Lazy Man, Author at Lazy Man and Money

How Much are You Spending on Your Home?

June 22, 2018 by Lazy Man 2 Comments

[Editor’s Note: If you were a member of my VIP Email List on Wednesday, you know that I’m giving away $100. If you missed it, perhaps you should join the list as I’ll be doing more giveaways.]

A couple of weeks ago, I wrote, Your Life or Your Home. In it, I explained that people generally work 45 years and housing expenses. It’s estimated that people spend about 1/3 of their money on their homes, which translates to 15 years of work. (It’s not exactly that simple as income typically changes throughout one’s lifetime.)

I got an email from Zillow that reminded me about this. Their press release stated research that Mortgage Payments Require Largest Share of Income Since 2009.

If you think about it, it seems obvious. How could it be any other way with the housing recovery and rising interest rates on mortgages? I suppose income could be growing faster to outpace the recovery, but income (at a nationwide average level) doesn’t usually fluctuate that much.

This is the rare case where the headline didn’t seem to tell the most interesting story. It was almost anti-clickbait.

Zillow looked at the 35 largest housing markets and gave a regional breakdown of “Share of Income Spent On Mortgage” for each. They gave averages for the past and projections for the future, but I was mostly interested in the 2018 number. Maybe I’m just in a “live for now” mood today.

I think it’s worth looking at the national numbers to get some perspective on the average. From 1985-2000 mortgages were around 21% of income. In 2018 it’s only 17%, and that’s despite growing a lot over the last 9 years to reach a high. There are other housing expenses than just mortgages, but it still seems like this is below the 1/3 (33%) estimation that I’ve seen as an average.

I immediately decided to calculate our own number. I bet most people don’t know it off the top of their head. Our income fluctuates quite a bit due blogging, dog sitting, and whatever else we’ve got going on. I picked out a reasonable average and our mortgage came out to 21.6% of income. I’m changing my name from Lazy Man to Mr. National Average (at least in this case.) That may not be a fair number as we have a 15-year mortgage and most people probably have 30-year mortgages. It would likely have been closer to 15% if we didn’t love the idea of not paying the bank for 15 years.

The regional details in the report showed how much this number can fluctuate. If you scroll towards the bottom of the chart, you’ll see two of the extremes, Indianapolis at ~12% and San Jose at over 51% of income. Of course the job situation in Silicon Valley is very different than Indianapolis. It’s no surprise that housing prices were at opposite sides of the spectrum in these two cities. However, this number is a percentage of income, which means it should be normalized for all the high tech salaries in San Jose.

If you had guess without looking at the chart, you’d think that New York City would be like San Jose. We know the housing in New York City is outrageous, right? We’ll it’s 27.7% of income, which is just 6% more than average of the US. That’s not insignificant, but I found it notable that NYC is a lot closer to Indianapolis (15% difference) than San Jose (24% difference.)

When I wrote that aforementioned VIP Email List earlier this week, I asked people for suggestions on how to improve the website. Many of them asked for more practical advice. It’s hard to know what’s practical for a diverse group of people. However, what if we used this chart to figure out if relocation could pay off for us?

I know there are a lot of factors that go into choosing where you live. However, with so much of your income tied up by this decision, it’s probably worth taking a second look and seeing what you are spending on your home and what you could be spending. It’ll make a much bigger difference than that subscription to Netflix.

We Disappeared on an Tiny Island (Summer Hole 2018)

June 19, 2018 by Lazy Man 3 Comments

I hope all the fathers out there reading this had a good Father’s Day this weekend. It’s hard not look at the news headlines and realize that not all fathers had a good day.

We just finished up the two week period between the end of school and the start of summer camp. I call this the “summer hole” because my wife and I are kid care for two full weeks. (Summer hole is a particularly bad name since it isn’t summer and hole sounds bad. Unfortunately, I can’t think of anything better.)

Last year was our first year at our school and it caught us by surprise. The school didn’t really announce, “We end everything two weeks before the other schools, good luck with summer camp that doesn’t begin until then.” My wife didn’t plan to take vacation until late and we weren’t prepared. This year things went smoothly, but we saw parents of children in my youngest’s class (their first time) get surprised too.

The first week started with graduation and school-organized play-dates for the kids. You can laugh about the accomplishment of graduating pre-school, but it is certainly cute and entertaining for parents. We did some local things for a day or two and then it was time for my 20th college reunion followed by our annual trip to Block Island.

College Reunion 2018

There’s a reason why everyone says that time flies and 20th reunions are one of them. I wasn’t a huge fan of my college, but it is hard to argue with free tuition at one of the best liberal arts educations in the country. I did make a great group of friends and it was a good opportunity to catch up with them as our lives have moved in different directions.

The big theme of the party, at least for men was, less hair and bigger bellies. I wasn’t an exception to that. We were all reminded of what we looked like 20 years ago so that others could recognize us.

My wife felt like the school really went all out, which I agreed with. My kids, age 4 and 5, were somewhat excited about the new place, but bored easily.

As my wife says, reunions are odd. If you wanted to keep in touch with people, you probably would. Most of the people I’d want to get back in touch with live across the country and didn’t show up. Even if they did, it’s hard to re-kindle a friendship over such a distance with families moving in different directions.

I wish I had a more personal finance angle to share about this. We stayed only 24 hours because my wife was hosting some out of town coworkers in Rhode Island. That was minor pit stop before…

Block Island 2018

If you’ve never heard of Block Island, you are a normal person. There’s a better chance that you’ve heard of Nantucket or Martha’s Vineyard. Those islands are known for being popular vacation escapes off the coast of Massachusetts. You aren’t allowed onto those island unless you have a belt that has at least two of the following nautical symbols: anchor, whale, sailboat, ship wheel (helm?), lighthouse, sea star (starfish), or crab. Also, it seems like white pants and pastels are part of the dress code.

Block Island is a lot like Nantucket or Martha’s Vineyard, but much smaller. I described it a bit in last year’s Block Island review, but here’s a short explanation: Block Island consists mostly of the city with the fewest people (~1000) in the smallest state (Rhode Island). The island has one grocery store, one bank, and one gas station… and at least 15 beaches and hiking trails.

For us, it has a few advantages:

It’s close to us. We can get to ferry in about 30 minutes.
It’s a relatively frugal vacation. Plane tickets for our family of four almost always come in around $1000-$1500. Instead, we can bring our car and all of us on the ferry for under $100.
We are away form the “dishes.” We can be fully on vacation with no chores and away email messages that say, “We’re on an island with very slow Internet connection. We’ll get back to you in a few weeks.” That’s one reason why we leave one island vacation land to go to another island vacation land.
It’s more mindful travel… I think.
We can bring the dog. It’s become quite clear to me that dogs and planes don’t mix due to airline policies. Having someone sit the dog can be about $200 for 5 days in my area. (I know, I do a lot of dog sitting myself.)

This year we stayed at Darius Inn. That means we avoided the unsuitable, historical hotel with tiny rooms and little electricity from last year. We went from my worst hotel experience to my best. Darius Inn is like a bed and breakfast. The inn keeper made an awesome (if a little bit hippy on the quinoa and nuts) breakfast every morning. There were daily wine and cheese happy hours.

I’ve never been treated so well staying away from home, which actually made me feel guilty. I’m not use to receiving such generous service.

In addition to saving money with the breakfast that was provided, we brought a lot of our own food. With the kitchenette available and the ability to pack a whole car, there was no reason not it. It’s a good savings, because buying from the grocery is extremely expensive (everything is shipped on ferry, so there’s extra cost to that.) The restaurant costs go up from there.

Here’s a little bit of what we did:

Took the kids and dog to the Block Island Labyrinth:

This is a favorite spot of ours. You are supposed to walk around a circular maze/path while you meditate. The kids wanted to run through it. It’s a different type of experience. Even our dog, Jake loved it. He’s like a giant dog on Easter Island:

We also searched for glass float globes. An artist comes to the island to hide 550 glass float globes every year. Find one and you get to keep. Seems like it would be easy, but he makes a few trips over the summer releasing about 75 at a time. There are quite a few people who are obsessed with the treasure hunt.

We thought our kids would love it, but it turned out to be too much walking. I thought for sure there would be a glass float in here:

The weather was rainy for half of our stay, so we spent a little time at the local library. It was literally next door to us at the Darius Inn.

Libraries are doing lots of innovative things nowadays. One day they had a walking book tour. The kids loved walking around reading the book through the various signs.

Unfortunately, my wife got news that she didn’t get the promotion she was hoping for while we were at the library. I didn’t have a magic wand to wave and make things better, but I did find this:

I took an “I’m proud of you!” for my wife and a “Be the change” for the oldest. My youngest got one similar to the “You are loved.”

They library also had a cool honor system program to clean up the island:

There’s some recognizable books in there, right? We booked it forward with a couple of children’s books that caught the kids’ eyes. And yes we picked up some trash, though we had already cleared out quite a bit on our nature walks.

Finally, we got ourselves one really nice beach day:

Then it was time for home.

Father’s Day (or The $11 Milk Shake)

I was going to write a little bit more about Father’s Day, but my dog is getting impatient for a walk and I have a dentist appointment soon.

Quickly, I can tell you that I am now equipped to properly go to Martha’s Vineyard or Nantucket. My wife found the perfect belt on Poshmark.*

After a Father’s Day lunch (me and my wife’s father were the guests of honor), we went on a walk to get some ice cream. I found a BOGO Father’s Day deal at Ben and Jerry’s which I shared with the kids. My wife wanted to try the fancy new milkshake place in town. The drinks look more like Edible Arrangements than a milkshake.

Unfortunately, I had to leave as my meter expired, but I heard later that it was an $11 milkshake. Looks like a lot has changed in the 20 years since I graduated college. Remember when a $5 milkshake was expensive? (Caution, adult language language:)

Question, it’s still okay to reference Harvey Weinstein movies, right?

This brings you up to date on everything over the last two weeks… with the exception of the two days it took to write and publish this.

* This conversation involved my wife trying to explain Poshmark to her sister with an instant classic, “It’s like Tinder for clothes…” Ummm, honey, is there something you aren’t telling me?

Alternative Income Update: May 2018

June 14, 2018 by Lazy Man 1 Comment

We’ve got a few more days of the “summer hole” that I’ve mentioned in the last couple of posts. Come the 18th, the kids have camp and I’ll start to focus on making money again. In the meantime, we’re enjoying an extremely relaxing vacation. One could mistake it for retirement, but even in retirement there’s a need to tend to some “life stuff.” For a few days, all that is getting put on hold. I hope to share some stories and pictures next week when I catch up.

In the meantime, it’s the time of the month where I review last month’s alternative income.

May should have been a typical month and maybe it was. We started off with several social commitments where we usually have very few. I also focused my attention on other life “to do” things that weren’t “money makers.” Those were things like cleaning the clutter and organizing around the house. For example the cleaning before Mother’s Day was several days. Around the middle of the month, we got a surge of dogs to sit. By the end of the month, we were focused on the kids graduating school and some more organizing. (I’ve fallen in love with IKEA Kallax to store the kids toys. They really didn’t have storage before.)

In other words, there was a focus on “life” in the “work/life” balance. Also, I watched a LOT of the Bruins and Celtics postseason runs. It wasn’t unusual to have three Boston-based games on a night. I also binged 13 Reasons Why and caught Black Panther on Redbox. I’m usually not a big television watcher, but for one month I was.

Enough about my non-financial may, let’s dig into the money details!

Alternative Income Update: May 2018

For those that don’t know the term, “alternative income”, I started using it 11 years ago to be purposely vague. I needed something to cover blogging income. Blogging income can be very erratic, but there’s a residual nature to it as well. Some popular bloggers are still struggling to categorize it. I think alternative income was more passive back in 2007 before social media, podcasting, and video. Today it seems like every blogger talks of hustling (as in moving quickly, not grifting people) and by that they mean “being everywhere.” I feel like the only one dumb enough to just keep writing blog posts… blog posts that often don’t have cool “pinnable” images.

In general, I call alternative income everything that comes from passive investment and these side hustles. The best way to think of it is income where you aren’t directly trading your time for money. This report is about all my alternative income. To include 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, 2017.

The last month I reported, April, my alternative income added up to $5,934.46. (I know I really need to set up a chart. I am certainly living up to my Lazy name here.) April was a strong dog sitting month, which often leads to less than stellar blogging month, which I will get into later.

In any case, April is ancient history now, so let’s move on to more recent history… May.

Lazy Man’s Alternative Income – May 2018

In looking at our alternative income, I break it down to 3 main sources… each with their own caveats.

1. Blogging + Dog Sitting Income

My “real world” friends have asked 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. My responses of “software engineer” has received very differently reactions 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 and blogging fills in the gaps.

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.”

I’ve spent too many words on it, but if you want to read more of what I’m doing check out my “Now” page.

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 catastrophe going on. (Sometimes it feels like life is a series of catastrophes. Fortunately, for me, they’ve been minor. I’m sure I’m not alone in feeling that it’s just one thing after another derailing your progress.)

You may be asking right now, “Isn’t alternative income about NOT trading time for money?” Isn’t dog sitting and blogging TRADING time for money? That’s a solid point. 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 very different than being an Uber driver. 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’ child seats. Also the recent MIT report shows that Uber drivers make far below minimum wage.)

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 (such as this one!), 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 12 years of blogging.

May was a slightly below average month for sitting dogs. That’s typical since it isn’t a big family travel month with school in session. There were times where there were no dogs (Mother’s Day) and times where there were many dogs. It almost averaged out.

Blogging income was its worst of the year in May. Ugh! I’m a kidding a bit there. After years of blogging, I realize that’s how the cookie crumbles some months. With the benefit of almost half of June in the books, I can say that things are going in the right direction again.

While on the topic of blogging, I’d like to add that it isn’t about the money. I highly recommend personal 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 April, these two categories combined to a total of $2,992.54. But for April it is…

Total Blogging + Dog Sitting Income: $2,047.30

That’s far below what I’m used to earning, but again, June is already looking up and I’ve only had the “summer hole” time where I’m either 100% kid care or on vacation (which is also kid care). In addition to this, I’m adding some part time work that won’t be included in this mix as it is mostly regular income.

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 9 years, we should be able to collect an estimated income of $40,000 (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 the properties 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 it better. If someone offered you a million dollars in 10 years or $10 per year right now, you’d wait for the million (I hope). 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. Next I calculate an equity-to-value ratio. In short, this is the percentage of the property value that we own vs. the bank. I then calculate the rents of all the properties as if they were owned free and clear. Thus we can say that we are “banking” (in a completely fudgey sense) a percentage of the rent that we would expect to have in the future.

If you are confused (and you probably are), this article on calculating cash flow of cash flowless real estate explains it in more detail.

Here are the numbers for May. We have 47.28% of equity in our properties with an estimated combined rent of $3,325. (This number is after insurance, property taxes, and condo fees.) We were able to raise the rents earlier this year a little bit as the rental market has been good and we turned over to new tenants.

If you multiply $3,325 by 47.28% you get $1,572 in fudged monthly alternative income. At the 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 17 months, we’ve seen the number grow around $398/mo. As the years march on, the ratio will grow to 100% of the $3,325 month rent. That’s what gets us to that annual $40,000 I mentioned above.

In the previous report, the rental property income was $1,533. This number usually moves slowly, but a $39 jump is significant. This number only changes if one of two things happen: 1) The properties go up in value. 2) We charge more for rent. I don’t control the housing market, so I can’t change much here. Tenants are typically locked in for at least a year. The monthly paying down of the mortgages creates some equity each month.

Slow and steady wins this race. My hope is that by the end of this year, we’ll be looking at having 50% of the equity with $3,325 in rent or $1662.50 a month in fudged alternative income. It should be close as we’ve moved from 43.32% at the beginning of the year to 47.28% in 5 months.

Total Rental Property Income: $1,572

3. Dividend Income

Like the rental property “income”, I’m going to play a game with the numbers. You can decide if the game is 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 for sake of this exercise. In reality we a vast majority in index funds, but I do some stock picking with a small percentage of our portfolio. Though the index funds do pay dividends, it’s not their core goal. I’m also fudging the numbers in another way. The money I’m referring to here is in our retirement accounts, so it isn’t something that we would tap as “income.”

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. However, like the mortgages on the rental property, there’s real value here that I feel should 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 2.50% in dividends. Most people estimate a 4% safe withdrawal rate, but withdrawal is not our plan here. We are only thinking about the cash that these investments could yield to pay for our living expenses.

May was another tremendous month for our portfolios. I have written about buying Twitter stock back in 2014. I grossly overpaid back then, but I kept dollar cost averaging as it went down and bought a lot under $18. With it around $44, I’m up nearly 100%. So the stock picking is working, but the general markets are doing tremendously too.

Total Dividend Income: $1,497

Last month, it was $1449, so we gained $48 of theoretical monthly money from theoretical dividends. That’s the biggest gain of the year, so it worth celebrating.

Very Close to Passive Income

Most people consider rental property income fairly passive income. It’s not, because you have to deal with tenants. However, when things are going well, there might only be “work” every couple of months. For sake of argument, I think we agree it is “more” passive than writing blog posts and sitting dogs. I spend a lot more time on the later than the former.

Of course dividend income is completely passive, so I don’t need to argue much there.

This “very close to passive income” category is a combination of “rental property income” with “dividend income.” (Yes, that’s a lot of quotes.)

It’s interesting to me that these two numbers are so close. It’s like the stocks vs. real estate debate, but for our personal finances. I think of it as putting them in an arena to fight out which is the strongest. The dividend income started out the year with a big, nearly $50, lead. In March it fell behind real property income by more than $100. It’s closed the gap and now there’s only it’s only an $75 advantage for real estate.

The stock market goes up and down which makes the dividends fluctuate as well. The rental property income keeps going up, because the mortgages are always getting paid down every month. The stock market can more a lot faster than the housing market. In any case, I like having both of them working for us.

April’s Very Close to Passive Income: $3,069

Last month it was $2,981, so it’s time to celebrate crossing the big $3K! That’s grown from a combined $2,354 in January 2017. Since then, this has gone from an estimated annual income of $28,252 from these sources to $36,832. Investing (in this bull market) is awesome! It’s worth noting that, once again, these are fudged numbers that aren’t “real” yet. However, looking forward to 9 years from now when the investment properties are paid off and how the stock market might grow (assuming a conservative 4%), this number could reach 80K a year. I estimate our long-term expenses to be around $35,000 a year, so we should be firmly in the positive side of things.

Final Alternative Income

Adding up “dogs and blogs” to the “very close to passive income”, this month we on the investment stuff had $5,116.30 in monthly “alternative” income. That would be $61,395.60 a year. It was trending towards over $100,000 last year, so seeing this go down is a little depressing. The dogs and blogs aren’t pulling their weight while I focus on more family things. On the other hand, by adding that other income opportunity, things could move back up.

Also, $61,000 a year on investments, writing on a blog, and taking care of dogs is nothing to complain about. In the long term, we can get by on half of that income, and it doesn’t include any of my wife’s bread-winning pharmacist income or her potential military pension if she retires next year.

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. Seriously… it seems everyone in personal finance is getting a book deal except for me. 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 isn’t 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.

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.

In May, our net worth grew 2.28%. That’s even better than April’s great gain of 1.73%.

Our net worth for the first five months of the year is 6.88%. If it continues, that would be 16.5% for the year. We’ll take that any year!

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

Sky-high Market? Seven Value Stocks to Consider

June 10, 2018 by Lazy Man 1 Comment

We’re into week two of our “summer hole”, the 2-week void where the kids’ school is over and summer camps haven’t started yet. In the last 2.5 days, I’ve had a kids’ hospital appointment in a different state, 3 meal/parties at my college 20th reunion, a visit with my mom, helped my wife host her work friends for 2 more meals, fought off a cold, played competitive tag against a dozen 5-year olds, and packed for our next trip that starts in a few hours.

While the family will slow down on that trip, we are booked fairly solid until the 18th. That’s a very long of way of saying that I’m going to try to best to get some blog posts in, but the odds are against it.

Enough about me, let’s talk money!

It looks like the Vanguard Total Stock Market Index (VTI) is nearing a new all-time high. My retirement accounts have never been higher. (Sorry “me talk” again.) It’s completely possible that the market continues to go up, but this bull market can’t last forever, right?

Just like everyone else, I don’t know when it’s going to end, but I’ve started to be more cautious in my investments. For most of my life I’ve been 100% invested in aggressive growth equities. I’m holding more cash and bonds than I ever had. That’s still only 10% of my portfolio, but I might grow that. I’m also overweighted on international stocks that haven’t had exactly the same run-up as the US stock market. Vanguard’s Emerging Market’s ETF (VWO) is 12% off its highs, which could be considered a bargain in this market.

Consider VWO a bonus to the eight stocks, I’m going to mention below. I’ve had them all on my Google Spreadsheet watch list for some reason or another. It’s not like I ran a stock screener to find these stocks (but that might be a good way to start). Most of them in that “off 15-20%” from their highs. That, in my opinion, indicates there’s some room for these to go up. They are also somewhat near their lows, which may be a sign of them being cheap.

General Electric (GE)
This stock if down big from it’s 52-week high of nearly $30. There’s a lot of bad news around GE. There’s a lot of talk of people who think that all the terrible stuff is priced into the stock and it can only go up. There’s also some talk that there’s still some bad news left to come, but I have seen less of this. I like that it still has a dividend of around 3.5%.

Disclosure: I am long this stock, having bought around these prices.
Colgate-Palmolive (CL)
CL is nearly 20% off its 52-week high and only 3% above its 52-week low. It has a 23.72 P/E, which isn’t super cheap, but it is reasonable. With a dividend of 2.65%, you’ll get some cash while you wait for it to recover to its highs.
Johnson and Johnson (JNJ)
JNJ is off more than 15% off its 52-week high and about 4% above its 52-week low. Its dividend is nearly 2.9%, so like the previous stocks, its going to pay you some cash in the meantime.

You should be starting to see a trend here. I think these big, boring companies. For retirees looking to use the rule of 4% to live off a nest egg, these dividends get you close without even selling any stock.
Proctor & Gamble (PG)
This is yet another big company that is nearly 20% off its highs. However, its a 8% off its 52-week lows. I was able to buy in a little lower, so I’m up 6% on this investment. Of all the stocks I’ve mentioned thus far, this has the highest dividend at 3.72%. It also has a cheapish P/E of 18.31.

Disclosure: I am still long this stock.
International Business Machines (IBM)
IBM is my favorite investment on paper. Its price has dropped 6.5% since I have been buying it over the last several years. I should hate this stock, but I don’t. Where else can you find a tech stock with a 4.3% dividend yield, a 12.30 price/earnings, and trading near its lows?

If IBM can get back to growing the company, it should shoot up. However, as long as the earnings keep as steady as they have been, it shouldn’t fall much and investors will collect a healthy dividend.

Disclosure: I am still long this stock.
AT&T (T)
I just started recently following AT&T. I’ve been a customer of its cellphone service for some time. It fits the familiar pattern of being off the highs by 15%, but only 7% off its lows. What’s unique is that it pays nearly a 6% dividend. It’s had some bad news with mergers and such, but it still seems like a well-positioned tech stock.
Disney (DIS)
I almost invested in this a month or two ago and I wish I did. I’m not sure if I’ll see sub-100 prices on Disney again. We know how well the Marvel, Star Wars, and Pixar line of movies are doing, but Disney has so much more such as the theme parks. Not everyone can hack Disney like our family and many are happy to pay full price.

Their upcoming Netflix-like subscription service should be a big winner for the company. It’s trading at a relatively low 16.24 P/E, but it only pays a dividend of 1.62%.

With the exception of Colgate’s $55 billion market capitalization, these stocks are all household names with $120 billion market caps or more. They all have a long history of real earnings and weathering numerous recessions.

I still believe in buying and holding index funds. However, I am finding that many index funds are very tech heavy with Apple, Microsoft, Google, Amazon all valued twice of the companies here. Facebook dwarfs many of the companies here as well. For the most part, they don’t pay strong dividends and they are almost all at their highs. If the bull market ends, I think these tech stocks will be the hardest hit.

I might be in the minority, but I don’t mind speculating a little bit on big names at low prices during this bull market.

Your Life or Your Home

June 5, 2018 by Lazy Man 8 Comments

Quick House Keeping Note: It’s a busy time in our home. I refer to these two weeks as the “summer hole.” (I need to come up with a better name.) It’s the time when our kids are out of school and camps haven’t started yet. We’re in year two, so at least we were prepared this summer. We scheduled a little vacation and some other activities. In other words, expect the writing to be a little limited until the 18th or so.

I suspect that most of my readers are at least familiar with the title of a book called, Your Money or Your Life. It is widely considered the best personal finance book. (I haven’t finished reading it, but so far it hasn’t met my extremely high expectations. That’s not to say it is poor in any way.)

One of the main ideas of that book is that you trade your life for money. By limiting consumerism, your money goes further, you can retire early (if you choose) and get your life back. That’s really the core of the FIRE (Financial Independent/Retire Early) movement.

I’m going to piggyback on that to share a concept that I like to call, Your Home or Your Life. For most people, their home is their largest expense. So, by proxy, keeping housing expenses low will save you money to get you to FIRE quicker. In 2007, I called it Get Rich by Thinking Small. (I miss the days when a 350-word article and a well-placed George Carlin joke would get 26 comments.)

Today, there’s a lot more focus on tiny houses or even living in trailer. I get excited when I watch a tiny house television show because it seems like everything is amazingly efficient. I’m not sure how practical living in a tiny house would be. Sometimes things that sound great don’t pan out in real life and this may be one of those things.

Big Closet — Does anyone’s closet really look like this one from NEHomeLife.com?

Last month I picked up a free magazine, New England Home Life. The closet on the cover caught my attention. It is bigger than most best bedrooms and seems to have very few clothes. It was so ridiculously not like any normal closet that I had to pick it up. Surprisingly, there was an article in there that was the exact opposite of the cover, Tiny Home Living, by Mary Hullett. I wish I could share it with you, but it isn’t available online from what I can tell.

The article does a good job of painting a picture. In Japan the average apartment is 250-300 square feet, while the Americans move to bigger and bigger houses. It then explains that the tiny house movement began due to environmental and financial concerns. That’s where it gets interesting with this quote:

“For most Americans 1/3 to 1/2 of their income is dedicated to the roof over their heads; this translates to 15 years of working over your lifetime.

I was just about to start to go into all the math behind that, when I realized that it really isn’t that complicated. I think we can presume that a typical working career is typically 45 years (age 22 to 67). A lot of things vary, but that’s exiting college until retirement, which gets extended a couple of years as people live longer. So 1/3rd of your income is 15 years of working. If you spend half of your money on your home, it’s 22 years.

For me, that drove home the true cost of a home. Of course, the alternative of not having a home isn’t a good plan. That’s where a tiny house comes into the picture. I’ve seen them starting at around $40,000. That’s the kind of mortgage that many people could pay off in less than 10 years. It’s like getting a decade (or more) of financial freedom.

I ran some numbers on how much of our income our own regular-size house is. Because my income varies a lot from year to year, it’s impossible to get an exact number. It is around 20% and it would be less if we had a typical 30-year mortgage instead of a 15-year one. Look like we are in good shape.

There’s one more thing that I can’t help but think about. We have 3 rental properties (condos) that mostly pay for themselves. Two are them are very similar as they are in the same complex. They should be paid off by the time our kids are 15 years old. There’s a very real option that they’ll have the choice of a free home. (Or we may decide to keep it to support ourselves.) It’s hard to imagine the financial challenges more than 10 years from now, but I think that having that home will be the kindling for their own FIRE.

We have an affiliate relationship with one or more of the companies linked in this article.

How Much are You Spending on Your Home?

We Disappeared on an Tiny Island (Summer Hole 2018)

Alternative Income Update: May 2018

Alternative Income Update: May 2018