. While I don’t like to see this go backwards, I’m going to focus on the positive of the “very close to passive income” which is growing nicely.
Just like every month, I’m still hoping to 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
Since I don’t share real numbers of our net worth, this may not be very exciting. 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 is still fun.
In October, our net worth GREW 1.50%! This year has seen a lot of gains in net worth (thanks to the real estate and stock markets). For the year our net worth has increased 17.12%. It looks like we may be able to grow our net worth by 20% as I hoped. Each month, I say it can’t be true and/or can’t continue, but then it does. I’m knocking on wood.
How was your October? Let me know in the comments.
* If anyone can lay claim to “alternative income” before 2006, I’ll happily give credit to them.