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Time to Buckle Down and Get Back to Work

September 6, 2019 by Lazy Man 3 Comments

I started writing this a couple of days ago, but between being sick and the annual Fincon conference I didn’t get it together to post. Hopefully, I’ll be better by next week and can live up the title.

I recently wrote about my wife practicing early retirement. We went straight from that to a family vacation/road trip to NYC and Hershey, PA. It’s our attempt to squeeze all the fun we can.

The sad part is that no matter how much we do, I can’t help focusing on the things we didn’t do. We didn’t get to Thomas Land this year. We didn’t get to the local “Fools’ Rules” regatta. The event requires entrants to build a vessel out of non-marine items in two hours, and sail it to complete the course. It sounds so awesome, but the timing has never worked out for us. I bought baseball gloves for the kids and haven’t gotten in a single game of catch.

I know I shouldn’t focus on the things that we didn’t do. I’m probably breaking a cardinal rule of blogging by not depicting everything in the most optimistic way. My optimistic and pessimistic sides are often at war with each other. In this case, I can keep my pessimistic side in check by going back to my pictures of the summer and all the things we did do. That’s when I start to realize that we did 80-90% of what we wanted and the other 10-20% were outliers.

For the last couple of weeks, we’ve been spending, spending, and spending some more. We don’t budget, but instead focus our spending mindfully. It has always worked well for us in the past. However, it seems that when you aren’t mindful it doesn’t work. Who knew ;-)?

It’s not like I bought a jet ski, or a Patriots’ jet ski, or a Patriots’ jet ski autographed by Tom Brady. My wife hasn’t done the Broadway equivalent of that (which I suppose would involve Lin-Manuel Miranda), either. It’s been a lot of small things, mostly restaurants lunches and dinners.

However, it’s time to heed the immortal words of Daniel Tiger, “That was fun but now it’s done.”

It feels like a rubber band snapping back after you stretched it too far. The kids are back to school tomorrow. The personal finance blogger conference (FinCon) is tomorrow. I literally hug the kids and send them off, and then drive straight to the airport for D.C. I haven’t even packed yet.

I know some friends who travel often and it’s easy for them. I rarely travel. I am extremely anxious about everything. Did I forget [X] or [Y]? I always make sure that I have phone chargers. That calms me.

In any event, it’s time to focus on being productive outside of “family fun” activities. I have a list of more than 50 blog posts that I want to write. Sometimes, I feel like I’ve written everything that can be written about personal finance in 13+ years. However, there’s always more to write. In my case, I can rewrite my old articles 4 or 5 times until they become coherent – LOL.

I’ve got a lot of other non-blogging work to do. My fantastic tenants of 5 years bought their dream home. Another tenant has bounced yet another check (she’s been good at recovering, but it is concerning.) I’m 99% of the way into a new business partnership. I will write more about that in the future, but since they read the blog, I’ll have to run all the language by them first. It is very, very boring stuff, so even though I’ll be vague, you wouldn’t want the details anyway… trust me.

I’ll be back from FinCon around the 9th. I’ll have much deeper posts about personal finance. The first will likely be a monthly alternative income report for August. These have been a little formulaic in the past, but it will be interesting to see how extreme spending and vacation (less blogging and no dog sitting), work together. It sounds like a disaster, but I think our focus on personal finance will pay off.

The Basics of REIT Investing for Passive Income

August 28, 2019 by Lazy Man 5 Comments

It’s been a little while between posts. I’ve been on a short family vacation/road trip. We brought the kids to New York City for a day before moving on to Hershey Park. We’re trying to squeeze every last drop of fun of summer before school starts. It’s been nice to put down the laptop and be blissfully ignorant of whatever is going on in the chicken sandwich wars. However, I’ve been fortunate enough to have a guest post from sureDividend on two of my favorite topics – REITs and passive income. I plan to be back next week with an article (and maybe one before that), before taking another break for the FINCON financial blogger conference.

My Passive Income Pyramid

Real estate is a highly popular method of investing for passive income, and for good reason. It has proven to be one of the most reliable long-term investments capable of delivering consistent, sustainable, and inflation-resistant cash flow.

However, it has the main drawback of potentially requiring extensive hands-on management and the hassles that come with being a landlord, which prevent it from being a truly passive investment. Additionally, real estate often requires considerable capital just to purchase your first investment, making it a cost-prohibitive investment for beginning investors.

However, for those looking for true passivity, a less cost-prohibitive, and/or a potentially even more lucrative and lower risk means of investing in real estate, publicly traded real estate investment trusts (or REITs for short) offer investors a compelling alternative. REITs are also attractive for their high dividend yields.

Why Real Estate?

Investopedia defines REITs as real estate portfolios that receive income from a variety of properties and then distribute at least 90% of that taxable income to investors in the form of dividends. Additionally, the REIT itself qualifies as a pass-through entity which means that it does not have to pay any corporate income taxes and most, if not all, of its dividends qualify for a 20% tax write-off after the latest tax reform bill.

Real estate is a tangible asset that provides clear value to its user. Additionally, the nature of its value is limited, necessary, and flexible – giving it remarkable durability and stability in value and making it extremely unlikely to become worthless over time unless it is grossly mismanaged and overleveraged.

Furthermore, real estate often generates cash flow through a variety of means. This means that it can be repurposed to fit whichever business is in demand at the time.

Finally, its finite supply makes it inflation-resistant. While the fiat currencies of the world continue their inevitable march towards zero, the amount of available land actually declines as the population increases. This has resulted in the value of real estate, on average, growing in a direct positive correlation to the rates of inflation and population growth over time.

This aspect of real estate is extremely valuable for early retirees as it leads to cash flow growing in line with consumer prices over time, making it a great way to ensure stable buying power to fund a retirement lifestyle.

These positive qualities are also supported by the data, as commercial real estate scores as the best possible risk-adjusted investment over long periods of time.

Why REITs?

As previously mentioned, while real estate investors enjoy many advantages that often lead to stellar long-term results, real estate still has some drawbacks as a passive income source. In fact, some would argue that it is not really passive income at all. Being a landlord necessitates going through the sometimes arduous and stressful process of finding good tenants, completing the necessary legal work, performing routine maintenance and occasional repairs or hiring contractors, and keeping your tenants accountable to paying their rent on time.

Furthermore, if you ever need to liquidate your investment, preparing, listing, and ultimately selling your property can be a costly, time-consuming, and stressful endeavor. If you have to liquidate it quickly, you will quite possibly have to settle for far less than market value to attract an immediate cash buyer.

Of course, you can always hire a property manager to mitigate many of these stresses, but the costs associated with that will eat heavily into your cash flow and total returns. Additionally, there is the personal liability of getting financing and making mortgage payments if you do not buy your property with all cash as well as the potential for a costly law suit from tenants. In all, these costs could make owning physical real estate a much less appealing long-term investment compared to alternatives.

Finally, there is substantial concentration risk. Unless you are a multimillionaire who can afford to purchase a large empire of rental properties, you will be focusing much of your wealth on a concentrated selection of assets. If that real estate market turns south, or a couple of your properties suffer from prolonged vacancies and/or bad tenants, your investment returns will be significantly harmed.

In contrast, REITs provide investors with all the benefits of traditional real estate investing without the aforementioned downsides. Instead of dealing with the dreaded “triple Ts” (tenants, toilets, and trash) of landlording, shareholders in a publicly traded REIT can kick back and relax, knowing that a professional management team is caring for their real estate portfolio 24/7. This makes REITs a truly passive investment.

Furthermore, publicly traded REITs are very liquid investments. With a simple click of a mouse (and without costly transaction fees), investors can buy and sell shares of a REIT at the current market price. This means that if an emergency strikes or some other reason arises that causes investors to want to liquidate their real estate investments quickly, REIT investors can get out immediately if they need to.

Finally, REITs offer investors much less risk than physical real estate. A single REIT share in some cases can be purchased for a few dollars, providing a stark contrast to the thousands of dollars’ worth of equity typically needed to purchase a piece of physical real estate. This enables even small dollar investors to diversify broadly across a large number of different REITs. Additionally, each individual REIT typically holds dozens, hundreds, or even thousands of different individual properties, often across multiple cities, regions, and even countries. This gives REIT investors an enormous diversification advantage over their real estate landlord peers as their cash flow tends to be much more stable and secure against market, tenant, and vacancy risks.

A final advantage of investing in REITs is that over long periods of time they have proven to offer superior average returns than investing in individual properties by a score of 11% per year to 7% per year (source).

While this outcome may sound surprising at first, it’s very much expected and even normal. There are real economic reasons why REITs outperform and why this outperformance is expected to continue. First is because REITs generally experience faster growth rates than individual property investments. This is due to the fact that REITs have better access to low-cost capital and enjoy professional management and economies of scale. Second, private investors have a tendency to take on far too much leverage and are lulled into a false sense of security during prosperous times. REITs, meanwhile, take a longer-term, full-cycle approach to investing and typically maintain a responsible “happy medium” level of leverage. This enhances long-term returns without putting them at excessive risk of suffering permanent loss or even bankruptcy in an economic downturn.

Final Thoughts

Real estate has proven to be a great way to build long term wealth and a steady and growing stream of passive income. With access to publicly traded REITs, every investor can begin building wealth and an entirely passive income stream today. In fact, many investors would be better served over the long term by investing solely in REITs instead of physical real estate.

Despite this, many investors lack the proper mentality to invest in publicly traded securities as they will panic at the first sign of extreme market volatility and sell their REIT shares at a loss. Other investors prefer to have as much control as possible over their investments and therefore also prefer to invest in physical real estate. For those that can handle the volatility and prefer total passivity to their income-generating investments, however, REITs are the ideal passive income generating investment.

This article discussed REITs to fill out the top of your Passive Income Pyramid. To see our favorite dividend growth stocks today, start your free trial of The Sure Dividend Newsletter.

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What’s Your True Investment Rate?

July 31, 2019 by Lazy Man 6 Comments

Usually, when I start an article, I have an idea where it’s going until the end. This is not one of those articles.

Part of the reason is that things have been busy over the last couple of weeks. I’ll explain more in the monthly report, but our dog sitting has reached new records. At the same time, my wife has been spending more time office. I honestly feel like my kids, at age 5 and 6, are more competent than their camp director or counselors (but I try to go easy on them as managing many kids can’t be easy.) Finally, I’m feeling that summer is passing us by as it does every year. It will be back to school in about a month.

The topic of school is a large part of what I wanted to cover today, but first I want to review some FIRE basics. Most FIRE people would say that your savings rate is what impacts you the most about being able to FIRE (be Financially Independent and/or Retire Early). Some bloggers are saving as much as 50% of their income and investing it. With the power of compound interest and 10-20 years, they’ve got a nice nest egg to retire on. That would be a accurate, though oversimplified version of our financial situation.

Our situation is a lot more complicated with my irregular freelance, side hustles, and businesses (blogging and dog sitting), and our investment properties. For this reason, I don’t bother to calculate our savings rate. Instead, I’ve recented used a net worth growth to income ratio. They are both high numbers for us, so that’s a good thing. For most people a savings rate would be easier to calculate.

Spending vs. Saving vs. Investing

You’d think after blogging about these for 13 years, I’d be clearly able to delinate all these things. It’s not always so easy. In fact, there are mashups of them like “spaving”, which is loosely defined as spending money to save.

It possible to have a high savings rate, but not invest it. For example, maybe you love the safety of having cash in the bank, but it’s not paying a good interest rate. Technically, you may be investing on that savings account, but it’s called a savings account for a reason. A high savings rate doesn’t mean a high investing rate.

In our situation, we have a good savings rate. If anything, we may invest too much and it might be better to keep more liquid cash on hand.

I suspect that for most FIRE bloggers, once they get a nice cushion of liquid cash in their emergency, they invest a vast majority of the rest. When I read some blogs, it seems like most of that 50% gets invested. You’ll see the typical brokerage and retirement accounts mentioned: 401k, Roth IRA, SEP-IRA, TSP, solo 401k. Occassionally, you even see a 529 plan for bloggers with kids.

These are all great investment vehicles. We have them too. As explained above, we have a lot of unusual things about our financial lives.

What About “Invest in Yourself?”

For the last few years, we’ve paid around $30,000 a year for school. You may notice that I didn’t wrote “paid” not “spend.” What I really mean to say is that we invested an extra $30,000 in education.

With my wife graduating in about a week, we’ll be down to around $22,000 for the next few years for just the kids. My wife’s investment was for an MBA to add to her Pharm. D. (We’ve messed up our health system so bad that we are asking our pharmacists to have masters in business as well.) It’s too early to tell if that MBA will pay off, but the “powers that be” at her employment have seemed to change course on valuing it when it comes to promotion time. I could write another 3000 words on the topic, but it wouldn’t help anyone and possibly cause more problems.

If my wife moves on from the military to the private sector, the degree will have a large ROI. However, she may choose to just retire, now that she has her pension.

The other $22,000 is a private school for our two kids. We’re “spaving” a huge percent of the typical costs with my wife’s military status. It’s still a lot more than an average private elementary school. Obviously we think it’s an exceptional school. Would you pay half price if you got into Stanford or Harvard? It’s not an easy question at the elementary school level.

What if that money was put in a 529 plan? Almost everyone would agree that’s investing, right? So is this different? What if it leads to a scholarship down the line?

In almost all these cases, they qualify as the old adage of “investing in yourself”, except it’s literally the people closest to me.

It feels like the rest of the community would consider this as spending, no different than if we spent an extra $22,000 on a sports car.

However, if I were start to really calculate our savings rate and investing rate, I’d create a “True Investment Rate” that included school tuition. It’s not in a brokerage account, but that doesn’t mean it’s any less valuable.

What do you think? This is a complicated topic and I’m sure people have different feelings. I can see a lot of gray areas. Is a vacation to Paris museums an education investment? Are tennis lessons an investment?

In the end, I don’t think the characterizations matter. You are the judge of what’s the best value for your money. I find value internally knowing that the money is invested in personal development that matters deeply to us. For a long time, I felt like we should be saving even more in brokerage accounts or wondering why we don’t feel rich. Once I started to think of education spend as investing, my outlook changed dramatically.

Alternative Income Update: June 2019 ($8,527.97)

July 19, 2019 by Lazy Man 1 Comment

I am very late this month in posting the alternative income numbers for June. Usually it takes about a week to get the tenants checks cleared and mortgages paid, but the write up took right up into the weekend before the ~~Black Friday~~ Amazon Prime Day “holiday.”

June was a tremendous financial month for us. That will be the obvious takeaway when you read this alternative update and net worth data at the end.

However, before we get to the boring numbers, I thought I’d give a little breakdown of June. With the kids finishing up kindergarten and pre-kindergarten we had two weeks to fill before the start of summer camp.

We took one week to go our favorite staycation destination, Block Island. It has not only the smallest city in the smallest state, but you have to take a ferry or plane to get there. Unfortunately, it rained most of the time we were there. There isn’t much to do there when it rains. It was still great to get away from the monotony of the homefront.

The second week, I took the kid on a number of adventures. Sometimes it was local errands before their swim class. Other times, we drove the five minutes to the beach. When I was going through the pictures of the month, they were almost all kids from various fairs, bouncey houses, and their first sailing trip. Amazingly, we were still able to sit many dogs.

I’ll mix in some pictures from the month throughout this financial update, because some people find numbers boring. (But not you or you wouldn’t be here!)

If you are a new reader, you’re going to want to refer to my Alternative Income FAQ as you’ll have a lot of questions.

Lazy Man’s Alternative Income – June 2019

I break our alternative income into 3 main sources that are largely represented in the passive income pyramid. I ignore the bottom section of career/job. I combine dog sitting and blogging into one section of “slightly active” income. I leave real estate and investment income as their own separate main souces of passive income.

1. Blogging + Dog Sitting Income

The last month I reported, May, had a 33% drop-off in dog sitting income. I think that was just random bad luck. June jumped backed up to being our second best month of the year. It was second best by a small, small fraction. The summer months are popular when you live in a tourist area.

[The local Navy base was offering free sailing expeditions for military members, so we took advantage. I’ve forgotten a lot about sailing from the summer about 15 years ago. My wife remembered a lot more from her college days. The kids on their first sailing trip got to sail the boat and they loved it.]

Blogging income for June was a record for the year… but just by a tiny bit. Some months advertisers love me. I can’t depend on that, so that’s one reason why it’s great to be diversified across all these income streams.

In May, these combined for a total of $3,428.60. In June, it was:

Total Blogging + Dog Sitting Income: $4,922.97

That’s just a few dollars shy of the highest amount this year. This is really good for having spent nearly a week on vacation and having the kids at home with no school/camp options.

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

2. Rental Property Income

Zillow said our rental properties were worth a few thousand more than last month. As with every month, we paid off a couple thousand of mortgage debt. The combination leads to about $5,000 in equity. It is boring, but in a great, slow, and steady way.

We now have 56.53% of the equity in our properties with a combined rent of $3,325 after insurance, property taxes, condo fees, and estimated maintenance. I like to use that number, because it represents our net gain.

[Annual picture of our labyrinth walk at Block Island. The laybrinth is a circular path you follow that eventually brings you into the center. It’s hard to get a 5 and 6 year old to meditate on life, but fortunately no one else was there so we didn’t bother anyone.]

If you multiply $3,325 by 56.53% you get $1,880 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 29 months, we’ve seen the number grow $706/mo. That’s like giving ourselves an annual $8,472 raise until the end of time from where we were nearly 2.5+ years ago.

As the years march on, the ratio will grow to 100% of the $3,325 monthly inflation-resistant rent. That’s what gets us to that annual $40,000 income I mentioned in the FAQ mentioned at the beginning of the article.

In the previous report, the rental property income was $1,860. This number always moves slowly as it only changes if one of two things happen: 1) The properties go up in value. 2) We charge more for rent. Later this year, we should be able to raise the rents a bit.

Total Rental Property Income: $1,880

3. Dividend Income

For the first time in four months, June was a break-out month for our portfolios. It’s also the first time over that span that the Tariff Man didn’t send the stock markets into shock. Those were just tiny blips on the radar and haven’t hurt the long-term trend yet.

For this section, I generally assume we’ll be able to make a 2.5% dividend yield on our holdings. That could be from a high-dividend ETF or from simply holding strong companies that have a long history of dividend growth. For that we’ll look at making passive income with dividend kings. I’ll get Sure Dividend’s newsletter (this link has a special coupon code if you are interested) to try to get closer to a 4% average dividend yield.

[At the center of the labyrinth was this rock memorializing Scott James Peacock. I don’t know him, except for what was in an unfortunate Google search. However, I can tell you that he was born on my 14th birthday and died on my 11th wedding anniversary.]

With this month’s growth we have a result of:

Total Dividend Income: $1,725

Last month, it was $1,651, so it really was dramatic growth. If we made $1725 every month it would be around $20,000 a year. If our mortgage was paid off, we could probably live off that alone.

Very Close to Passive Income

Our “very close to passive income” is a combination of rental property income and dividend income. If there were some royalty income from books, movies, or music, we’d include that here (but we don’t have that).

The stock market goes up and down fast which makes the dividends calculation fluctuate a bit. The rental property income keeps going up because the mortgages are always getting paid down every month. Unless there’s a housing market crash, this should continue to happen.

[My wife and I like to do a few lunches at the local Castle Hill restaurant. This is the view. If you saw the last season of How I Met Your Mother, the outside pictures of the wedding venue were of Castle Hill.]

Having both types of income working together for us is going great. The diversification gives me great confidence that we’ll be better prepared than most people in the case of an unfortunate event. We’ll still likely get rent checks if the stock market crashes. We’ll still get dividend checks if a tenant is late paying for awhile.

Very Close to Passive Income: $3,604

Last month it was $3,511, so it’s up $93. Another month, another record high. 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 $43,254. 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… and that’s not selling off any stock.

Final Alternative Income

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

June’s Alternative Income: $8,527.97

That’s just about a hundred dollars shy from our record back in May 2017. Sometimes dog sitting doesn’t go great and sometimes blogging doesn’t go great, but growing rental and investment income can cover a lot of the imperfections there. Annualized, the nearly $8528 in monthly income would be $102,335 for a whole year. I have been trying to get this number over $100,000. When everything goes right, like this month, I can get there. However, for the year it looks like we’re closer to landing the $80-85K range.

[With the kids off of school and my flexible work schedule, we got some good beach time in. This is Newport Rhode Island’s famous Easton’s Beach (better known as first beach).]

That largely hypothetical annual income for writing on a blog, taking care of dogs, and investments feels like a dream. In the long term, $80K+ would be a lot more income than we’d need. Here’s what our expenses for the next 45 years looks like.

None of the numbers here include my wife’s bread-winning pharmacist income, her vested military pension (more passive income), or some of the freelance work I’ve been doing over the last year.

As always, I’m still hoping to write a book someday. I’m probably going to tip my toe into self-publishing within the next year. I would love to talk to a real a publisher, but I don’t want to take on the “job” of writing. If you know someone who I could talk to contact me.

Net Worth Update

My net worth updates aren’t very exciting as I don’t share the exact numbers. That’s why it’s just a footnote here.

[Build-A-Bear’s Pay Your Age was a good deal for a 5 and 6 year old. I got lucky to avoid all the add-ons. Just one bear shirt was prices more than both bears. Unfortunately, Pokemon weren’t part of the promotion.]
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. For more full disclosure, I haven’t made a dollar from that suggestion this year so I’m just suggesting it because I’m getting rich off it.

With the stock market and the real estate markets going up, our net worth overall went up 2.54%. For the year it’s up 24.72%. A little more than half of that growth was from a large percentage of that was based on a website sale that I had at the beginning of the year. The rest has been simply investment gains.

I always have to remember that percentages can be weird due to the law of large numbers. Imagine someone with a net worth of $100 finds a $100 bill on the ground. Instantly it doubles his/her 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 ($100,000 gain) than 20% growth of a $100K ($20,000 gain), right?

[We found a Dumb and Dumber truck on Block Island. I guess it travels the country and is a real business.]
There’s a big wild card in calculating our net worth. Now that my wife’s pension is vested, it’s reasonable to ask Should I Include a Pension in Our Net Worth?. I decided that it does make sense to do it. It’s not easy, but I came up with some ways to figure out what a pension is worth. In the end, it seems my wife’s may be worth $2.3 million. However, like all the money mentioned in this article, it isn’t immediately spendable cash.

However, because that would ridiculously dominate our net worth, I think I’ll include it as two separate numbers in our spreadsheet. Since I don’t share the numbers anyway, except for these hints, it shouldn’t matter much.

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

Alternative Income Update: May 2019 ($6,939.60)

June 11, 2019 by Lazy Man 2 Comments

It’s almost the middle of the month, so that means that I have the final alternative income numbers for last month. It can take awhile for the tenants to have their rent checks in and for us to have the mortgages paid.

My Passive Income Pyramid

May was the first month in a long time where I didn’t feel overwhelmed and overbooked. Although that wasn’t true for the beginning of the month. My wife had a week of work travel and we did a lot of cleaning for Mother’s Day.

The kids’ obsession with Pokemon continues in its 11th month. I continue to leverage that to teach them (and myself) new things. For example, they wanted to learn Japanese, and they got a 20-day streak on Duolingo. We’re taking a little break and getting back to our normal bedtime reading of books. I’m still moving forward myself with Japanese with a streak of 40+ days. I’m doing the smallest amount possible each night, so I’m not good at all, but I find it uplifting to see the consistent growth from the steady habit.

I’ll mix in some pictures from the month throughout the financial update, because some people find numbers boring. (But not you or you wouldn’t be here!)

If you are a new reader, you’re going to want to refer to my Alternative Income FAQ as you’ll have a lot of questions.

Lazy Man’s Alternative Income – May 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

The last month I reported, April, had us sitting almost all the dogs imaginable. May was a 33% drop-off, but it was still a top month for the year. That’s because Memorial Day is a big travel day and holiday pay kicks in.

Blogging income for May was significantly below average. For some reason, advertisers stayed away. Maybe it’s the start of the blogging summer slowdown.

Our son’s Kindergarten class had a field trip to a pond to investigate the life in that habitat. Parents were invited and my wife and I made up around a quarter of those attendees.

In April, we were on vacation and these combined for a total of $4,971.13. In May, it was:

Total Blogging + Dog Sitting Income: $3,428.60

I knew I wasn’t going to keep up with the record-breaking April performance, but I’ll take an above average number. It’s still moving in the right direction.

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

2. Rental Property Income

Zillow said our rental properties were worth 1% more than last month. As with every month, we paid off a couple thousand of mortgage debt. It is boring, but in a great, slow and steady way.

We now have 55.93% 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 55.93% you get $1,860 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 28 months, we’ve seen the number grow $686/mo. That’s like giving ourselves an annual $8,232 raise until the end of time from where we were nearly 2.5+ years ago.

A year ago, I had to ask on Twitter what Pokemon was. This month, we went to the premier of Detective Pikachu and brought some friends. I’ve been a fan of the Marvel Cinematic Universe for a long time, but, in my opinion, Detective Pikachu was an objectively better movie than Endgame.

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 $1,835. This number always moves slowly as it only changes if one of two things happen: 1) The properties go up in value. 2) We charge more for rent. Later this year, we should be able to raise the rents a bit.

Total Rental Property Income: $1,860

3. Dividend Income

For the third straight month May did little for our portfolios. For the April report, I took the numbers a little late on May 11th due to the beginning of the month rush. That was after Trump escalated the trade war with China. A few days ago, when it was time to get the numbers for all of May, the Tariff Man was back with Mexico in his sights.

Homemade S’mores aren’t just delicious. They are a reminder that some of life’s best little pleasures can be very cheap. (There’s no hiding the Pokemon shirt. And the shoes are “more comfortable” on the wrong feet.)

These incidents temporarily scared the market, but the timing happened to be when I was taking the numbers. Just how boring were the numbers this month? Take a look:

Total Dividend Income: $1,651

Last month, it was $1,659, so we lost $8 of theoretical monthly money from theoretical dividends. That’s the third month it was between $1650 and $1660 after being up from $1372 earlier this year.

Very Close to Passive Income

Our “very close to passive income” is a combination of rental property income and dividend income. If there were some residual income from books, movies, or music, we’d include that here (but we don’t have that).

The stock market goes up and down fast which makes the dividends calculation fluctuate a bit. The rental property income keeps going up because the mortgages are always getting paid down every month. Unless there’s a housing market crash, this should continue to happen.

The kids’ school had a huge gala outside in a tent. I thought it was incredible, but my wife thought it was just “meh.” It was great to talk with the teachers (and even other parents) in a much more relaxed setting.

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 people in the case of an unfortunate event. We’ll still likely get rent checks if there are futher tariff fears. We’ll still get dividend checks if a tenant is late paying one month.

Very Close to Passive Income: $3,511

Last month it was $3,511, so it’s up $17. 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 $42,128. 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.

Final Alternative Income

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

May’s Alternative Income: $6,939.60

That would be $83,275.20 for a whole year. I had been trying to get this number over $100,000. I made it in the previous report, but it’s dropped back down.

That largely hypothetical annual income for writing on a blog, taking care of dogs, and investments feels a little like a dream. In the long term, that 100K+ would be a lot more income than we’d need. Here’s what our expenses for the next 45 years looks like.

These numbers don’t include any of my wife’s bread-winning pharmacist income, her NOW VESTED military pension or some of the freelance work I’ve been doing over the last several months.

We had our first visit from the tooth fairy this month. It went so well that we had another visit in early June. (Yes that’s Pikachu’s ears on the shirt.)

As always, I’m still hoping to write a book someday. I’m probably going to tip my toe into self-publishing soon. I would love to talk to a real a publisher, but I don’t want to take on the “job” of writing. If you know someone who I could talk to contact me.

Net Worth Update

My net worth updates aren’t very exciting as I don’t share the exact numbers. That’s why it’s just a footnote here.

I truly believe that net worth is one of the most important numbers in personal finance so it is worth sharing in some way. Showing relative growth can be useful, I think? (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. For more full disclosure, I haven’t made a dollar from that suggestion this year.

The stock market was down, but it was just a small amount. Our real estate, including our own home, was up around 1% across the board. Our net worth overall went up 0.73%. For the year it’s up 21.63%, 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 due to the law of large numbers. Imagine someone with a net worth of $100 finds a $100 bill on the ground. Instantly it doubles his/her 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 ($100,000 gain) than 20% growth of a $100K ($20,000 gain), right?

There’s a big wild card in calculating our net worth. Now that my wife’s pension is vested, it’s reasonable to ask Should I Include a Pension in Our Net Worth?. I decided that it does make sense to do it. It’s not easy, but I came up with some ways to figure out what a pension is worth. In the end, it seems my wife’s may be worth $2.3 million. However, like all the money mentioned in this article, it isn’t immediately spendable cash.

However, because that would ridiculously dominate our net worth, I think I’ll include it as two separate numbers in our spreadsheet. Since I don’t share the numbers anyway, except for these hints, it shouldn’t matter much.

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