Lazy Man and Money

How Much Should I Spend on a Cell Phone?

by 9 Comments

For the first in forever, I’m at a loss on how much I should spend on a phone. In the past it was an easy decision.

My smart phone history started with a Handspring Treo 180 around 2002. I continued to upgrade to a new Treo whenever they came out, because carrying the internet in your pocket was awesome. (So was SD storage cards to hold videos, which some iCompanies still can’t figure out.) Sprint had a really cheap plan, so everything was great.

Things changed in 2009. That’s when the Palm Pre came out. I continued with various Palm Pre’s even getting an unreleased Pre 3.*

The best part about this upgrade cycle is that you could always sell the old phone on Ebay for around 70-75% of the new phone.

After 4 years with the Pre, I had to finally move on. Since Hewlett-Packard wasn’t going to support it, I had to make the choice that most people do: iOS or Android.

I voted with my wallet. Android won. Apple phones were way too expensive.

In October 2013 I went bought a Google Nexus 5. When that screen broke (Feb 2017), I moved to my current phone Moto X Pure.

I know what you are thinking, “Cool story, bro.”

cell phone spending

While it’s not exciting, I can use this to look at a history of purchase prices of phones per year. The cost of new hardware for Treo era (7 years) was about $350… or $50 a year. The Palm Pre was $200 (after $100 mail-in rebate), which got me through another 4 years… or $50 a year. The Nexus 5 at $399 made me sick to my stomach, but I got 3.5 years or around $115 a year. My $300 Moto X Pure is more than 2 years old, so we’re approaching around $120 a year.

Recently my phone started feeling slow, very slow. My first thought that was it was time to upgrade. After all, the phone came out in 2015 which is old nowadays. However, I realized that the lethargy was likely due to the 100+ Chrome tabs or the pile of apps on it that I rarely use. I deleted a bunch of stuff and now manage just a few browser tabs. That seemed to buy me some time, but doesn’t have the same life it had when I first got it.

I can’t push off the decision forever. I want to have control how I use my phone… not have my phone control how I use it. I’m going to have upgrade at some point.

That’s when there’s that looming question:

How Much Should I Spend on a Cell Phone?

There are a few reasons why it is more difficult this time. First, there are more phones out there. My current phone was the only phone where I had to actually think about what I wanted and compare specifications and pricing.

The second reason is that phone prices are going up. The introduction of the $1000 iPhone and the $2000 Samsung folding phone disaster creates a lot of room for mid-range phones to charge $500.

However, by far the biggest reason why this is a difficult choice is an odd phenomenon. The choice is between a very good product at a very cheap price and an excellent product that is a lot more money. At first it seems obvious to me that I should go with the cheap option. However, because of how often a cell phone is used, that small difference between very good and excellent is greatly amplified.

For me, the choice is likely between three phones:

  1. Moto G6 – At $140 on Amazon, the Moto G6 is only a year old. Moving my phone up from a higher-end in 2015 technology to a mid-range 2018 is a good upgrade.
  2. Moto X4 – For only $120 on Amazon, the Moto X4 is a little older than the G6, but it’s higher-end phone. I think it’s a better phone for $20 less, but it could be up to personal preference.
  3. Google Pixel 3a – This phone is supposed to be announced and launched today so I don’t have a link. It’s a “lite” version of Google Pixel expensive flagship Pixel 3. It’s rumored to be priced at $399 – half the price of its big brother. With the same camera, it doesn’t compromise too much in other areas. I think it’s a happy medium between the very good at a very cheap price and the excellent at a very expensive price.

While the Pixel 3a is tempting, I have soured on it. It doesn’t feel like a bargain. The Pixel 3 was on sale a couple of weeks ago for $399 and I didn’t bite then. It’s hard to justify spending the same money for the light version today. The good news is that the Pixel 3a may be on sale when I upgrade my phone down the line.

If I had to make a choice today, I’d go with the Moto X4. I’m confident that I could be happy for a couple of years with it. At a price of $60 a year, it would be a very good value compared to some of my other phones. It would also be easy to justify giving it to one of the kids when it’s time to upgrade.

How Much Should You Spend on a Cell Phone?

Exactly $424.42… not a penny more or less. (Joking, of course.)

If you were expecting me to tell you want to do about anything, you’ve come to the wrong place. You know yourself best.

However, I can give you a couple of tips that have helped me. The first I’ve already written about. Looking at a phone as a cost per year may be helpful in making your choice. Some people may feel that $2 a day ($700+ a year) is a reasonable price for all the value they get out of their phone. I think I prefer to save the $500 and put it towards hiring a cleaning service.

The second tip is to consider the purchase in the context of your overall technology budget. I’m a big tech geek (hence the smartphone back in 2002), so I usually spend more than most people. My wife doesn’t care that much, so the low-end laptops and cell phones work for her. If I know that I’m going to spend half my internet on my cell phone, I might spend more on it. However, I am usually around my laptop, so that’s my priority.

Final Thoughts on Cell Phone Spending

We live in an era where cell phones aren’t advancing that much. They continue to get faster, more efficient chips, more memory, and better cameras. There aren’t a lot of new featuers. Some of the more recent phones have embraced wireless charging pioneered by my beloved Palm Pre (celebrating it’s 10-year birthday next month).

For us as consumers, there’s almost no wrong choice. It’s great to have very good phones available for less than $150. That’s the right choice for me, but for the first time in a long time, I understand why people spend a lot more.

* I started up the Palm Pre 3 last year and it still works great. The replaceable battery I bought very cheaply on Ebay allowed me to get all my pictures.

My Kids Get Roth IRAs

by 8 Comments

My kids are getting a Roth IRA to jump-start them to an early retirement. How? Read On.

Yesterday, my dog walked me to a yard sale. I’m used to be walked places by him since he’s a sled dog. Rarely is there anything very interesting. This time was different:


Someone asked why I negotiated up at a yard sale. If someone is going to save me $50-60 in something that will give our family literally hundreds of hours of entertainment, I don’t mind giving him/her an extra Hamilton. It makes the seller’s day and keeps the money in the community. My day (with the savings) and my kids’ days were already happy. It’s a rare, feel-good case where everyone wins.

It was later that evening, during a family game of Rack-o where I had a revelation – my wife was going to win the game. I had a pretty poor board and I pinned myself into needing a couple of specific numbers. Although there were four of us playing, it was a simple matter of process of elimination…

… the other two players were my 5 and 6 year old sons. The game is 8+, so there were no expectations that they would be able to play a strategic game. So jokingly, said that they were a “couple of buffoons.” Everyone laughed because buffoon is a funny word, especially for a 5 and 6 year old.

That’s a long Grandpa Simpson Story way of saying that I hired my sons to do real work. I’m going to pay them real money. They’ll start funding their retirement plan this year.

Kids and Roth IRAs

It’s difficult for a child as young as ours to build wealth. They get money on birthdays and Christmas. Occasionally they give my wife a toy to sell on Ebay. We recently started to have them do some chores around the house for extra money.

Their ability to earn extra money is very limited. The US Internal Revenue Service (IRS) makes it clear that only earned income can be used for a Roth IRA. The problem is that my baby modeling idea never took off. I also don’t see people lining up to purchase their wonderful Pokemon art creations.

For a more detailed look at kids and Roth IRAs, CNBC has a helpful video. It’s especially powerful to see the amazing growth of compound interest over 55 years. Who wouldn’t want 3.4 million in one of their accounts?



So how are they going to earn this money to comply with the IRS’ demands for funding a Roth IRA. I’m going to pay them. Unfortunately, the IRS doesn’t let you pay them for household chores. For many people that’s a show-stopper for kids this age.

Kids Roth IRA

However, I make money dog sitting on Rover.com. It’s a very significant amount too since I can “double dip” at home doing other freelancing gigs.

I’ve been doing this for three and a half years now, so the kids have grown up with a couple of extra dogs around. They’ve become naturally curious about feeding dogs. They love to play fetch with the dogs. Recently, we’ve introduced them to picking up the dog droppings. It’s a chore that their peers do for allowance. However, for the family dog sitting business it’s a core part of the job.

Feeding dogs, playing with dogs, keeping the water bowl filled, and picking up after the dogs is most of the dog sitting job. These are all things that my kids can do. Occasionally I have to give them medicine, but that’s about the only thing that I need to do 100% myself. The IRS should have no issue with me subcontracting out some of the work to them. In fact, I did some math on what a professional pooper scooper company costs and it seems like it could be thousands a year for the amount of dogs we have and how often they’d have to come.

My kids are going to go into the dog sitting business. I haven’t figured out exactly what I will pay them. I think the professional pooper scooper service may be a good guide. My kids aren’t professionals, but the service doesn’t fill the water bowls or play with the dogs.

Contributing to a Roth IRA at this age is very, very powerful. Money grows quite a bit with 60 years of compounding until they reach ages 65 and 66. If they were to earn 7% interest over that long period of time, a single dollar would be nearly $58. So $1000 in a Roth IRA would be worth $58,000. Of course, at 3.5% inflation over that time, you’d need $7,878 to have the buying power of $1,000 today.

When you crunch those numbers, it gives them a real post-inflation gain of 7x their money. Theoretically, if they could earn the $6000 Roth IRA limit, they’d set themselves up with $42,000 in retirement. Of course, that would be an extreme amount of dog care and that wouldn’t be reasonable.

In addition to the Roth IRA, we’ll be paying them some real spending money. They are saving up for a Nintendo Switch, so we’re going to be creating a chart of their progress.

Finally, in the next couple of years, I’m hoping they can participate in some of blogging work. Perhaps later this year or next year, I’ll introduce a bi-weekly kids article. I’ll interview them and get their perspective on what money-related thoughts they have. I’ll then explore how we are parenting their use of money. This is just a seed of an idea. I need to think a little more about how this would work. Of course, I’d pay them for their time and insight.

Impact on Our Taxes

I have to check on this with our tax planning, but I think we’d make out well with this too. We’d be able to write off the amount we are paying, just as we would a professional service. Of course our kids would have to report the income, but it would be too low for them to be taxed on it. As best I can tell, this (small amount money) wouldn’t be taxed all and, since it is going into a Roth IRA would never be taxed.

I think it gets more complicated with them helping out with the blog since it’s an S-Corp. I may have to set-up payroll and things like that which get a little tricky. I’ll definitely need some professional tax guidance on that.

Again, I’m not sure if my understanding of that is accurate, so please check with your own tax professionals before trying anything like this.

After all, the real buffoon in the game was me. My 6 year old won handily.

This article contains affiliate links. I may receive compensation if you click on and choose to use one of the products or services.

Are You Successful?

by 5 Comments

That’s a loaded question for three simple words, right?

The only way to get started is to come up with a definition of success. A couple of days ago, Joe from Retire by 40, asked, “What Does Success Mean to You?”

That question indirectly leads us to a definition of success. You are going to have to create a definition for yourself. Maybe you must be a banker to be fulfilled in life. While that may work for a sitcom, chances are your definition of success is much deeper.

Is Money the Measure of Success?

This is a blog about money… it’s in the name. And most discussions of success are going to lead back to money. After all, in the impeccable wisdom of Liz Phair:

It’s nice to be liked
But it’s better by far to get paid
I know that most of the friends that I have
Don’t really see it that way
But if you can give ’em each one wish
How much do you want to bet?
They’d which success for themselves and their friends
And that would include lots of money
I would surely include lots of money
You’ve got to have sh**loads of M-O-N-E-why, money

As you might be able to tell, Ms. Phair values money as a great sign of success. However, I think we can agree that it isn’t the only sign of success.

Most people would consider Saint Teresa of Calcutta as very successful, but money wasn’t a part of that success. Additionally, we have all heard the stories of lottery winners who have been unhappy. Joe made the great point that the richest person in the world failed at marriage.

Joe did what I would have done. He made a spreadsheet of the qualities that he considered important to success. Hopefully he doesn’t mind that I share it here, because it makes it easier to see where I’m going with this:

In his article, Joe then goes through each one and gives a little explanation about why it’s important and why he gave it the score he did. He chose to score each of them equally on a scale of 1 to 10 and average them out.

I (obviously) loved the idea or I wouldn’t be writing about it today. However, I thought I could make a couple of improvements. I love to tinker, especially with spreadsheets.

The first thing I did was take notice that some things are related. Joe has money, material things, and experiences all listed. If money is high (which it is for him) he can trade some for material things. The reason he doesn’t is that he doesn’t value a lot of material things as high as he does his freedom, another item on his list.*

I’ve started to do some mind mapping recently and I’d group some of these related items together. There’s a Four Burners Theory that says you have to split your efforts across family, friends, work, and health. It’s almost impossible for everyone to have enough gas to have all of them on full power.

I decided blatantly steal borrow Joe’s list and put the items in some categories. It’s not perfect, because I’d rather get your thoughts on this draft and evolve it. (That’s a hint to please leave a comment.) I also decided to allot 100 points among all the categories. The categories with more points are more important to me.

For example, Ebenezer Scrooge might have 90 points in the money category… and he might award himself an 85 for his success in getting money. In this system, he will have likely rated himself a great success. Saint Teresa would likely have put most her points in the philanthropy and spirituality categories and rate herself as a great success.

Here’s what mine looks like:

Lazy Success

The first thing you might notice is that my 1 to 100 scale only goes to 70. That’s because I’ve reserved the last 30 points for relationships, family and friends. I’ve decided to keep those private.

One important thing to keep in mind is that the numbers are very subjective. I just went with my gut and quickly filled up a 100 possible points. Then I spent 30 seconds thinking about whether I valued one thing more or less. In fact, I did this so quickly that just before publishing, I realized that I left health completely out of the spreadsheet. (It would have been an average 50% score.)

In the future, I may value material things less, but I bumped it up to an even number so that I could give myself half the points. In hindsight, the overall money category is worth the same amount as relationships (30 points), which needs some adjusting in a future draft.

Lazy Man’s Success Breakdown

Money Category

We have a very nice house and some nice things. However, I’m inherently frugal. I don’t mind Dollar Tree utensils for cooking. I’m very happy to wear an old Patriots sweatshirt from 1993 most of the time. We do have a fancy OLED TV and a luxury SUV. We also have a futon from Wal-Mart and our bedroom furniture is what I got after graduating college.

We have plenty of good experiences which includes our trips to Aruba and Disney World. We live on an island that is 5 minutes from the beach. Our kids get (mostly) the best education money can buy.

We are doing well with our finances. I hope to update this old article this summer, but we should have $200,000 a year in retirement income after my wife’s pension, rental properties, investments, social security, and some hobbies that make money.

Work

Joe included his engineering career and his blogging career. I’ll do the same and throw in my dog sitting career. I wasn’t the best software engineer, but I had some big accomplishments I can be proud of. In 13 years of blogging, I’ve managed 12 million page views and have been nominated for a Lifetime Achievement Plutus Award. I haven’t been featured in Rockstar Finance and I am still Susan Lucci/Ash Ketchum when it comes to winning a Plutus Award.

This is life on the blogger roller coaster.

Others’ View

I didn’t know what to call this category of fame, power, and legacy, so “others’ view” was my best attempt. I don’t care to much for fame and only a little bit about power. I care more about legacy.

I rated myself highly on legacy for things that have mostly flown under the radar. They are the things that show up in the 12 million page views and that Lifetime Achievement nomination. I’d like to write more about this someday, but I’m a little humble. Also, I don’t want it to trigger too much fame.

Own View

I gave myself a 3 of 5 when it comes to philanthropy. Some would look at money that I’ve donated and say that 3 is generous. However, I’ve devoted thousands of hours to helping people not get tied up into pyramid schemes and other scams.

I need to work on spirituality. It should be a larger in both possible points and awarded points.

I was perhaps generous in giving myself a 6 in contentment. It’s something that I actively have to work on.

Freedom

Finally, I gave myself a freedom score of 6 of 8. Maybe freedom should have more possible points, but it shares some of the Money’s points. The score of 6 is based on our financial situation and ability to work from home in a variety of different ways. It’s not going to be perfect because it’s not like we can just pick up and go to France on a moment’s notice. It’s hard to be truly free when you are raising a 5 and 6 year old.

Final thoughts

So I scored 45 of the 70 points. That’s nearly 65%… a solid D grade. Part of the reason it isn’t higher is that I didn’t believe in giving myself a perfect score, as there’s always someone else doing it better. So realistically it is 45 of 59 (I did give myself perfect fame) which is more of a C.

If I go buy a few nice things, win a Plutus award, and meditate my way to higher contentment, I should be able to pull of a solid B.

Now I’m off to go look at my old, very popular how to be successful article and see how I can make it better.

* I may be projecting my thoughts about Joe, but it’s my interpretation after reading his blog for a long time. While I could be wrong, we can still move on as if it were true for the purposes of the exercise.

Four Years of Solar Power Reviewed

by 3 Comments

Funny Solar Panel

Happy Earth Day! It’s hard to believe, but this month is exactly four years since we got solar panels installed and activated.

I was nervous about taking the plunge. We got a $16,000 Home Equity Line of Credit (HELOC) to pay for the panels. That’s a lot of money. And though I thought I understood everything about solar panels, you never truly know what you don’t know. Finally, I never know if I can trust local contractors that I’ll save money – they are interested in getting the job and it would be impossible to hold them accountable if they stretched the truth.

Fortunately, everything went according to plan and we’ve been extremely happy. (Knock on wood.)

One very important thing to note is that government funding via state grants and federal tax credits paid for another $16,000. Obviously state grants are going to depend where you live. I did very quick/rough research and it seems like the 30% federal tax credit is still around for 2019, but then it starts to become less in 2020 and 2021 before disappearing for residences/homes.

In short, if you are thinking about solar power, now may be the last chance to get the best price.

Before I get into our personal financial experience with solar power, the benefits to the environment have to be mentioned. Even if it financially break-even, why not do something that helps the environment? To date, our dashboard says that our panels have accomplished the equivalent of planting 686 trees. Using metrics from the EPA, planting one tree offsets the same amount of CO2 as 55.3 kilowatt-hours of clean energy production.

Put another way, our panels have generated the equivalent of 12,640,541 AA batteries. My math could be off, but I think that’s around 668,822 pounds of batteries. It’s a good thing our house doesn’t run on AA batteries.

Calculating the Value of our Solar Power

You can call it 686 trees or 12.6 million batteries, but scientists would say we’ve generated 37.9 megawatt-hours in 4 years. Thanks to the wonders of the metric system, we can say it’s 37,900 kilowatt-hours or kWh.

The reason why we care about the kilowatt-hours measurement is because that’s the unit your electric bill uses. In Rhode Island it costs 11 cents to create one kWh and 10 cents to deliver it. The costs are broken down into more excruciating detail, but I’ll spare you. So overall, using a kWh costs $0.21.

That’s actually the most expensive electricity in the continental United States. (For some reason their numbers are 22.67 cents, which is different than my bill, but it’s close enough.) The average bill in Rhode Island is $203.35. Ouch!

The 37,900 kWh that we’ve generated in 4 years would have cost us $7,985.53. We can round up that last nearly $15 and call it $8000… exactly half of $16,000 we financed. Roughly speaking we’ll have recouped our $16,000 in 4 more years. However to account for interest and inflation, let’s call it 5 years.

Thus after a total of 9 years, we’ll save roughly $2000 a year. (That’s based on easy math of the $8000 we saved already over 4 years.) It will be more as electricity prices rise over time due to inflation.

Our panels are guaranteed to be ~95% efficient for 25 years. It doesn’t mean that they won’t last longer, but that’s just the guarantee. By the time that guarantee is up we’ll have 16 years of free electricity. With inflation our electricity would likely cost around $3200 by the end. I’ll conservatively estimate that the savings come out to around $2500 a year over those 16 years.

That’s $40,000 in savings! If the system keeps working well, it could be more than $50,000.

For a handful of days of research and another few for doing the work, that’s quite the return on investment. It’s a year’s worth of income for many people. While your state will likely be less of a savings, it doesn’t mean you shouldn’t do it.

If you are thinking about getting solar power yourself, here’s a quick guide I wrote. It’s hard to get too specific because each state has its own tax credits as well as it’s own costs of power. If energy is cheap in your state, it could be a poor financial decision to get solar power. That’s why it can still save us money even though Rhode Island is not known for being sunny.

Have you explored solar power? Let me know what you think in the comments.

Alternative Income Update: March 2019

by 10 Comments

It’s past the middle of the month and that means I have the numbers (and time to process them) for last month’s alternative income.

This month I’m doing something a little different. The software engineer in me extracted 90% of the 2500 words that give background information each month and put them in a FAQ. For now, I’m including the FAQ in the beginning of the article. However, in future months, it will probably be a separate page… or maybe something that expands when you click on it. Please bear with me if there are some errors on this. It’s more complicated than it looks.

If you are a regular reader and just want to get to the numbers, there’s a link to jump you over the FAQ and to the month’s update

Before we get all the boring numbers, I need to give you March’s back story.

You’d think that the biggest thing that happened in March is that we spent two weeks in Orlando, Florida. (You’d be wrong.)

Indeed we did Disney World and Universal Studios. With two weeks, we took some much needed days off in between. Two weeks is a long time to be away with kids ages 5 and 6. I’ll write a longer article about the trip, but I’ll also share some highlights here because it was a large part of the month.

Going on vacation for two weeks is a great test of alternative income. If the alternative income stays high, I’ll probably continue to do well if I am home and earning money from hobbies.

You’d think that the biggest thing that happened in March is that I turned 43. (You’d be wrong.)

I had a great birthday, perhaps the best ever. My wife surprised me with a much-needed suit. I can finally donate the 20 year old ones that don’t fit anymore. I’m not sure where I’ll wear my new suit, but something usually comes up once a year or two.

You’d think that the biggest thing that happened in March is I received a Tweet from a HUGE celebrity who I have been a card-carrying fan club member for over 20 years. (You’d be wrong.)

I’ll be sharing that Tweet in this email.

You’d think that the biggest thing that happened in March was my wife reaching 20 years of military service and a pension worth around $55,000 a year.

This time you’d be right!

It’s obviously a huge deal – the whole inspiration for creating this blog. I’ll have more to write about this over time, but for now I’m just speechless and blessed.

Skip the FAQ and jump to the monthly update

Alternative Income FAQ

In 2006 I started tracking my alternative income on this website and continued it for years. Life intervened, as it does, and I stopped.

In January 2017, I publishing monthly reports again. Since most of the reports are very similar, I decided it would be best to create this FAQ for new readers. This will give you the background information to get you up to speed. This helps regular readers zero in on the monthly update of “what’s new.”

Q. What is “Alternative Income?”

A. I coined “alternative income” in 2006 to be purposely vague.

I needed something to cover the small amount of blogging income I was making. On one hand, blogging is not passive income – it’s work. On the other hand, there’s a residual nature to the income. If I go on vacation for a couple of weeks, I still make money from the previous articles I’ve written.

Alternative income was more passive back in 2006 before social media, podcasting, and video. Today it seems like every blogger talks of hustling (as in moving quickly, not grifting people) and “being everywhere.” I’m sticking to my dinosaur roots as the only one dumb enough to just keep writing blog posts without cool, “pinnable” images.

Alternative income is best described as income where you don’t directly trade your time for money. Some common alternative income sources include collecting rent, dividends, royalties, and blogging. It’s very subjective. Your definition of alternative income may be a little different than mine. That’s okay, many people have different definitions for “retirement”.

I believe we all get the concept. That’s the important part.

Q. How Do You Make Alternative Income?

A. Currently, it’s blogging, dog sitting, and two types of investments: rental properties and securities (stocks/bonds). I’m extremely likely to add another type of alternative income by the summer. It’s already in the works. After that I really need to get started in writing a book to increase royalties that way.

Q. How Do You Spend Your Time?

A. This is important. Someone with few dependents or responsibilities can focus their energy more on creating alternative income sources. If you have to work 2 full-time jobs just to pay rent and childcare, it is going to be difficult to create alternative income.

My first priority is to be a stay-at-home dad. My military wife works long days on top of getting an online MBA (to add to her Pharm.D.) from a prestigious school. For promotion, she’s strongly encouraged to take on a number of other committee head positions. Yes, she “brings home the bacon.”

The kids are in school/camp during the day, which gives me time to do the basic family errands (shopping, cooking, dishes, laundry, walking the dog, etc.). There’s this blog, dog sitting business, and managing the rental properties. In the middle of 2018, I took on two ongoing freelance jobs that take about 20-25 hours of week of my time. The hours are flexible and the pay is good.

It’s hard for me to put a specific label on what I am. I can’t label it myself. However, as you can see I’m not under a palm tree sipping a Mai Tai… well not always.

There’s more detail on my Now page.

Q. Can you Tell me More about Your Blogging and Dog Sitting Income

A. I don’t publicly break out the difference between 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.

Dog sitting can be high in the summer as people go on vacation. Blogging can be low in the summer with internet traffic low… as people go on vacation. They end up complimenting each other quite well. It’s almost like a school teacher opening up an ice cream shop.

Q. Dog sitting income doesn’t seem like alternative income to me.

A. That’s not even a question!

It is true that both seem like trading time for money. However, this is one area where alternative income is subjective.

Sitting dogs itself isn’t a time-intensive job. While there is more overhead than you might think between booking dogs and meeting dogs for suitability, we do often have regular clients that are very easy.

The important differentiation with dog sitting is that I can “double-dip” and earn money from something else (such as blogging) at the same time. It’s very different than being an Uber driver. Double-dipping doesn’t work there as the police tend to frown on blogging and driving.

If you are interested, I wrote a very detailed article on how to make money dog sitting.

Q. Blogging doesn’t seem like alternative income to me.*

A. Again, that’s not a question.

Like dog sitting, blogging 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 13 years of blogging.

Q. What’s the background on your rental properties

A. 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 2027, we should be able to collect an estimated income of $40,000 a year (in today’s dollars, after expenses) on them.

Q. How do you calculate rental property alternative income

A. Most landlords just calculate how much money they make after their expenses. That’s the easy way.

However, most landlords choose a 30-year fixed to keep their expenses low. We wanted to pay them off quickly. Thus our mortgages are high and we don’t make money on a monthly basis.

I came up with an alternative calculation that effective gives us the percentage of the rent that is ours. That is opposed to the percentage of the rents that are the bank’s. Imagine that you and a friend bought a $200,000 property and each owned 50%. If the property brought in $1500 a month in rent after expenses, each person gets $750 a month. This is what I do.

I add up all the properties’ equity (what we own) and estimated value. (Zillow is very accurate for these condos.) I calculate the percentage of the property that we own by dividing the equity to that estimated value.

Then I calculate the rents of all the properties as if they were owned free and clear. I subtract the expenses (condo fees, maintenance, etc.). I then multiply the percentage of the property that we own by that adjusted profit number.

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

Q. What about inflation of the real estate? Won’t that eat into the buying power of $40,000

A. Since rents are typically rise in line with inflation over the long term, we don’t have to adjust the numbers for the future. We’ll raise the $40,000 rents now to $80,000 at some point in the future, but it will still have roughly the same $40,000 buying power of today.

Q. How do you calculate dividend alternative income?

A. We don’t focus on putting our money in dividend stocks, but I’m going to pretend 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.

We can pretend that I moved all the money into a dividend focused portfolio. I estimate that we could easily earn 2.50% in dividends. This gives us a conservative number that we could expect to have.

However, since almost all this money is in retirements accounts, we can’t access it in a practical way without tax penalties. We’re going to ignore this for the sake of the report. In the end we need to capture around 20 years of mostly maxing out retirement contributions and compound interest.

Q. What’s “very close to passive income
A.

This is the income that is almost universally considered passive income. For us that would include just the rent payments and dividends. Maybe someday it will include royalties or book sales. I’m not counting blogging or dog sitting income in this.

* While on the topic of blogging, I’d like to add that it isn’t all 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.

Lazy Man’s Alternative Income – March 2019

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

1. Blogging + Dog Sitting Income

March’s dog sitting was very poor. That’s to be expected when you spend half the month in Florida. However, even when we weren’t in Florida we didn’t have a lot of requests. It almost made me feel like the business was dying and people were going with other Rover sitters. Fortunately, we’ve seen a huge pick-up in April and it’s one of our biggest months ever.

Blogging income in March was just about average. I was surprised as I didn’t get a chance to blog much with the vacation. This is where the library of nearly 2,500 old posts seems to pay off.

In February, these two categories combined for a total of $2,850.40, a little below the average of 2018. In March, it was:

Total Blogging + Dog Sitting Income: $2,148.86

For missing nearly two weeks, that’s a pretty good number. I’m not sure too many people would be excited for what amounts to a $25K income. However, when characterized as extra money earned on vacation, it’s great. Since we are more than halfway through April now, I can forecast that it could be one of the best months ever.

Here’s a historic chart with the red line being a 3-month average:

Remember that important Tweet that I mentioned in the beginning. Here’s Steven Tyler retweeted me with some encouragement on my roller coaster fears at Universal Studios.

2. Rental Property Income

Zillow moved the value of our rental properties down a few thousand dollars. At the same time, we were able to reduce the mortgages (like every month). That has an effect almost canceling each other out.

We now have 54.71% of the equity in our properties with an estimated combined rent of $3,325. The rent number is after insurance, property taxes, and condo fees. That’s so we can estimate what we’d really be taking home after expenses.

If you multiply $3,325 by 54.71% you get $1,819 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 26 months, we’ve seen the number grow $645/mo. That’s like giving ourselves an annual $7,740 raise until the end of time from where we were just 2+ 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.

In the previous report, the rental property income was $1,814. This number usually moves slowly and this $5 increase was the lowest in awhile. This number only changes if one of two things happen: 1) The properties go up in value. 2) We charge more for rent. Later this year, we should be able to raise the rents a bit.

Total Rental Property Income: $1,819

My wife and I had a staycation/no-kid-overnight at the historic Castle Hill hotel in Newport, RI. This was our view from the patio. The panorama image doesn’t translate well to a web page:

Castle Hill View

3. Dividend Income

March was a tremendous month for our portfolios. The stock market continued to soar from the lows in the year.

Total Dividend Income: $1,656

Last month, it was $1,567, so we gained $89 of theoretical monthly money from theoretical dividends. Amazingly, we gained exactly $89 the month before. This is an all-time new record for us. I’d like to say that we are executing amazingly, but it’s mostly the stock marketing going well. We continue to save and invest, so we’re control what we can.

It’s almost impossible to have a better birthday than I had:

Very Close to Passive Income

This is a combination of rental property income and dividend income.

The stock market goes up and down fast 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 move a lot faster than the housing market.

Having both types of income working together for us is great. The diversification gives me great confidence that we’ll be better prepared than most if there’s a market downturn in the future.

Very Close to Passive Income: $3,475

Last month it was $3,381, so it’s up $94. Last month was an all-time high, so we continue breaking records. It has grown from a combined $2,354 in January 2017. Since then, this has gone from an estimated annual income of $28,252 from these two sources to $41,697. It’s worth noting that, once again, these are fudged numbers that aren’t “real” yet. However, I’m looking forward to 9 years from now when the mortgages on the investment properties are paid off. Add in stock market growth (of a conservative 4%) and this number could reach $85K/year or more.

My kids found their favorite mouse at Disney:

Final Alternative Income

When you add up “dogs and blogs” to the “very close to passive income” you get:

December’s Very Close to Passive Income: $5,623.86

That would be $67,486.32 a year. I’m trying to get this number over $100,000 so it’s moving in the wrong direction. However, I think we’ll be close in April.

That largely hypothetical annual income for writing on a blog, and taking care of dogs feels a little like a dream. In the long term, we can get by on much less than $67K of income. Here’s what our expenses for the next 45 years looks like.

That doesn’t include any of my wife’s bread-winning pharmacist income, her NOW VESTED military pension or any of that freelance work I’ve been doing over the last several months. It also doesn’t include how much we could get selling our kids on the black market. (Just checking if you are reading this.)

As always, I’m still hoping to write a book someday. If you know of a publisher who I could talk to contact me. I’ve got 3 or 4 very marketable ideas in the personal finance space.

We brought the kids to see The Breakers for the first time. It’s a great field trip/history lesson just a couple of miles from our home. From a personal finance perspective, it’s fascinating what moguls could buy when there was no income tax:

Breakers Newport

Net Worth Update

This isn’t very exciting as I don’t share the exact numbers of our net worth. That’s why it’s little more than a footnote here.

I truly believe that net worth is one of the most important numbers in personal finance so it is worth sharing in some way. Showing relative growth can be useful, I think? (Let me know in the comments.)

I use Personal Capital to track my net worth and it makes everything easy. It’s free and you should give it a try. For full disclosure, I might make a few dollars if you do.

Due to the strong stock market and steady real estate market, our net worth went up 2.70% in March. That would have been our best growth month in 2018 and the numbers are bigger now, which makes it harder to do. For the year it’s up 19.62%, a large percentage of that was based on a website sale that I had at the beginning of the year.

I always have to remember that percentages can be weird… Imagine with someone with a net worth of $100 finds a $100 bill on the ground. Instantly it doubles his net worth. As our net worth grows larger, the percentage of growth will come down too. You’d rather have 10% growth of a million dollars than 20% growth of a hundred thousand, right?

There’s a new big wild card in calculating our net worth this month. Now that my wife’s pension is vested, it’s reasonable to include it’s value in a net worth calculation. I’ll have an article about whether a pension should be included in the future. I’ll also write about how to evaluate the value of the pension. It’s a strong pension that’s potentially worth $2 million or more. Because that would ridiculously dominate our net worth, I don’t think I’ll include it.

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

About

Learn more about Lazy Man and Money, how the site developed over the years, and more at the About page.

Recent Posts

Connect