Lazy Man, Author at Lazy Man and Money

Alternative Income Update: August 2017

September 19, 2017 by Lazy Man 3 Comments

Alternative Income Update: August 2017

It is well-past the middle of the month, which means that I’m very late to write about my alternative income for the last month. Many bloggers publish their monthly updates a few days after the month is over. I like to wait a week for rent checks from my tenants to clear. For whatever reason, something always comes up in the next week. This time it was a combination of some legal stuff, some tax stuff, some extensive water damage at the tenant property, kids going back to school and after-school activities, and my wife’s eventual deployment (maybe)*.

Let’s just get started…

Alternative Income Update: August 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. One way to 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.

Last month, July, my alternative income added up to $8,489, which a record for the year. July is always a good dog sitting month due to the Independence Day. My wife and I did take a few days off to celebrate our 10th anniversary. All things considered, it was great. When I’m on vacation, I’m not writing much, I’m not working on the blog, and I’m not sitting any dogs. It’s a good dry-run for what most people would think of as retirement. Hopefully “alternative income” makes more sense when you understand that reasonable amount of money can be earned while I’m literally at the beach.

July is in the past though. Let’s move on to errr… a different past.

Lazy Man’s Alternative Income August 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 the question is often used to pigeonhole someone. Maybe I’m over-analyzing, but my response of “software engineer” seems to be received very differently than “dog sitter.” Nonetheless, some response is required. I rotate among all the things that I do.

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 about 6 hours a day. That gives me time to do some basic family errands (shopping, cooking, dishes, laundry, walking my own dog, etc.).

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.”

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… 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 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.)

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 signficant 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.

August was a very average month for both blogs and dogs. I realize that doesn’t make for exciting writing. However, it is strange to have both numbers so close to the norm.

August is such a bland month. Dog sitting is almost always average in August. There’s still some summer vacation, but no big holidays like July 4th or Labor Day. The best dog sitting money comes on during the big vacation holidays.

August was just an average month when it comes to blogging too. I suspect that I’m not writing enough to maintain the growth I had earlier in the year. I was hopeful that things would turn around in September. Typically internet traffic is higher when everyone gets back to work after the summer. I’ll give a sneak peak into September a little later.

[Side note: I highly recommend pesonal finance blogging. It helped me stay accountable. Here’s how to get started blogging with any type blog you might be interested in.]

In July, these two categories added up to $5,722.77. So for August it is…

… before I reveal the August number, I’d like to give a little preview of how September is going. My writing and traffic for September is down quite a bit. I’m expecting quite the fall-off for all the reasons I mentioned at the start of the article. However, we did have the Labor Day holiday, so the dog sitting income looks better.

Total Blogging + Dog Sitting Income: $4,900.25

Ouch, going back to a number that starts with “4” seems like a big hit. I had hoped that tracking this income would encourage me to grow it. Instead, it’s allowed me to reflect on all the non-money things that factor into the month.

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 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.

So here’s 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 the money 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. If I don’t fudge the number 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 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 42.3% of equity of properties with an estimated rent of $3200. That comes out to $1,364.49. At the beginning of the year, we only had a ratio of 36.4% which lead to $1,174.74. As the years march on, this ratio will grow to 100% the rent, which should be more than $3200 a month(due to inflation). That’s what gets us to that annual $38,000 I mentioned above.

Last month the rental property income was $1,359.33. The extra $5 in alternative income this month is a let down. The reason it isn’t more is that Zillow knocked down the value of the properties a little bit. Just paying down the mortgages moves the needle, but the equity-to-value ratio took a hit. I’ll just move on, because this is a lot of writing for a $5 gain.

Total Rental Property Income: $1,364.49

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 had been doing well enough by Sept. 10th when I calculated all these numbers. However, it seemed to have a much better week after that.

Total Dividend Income: $1,268.25

Final Alternative Income

This month I had $7,532.99 in monthly “alternative” income, which is about $1000 less than last month. While I don’t like to see it go backwards, the investment income is slowly climbing which is a great sign. The investment income could go up quite a bit if we’re able to get new tenants at market rates. However, we have very good tenants right now… it’s worth leaving some money on the table.

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

This used to be a bonus feature, but now it’s a standard.

Since I don’t share real numbers of our net worth, this may not be very exciting. That’s why it’s little more than a footnote. I truly believe that net worth is one of the most important numbers in personal finance. Showing relative growth is still fun.

In August, our net worth DROPPED -0.75%! I’m faking shock. It’s really just a blip on the radar as the drop is almost entirely to Zillow saying our primary residence isn’t worth what it was last month. From the beginning of the year to now, we have increased our net worth around 11.44%. That’s largely due to the stock market, real estate appreciation, and paying off debt. We live frugally as well. We’d see things being going up a lot more if we didn’t have a number of big unusual expenses like condo assessments on those real estate properties.

With the way the year started, I was hoping we’d be able to grow our net worth by 20%. That may have been unrelastic, but the markets were doing so well. I’ve got no complaint in growing our net worth by nearly 11.5% in 8 months.

How was your August? Let me know in the comments.

* It seems that hurricane deployment can be rather unpredictable much like… well hurricanes. Jose doesn’t seem to want to make up his mind where he wants to go.

** If anyone can lay claim to “alternative income” before 2006, I’ll happily give credit to the person who had the same great thought I did, but before me.

Sue Equifax: No Lawyer Necessary

September 13, 2017 by Lazy Man 1 Comment

I’m the first person to say that I’m not a big fan of lawsuits. Full disclosure, I’ve been sued a few times now. That’s despite being the type of person who doesn’t cut the mattress tag off (even though you can). I’ve found that helping consumers by covering the same stories the news does (in the same way) tends to get me sued. Every lawyer representing me has said that I’ve done nothing wrong and no court has found that I’ve done anything wrong, but nonetheless anyone can be sued for anything.

Wait this article isn’t about me. This article is about Equifax. By now you must be aware that Equifax had this huge data breach and some 143 million people’s information may be floating around for identity thieves to profit from.

No one is happy about the situation (except for the identity thieves). The NY Times covers how I feel in this opinion appropriately titled, “Equifax’s Maddening Unaccountability. Here are a few choice quotes:

“I don’t doubt that companies regret these [security breaches], but I don’t think they care that much either. To them it means just a few days of bad press and at most a fine that amounts to a minuscule portion of their profits. With penalties like that, why would companies bother to make things better?”

“Most software failures and data breaches aren’t inevitable; they are a result of neglect and underinvestment in product reliability and security.”

“Perhaps the most maddening part of the Equifax breach is that the credit-rating industry is itself unforgiving in its approach to even the smallest error. I’m still dealing with the damage to my credit rating that resulted when I forgot to return a library book and a collection agency was called in (for a paltry sum). The Equifax executives who let my data be stolen will probably suffer fewer consequences than I will for an overdue library book. Even if they do get fired, it is likely that they will be sent off with millions of dollars in severance, which is common practice for executives.”

I think that last quote sums it up well. The only thing that I’d add is that none of us asked Equifax to have our data in the first place. I don’t think any of us could have opted-out. Even if we could opt-out, we probably would have realized consequences like it being difficult to get loans for homes, college, and cars – things that are fairly important.

How many people will have their identity stolen because of this? There’s no way to know. What we do know is that 143 million people now have be on DEFCON 2 for the rest of their lives.

I believe that Equifax should compensate people for their trouble and even the potential damage that could be caused. It doesn’t seem like Equifax is going to voluntarily offer compensation. From what I’ve been reading, it’s like pulling teeth just to get free credit freezes from them.

DoNotPay to the Rescue?

An entrepreneur, Joshua Browder, created an online application awhile back that has won 375,000 court cases involving parking tickets. He’s modified it so that you can draw up the paperwork to sue Equifax in a couple of minutes. This Yahoo article has all the details.

How much could you get? The maximum in small claims court varies from state to state. He says the average is between $10K-15K. My state is “only” $2500. I put “only” in quotes, because it’s still a large number.

Will you get that money? I think it’s going to be unlikely, but I’ve been wrong before. Browder partnered with volunteer lawyers so there’s some credibility behind the idea.

Is it fair for 143 million people to sue to Equifax in small claims court? I’m not sure that it is. However, the alternative is waiting for the class action settlement. Even if the settlement is for a billion dollars, which is HUGE, it would amount to $7 per person. I’m not sure it’s fair for people to get some small multiple of $7 either. Perhaps they have insurance, but I doubt they have insurance to cover something this large.

One more thing worth mentioning, it seems (and I’m no legal expert) that you can still be part of the class action if you are persuing them at the local level as well.

I’m going to give DoNotPay a shot. It may be unlikely to compensate me, but it is very, very low risk/effort and potentially with a large reward.

What do you think? Are you going to try to sue Equifax in small claims court?

The Importance of Life Insurance

September 11, 2017 by Lazy Man 5 Comments

I think I was around 13 or 14 the first time someone asked me about life insurance. My mother described a policy where I could pay some ridiculously low amount, I think around $6 a month for whatever the coverage was. The big question she had for me was whether I’d continue to pay it for the rest of my life to keep it active.

I like to think I was a responsible early teen, but I didn’t think it was wise to make such a commitment. I only had a very, very high-level understanding of what life insurance was. Looking back at it now, I’m happy I didn’t make a decision to buy back then. Even if I would have ended up saving money over the long haul (and I’m not sure I would), I am more confident in my ability to make financial decisions now than I was as a 14-year-old with limited life experience.

The next time I thought about life insurance was after I closed on my first condo when I was 28. At around the same time one of my good friends became an insurance salesman. He put together an in-depth analysis for me to review. The analysis made the point that if I were to die my estate would still be on the hook to make payments on the condo. However, since I was living there by myself with no dependents, I didn’t really care what happened to the condo.

Finally, at the age of 36, I found myself buying life insurance. What changed? My wife and I were expecting our first child. We both earn an income, but if one of us were to die life would be very, very difficult. In fact, raising a child by yourself and working seems impossible to me. I don’t know how some people pull it off. In an upcoming article, I’ll dig into what kind and how much life insurance we bought and why.

The financial support that life insurance would provide can make a world of difference. Money can be used to buy time, buy day care, camps/after school programs. It simply changes everything.

What’s disappointing to me is that I’ve read that too few people have life insurance. It makes sense to me as it isn’t the kind of thing they teach in school.

If you are looking for a place to get started with life insurance, you might want to consider Midland National’s awards or contact them through their LinkedIn account.

While the above article is sponsored by Midland National, these are my own words and thoughts.

How Many Days of Financial Freedom Have You Accrued?

September 8, 2017 by Lazy Man 4 Comments

Welcome to September! Wait, it’s already the 8th? I haven’t written an article this month yet?

As my friend Martin from Studenomics always says, “No one wants to hear your excuses!”

So I won’t tell you how me and the two toddlers have been passing a stomach bug back and forth. I also won’t mention that my wife’s been able to avoid it as she’s been traveling for work. Instead I could tell you about how we’ve been preparing for her to get deployed for Hurricane Irma. That’s not too exciting, so instead I’d like to tell you about the extensive water damage at one of our condo rental properties. Actually, since I’m still in the middle of that, I’ll wait until that’s completed and recap it. Quick highlight: Even if the condo association is negligent in keeping their parts maintained (i.e. the roof), the owner of the condo has to complete dozens of hours of legwork to line-up the vendors, insurances and other stakeholders.

I had three things that I wanted to accomplish with this article today. I just crossed the first one off the list with the above passive-aggressive kvetching*.

Next up, I have a favor to ask you. Nominations are open for the Plutus Awards. The Plutus Awards are the “Best of” the personal finance blogging community. There are a ton of different categories and usually a personal finance fits squarely into one. For example there are categories for financial independence/retire early, investment, real estate, frugality, military, entrepreneurship blogs etc. I’ve never fit a particular category, because I’ve written dozens of articles about ALL those topics.

I’m not delusional enough to ever think that I could the Blog of the Year category… my top priorities each day are supporting my wife’s military career and raising the kids. Maybe someone can win Blog of the Year with all that, but dog sitting and condo management is a better fit for our family now.

There is one category where you could be nominate me (using this link): Lifetime Achievement Award. I’ve been blogging for more than 11 years now, which only a handful of single author blogs can say. If you are reading this, hopefully you know a little of my history. If not, I tooted my own horn on Mr. 1500’s website which was the purpose of the exercise.

In any case, I’ve been nominated twice before and I was trounced by some of the biggest names in personal finance. (I don’t know the voting results, but I wouldn’t have voted for myself against the winners.) Won’t you please nominate me so that I can be the next Susan Lucci?

I believe nominations are due today (YIKES!) so please don’t delay.

Finally, we’re onto the third thing I wanted to cover today:

How Many Days of Financial Freedom Have You Accrued?

The idea for this article comes from two diametrically opposed personal finance forces. One is a force for good and the other is a force for evil. Yesterday, the good witch of the south, Our Next Life, wrote about how you should measure your spending in days of retirement. Years ago, the wicked witch of the west, Robert Kiyosaki** wrote about financial freedom as how long you can live on your savings. I’m going to end the metaphor now, because I don’t want to get sidetracked by Idina Menzel, Kristin Chenoweth, and Joel Grey #MyWifeTheBroadwayFan.

I believe Kiyosaki covered this exact topic in Rich Dad, Poor Dad. It has been 12 years since I’ve read the book, so my mind may be Sam Beckett swiss cheese. So while Ms. Our Next Life, can help with your spending, Kiyosaki’s concept can work to calculate how financially free you are… at least in theory.

Both of these concepts require knowing one simply thing, how much money you need to retire for one day. For many people, it’s as simple as dividing what they spend in a year and dividing by 365. Or you can use your monthly necessary expenses and divide by 30 (while recognizing that’s the bare minimum and that you will need more money to retire). For me, it’s a little more complicated since our current expenses include child care for two, an online MBA program, and a mortgage. In retirement, we won’t have any of these. I found it easier to calculate our expenses over the next 45 years and create an average year.

Using that, our necessary expenses are around $25,000 on average. If I add $11,500 to account for extra expenses, that’s $36,500 a year. Conveniently (due to that arbritary amount I added) that’s around $100 a day.

Now comes the hard part… implementing the idea behind Kiyosaki’s theory. After about 3 minutes of trying to apply that to my own financial life, I gave up. While I could do a calculation with my retirement accounts, it got difficult because of penalties and pre-tax vs. post-tax considerations. At least, it’s easy to see there’s a real number there. What’s a little more difficult is calculating the value of the real estate. It earns nothing now, but in 10 years when the mortgage is paid off it should make around $36,000 a year.

Related to the real estate income, it’s worth noting the value of any recurring income you may have from a passive (or passive-ish) business. If I can write an electronic book and sell 10 copies a day at $10, that’s my $100. (Okay, we’ll need to sell more taxes and such, but that’s still not bad.) The difficulty with that particular plan is that the book market is over-saturated.

At the end of the day, I’m more focused on this kind of cash flow than having a huge egg and drawing it down. When you are pulling money out to live on, you have what we used to call a burn-rate during the dot-com bust in 2001. I’d rather be self-sustaining.

I want to hear your thoughts on this. My income and retirement plan is very different from the norm. Perhaps you have a more traditional one that would make it easier to figure out how many days of financial freedom you have accrued. Let’s hope that decades is a better measuring stick ;-).

* You can take the boy out of Brandeis, but you can’t take the Brandeis out of the boy.

** Kiyosaki earns the title for the reasons in the article I linked to.

Hosting a Yard Sale Made Easy

August 29, 2017 by Lazy Man 2 Comments

Welcome to Limbo Week. That’s the week after camp ends, just before school begins. It’s difficult to get work done, but we’ve been learning about dinosaurs (thanks Dino Dana) and math (Cyberchase – both streaming free if you have Amazon Prime.) I also picked up some very basic Disney workbooks from DollarTree: first reading, addition/subtraction, and time/money. It’s amazing what a dollar can buy you these days!

Limbo Week is so crazy that I’m introducing it on a Wednesday! I’m going to do things a little differently today and go with a shorter article. Like Zombo Com, I can do anything during Limbo Week.

This past weekend, I found out how easy hosting a yard sale can really be. And by “I”, I mean my wife. That’s tip #1 to hosting an easy yard sale: Pass it off to your spouse… and hope he/she doesn’t read your blog that day. It wasn’t like I was just eating Bonbons on the couch, I was watching the kids and dog sitting… while eating Bonbons on the couch.

The yard sale hosting tip I wanted to share was renting a table at a community sale. One of the reasons why we don’t have a yard sale is that we’d have to create signs, advertise in Craigslist, and all that stuff to bring the traffic to us. All that just to waste 5 hours in the morning with people talking you down from 50 cents to 15 cents on everything. I have a friend who just donates everything to Goodwill and takes a tax write-off.

My wife found a community yard sale at a local church. The table fee was $30, which might be a tax deductible donation (check with your tax advisor). I figured that even if we didn’t sell anything, we’d still be helping out a charity. My wife brought a bunch of baby clothes and baby toys that we could no longer use. She ended up selling over $100 worth, to make a profit of $70. At the end of the yard sale it still looked to me like we had as much as she started with, but she assured me that it was much, much less. I suppose it would have to be because making $70 at 50 cents and a $1 here and there is a lot of selling.

Making $70-$75 isn’t exactly going to change our lives. However, the idea that someone else can reuse the products to help the environment and clear some of the garage/basement is big. It feels like a triple win for us and I’m sure the buyers feel the same way.

While on the topic of buyers, I love saving money by buying stuff at yard sales. We built a room from yard sale stuff.

I brought the kids to this yard sale for a little bit and ended up finding a very basic checkers game for $1, this Spin and Store food storage set for $2, and this Brain Quest America game for $2.

There’s another church sale in October. If the schedule lines up, we’ll be back with a lot more to sell.

The article above may have affiliate links where I may earn a small commission if you buy any of the products.