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Calculating Kids In Your Net Worth

April 1, 2020 by Lazy Man Leave a Comment

A lot of personal finance “gurus” talk about whether kids are expensive. Almost anyway you slice it up, they are. The rare cases I’ve seen when they aren’t expensive is when a family is already financially independent, so a member isn’t working anyway.

Calculating Kids Net Worth — This caricature of my kids probably doesn’t increase their value.

Personal experts agree that for almost everyone, if there isn’t a large direct cost, there’s a large indirect cost. For example, adults have to make sacrifices at work to be there when kids need care. Those sacrifices often come due during performance interviews that determine promotions and/or raises.

Relating it our own experience, kids are expensive. The oldest only eats “prime rib” (his name for any premium steak). I’m to blame for some of the expense because I have a not-so-modest STEM toy addiction. Our biggest expense though is the $250,000 that it will cost to get the two kids through 8th at their private school – and that represents a 50% discount.

If we’re spending all this money, we’re going to have to figure out a way to quantify this investment in our month net worth statements.

Luckily, I have an idea.

Calculating the Value of Your Kids

First, we clearly made a pair of terrible decisions. How can we turn this around? How do we get a return on this investment?

One of the most obvious ways to calculate the value of your kids is to use their value on the black market.

Of course, this wasn’t my idea. It was actually our doctor’s idea. I don’t know if he jokes with everyone this way, but when our first was born, he said that we can get $250,000 on the black market.

Like it or not, I’m going to take his word because I don’t want my Google searches to put me on some kind of list.

Does that mean we can get $250,000 for each of our kids today. No, we’re going to make some adjustments to that.

Almost all buyers are going to want babies more, that’s more time to bond and mold them. Our 6 and 7 year olds may be too attached to us now. They probably wouldn’t latch on to the new family too easily. (Note the use of “probably” – there’s some room for doubt.) However, at 6 and 7 they are potty trained and can get dressed and make their own breakfast. That should count for a lot.

You could also guess that, having invested in their education thus far, they may be able to command some kind of premium on the market. To maximize their value, we’d probably have to get some IQ and neuropsychological testing done. I’m comfortable that would boost their value. We can do some physical testing as well, but neither father nor their mother are considered athletes. I feel like these kinds of tests are either all good (Olympic Athlete), all bad (serious medical condition), or a non-factor (the vast majority).

Just trying balance the two factors is difficult. I think the value of having a fresh baby may be worth more. I have nothing concrete to base this off of. Maybe because puppies are at a premium and older dogs are less likely to get adopted.

One way of balancing those two factors is to split it in the middle – the value, not the kids. (This isn’t a King Solomon story.) If our doctor’s appraisal was on the level, I would guess we could probably still get $200,000 for each child.

Kids aren’t typically viewed as an asset. As my old physics teacher might say, have much more potential earnings than kinetic earnings. Hmmm, maybe he used a different “E” word there.

“E”-words aside, I’m going to have to go with the personal finance experts on this one. It pains me to have to agree with them, but it doesn’t make much sense to include some theoretical (and illegal) value of your kids in your net worth.

Important Disclosure

If you’ve gotten this far in the article, you’ve probably guessed that it was an April Fools’ joke. In fact, the first letter of each paragraph spells out “April Fools Day Joke.” However, the story about the doctor presenting the black market offer is 100% true. To this day, we don’t know if it was his (bad) joke, a test, or something else. Also, the part about spending $250,000 on tuition for two kids through the 8th grade is also true.

There are a lot of articles asking brands not to do April Fools this year due to COVID-19. First, I’ve never considered this blog much of a brand. It’s just one guy typing. I don’t sell a product. I don’t do anything that any traditional business would consider marketing.

Beyond that though, I feel that we need humor more than ever. Obviously COVID-19 is terrible and should be taken seriously. Social distancing is difficult – humor can make it easier. Let’s not COVID-19 ruin all the fun in the world.

Also, I had drafted this idea in late 2019. It was literally the only article I had planned for 2020. It wasn’t created in the time of the COVID-19 being what it is today… and it certainly isn’t related to COVID-19 in any way.

Our Family’s Coronavirus Update

March 16, 2020 by Lazy Man 6 Comments

Every business under the sun is giving a coronavirus update. I don’t want to this to be one of those. Staying home and reading personal finance blogs may be one of the safest things you can do now.

At the same time, everyone is sacraficing for the greater good now. Things are changing so rapidly almost every hour. I said to my wife, “It seems like each city and state is trying to one-up each other with more strict measures… and this is a healthy development!”

There are a few different perspectives in how this immediately impacts our family. Part of the reason I’m writing this here is that it impacts the Lazy Man blog. Another part is that it often just helps to talk to someone (even if it is writing online). If you need that space, feel free to use the comments below.

The Kids

The kids were already on school vacation for the next two weeks. I doubt the school will open then as planned. One grandmother was going to take them for a couple days. I was going to bring them to a children’s museum for a day. I was also going to bring them to my mother’s house who doesn’t get to see them much. That’s all canceled. With the local library closed, the only thing I think we’ll do outside is a hiking area with the dog while the kids play Pokemon Go. They’ll probably ride their bikes a bit too.

Being 6 and 7 years old, they often get in each other’s faces if they don’t have some separated time. That won’t be much of an option. That will be difficult to deal with.

Their private school costs $2200 a month – even if it’s closed. They’ll do some distance learning activities set up by the teachers, but I’ll be doing 90% of the teaching and 100% of the child care with 100% of the fight prevention. I feel like that we’d be losing 90% of the value that we pay for. I’d like to opt-out of the distance learning and grab my own homeschooling curriculum to save the money.

At the same time, I understand that teachers have mortgages and need to make an income too. It’s a difficult situation and I’m not sure there is an easy answer.

My Wife

As a phramacist with the United States Public Health Service (USPHS), she’s on the front lines of this. It was only a couple of weeks ago that she was dinner with the Surgeon General (along with a dozen other USPHS representatives). Things have moved fast, but they haven’t deployed her yet. She may be deployed to help with airport screenings on Tuesday. For now, she can work from home (the office is shut down), which is very helpful.

She’s very excited about the Presidential conference with all her USPHS co-workers at the podium. In 22 years of her being with the service, the work they do has been behind the scenes. It never gets mentioned in the big hurricanes, earthquakes, or ebola outbreaks. Now she’s pumped and ready to kick some coronavirus butt! I want to remind her that this is the administration that has spent three years trying to shut down USPHS. They systematically added new regulations that forced many to take second jobs and maintain fitness levels in off-time (military do it as part of their work day). My wife recently spent three years getting a master’s degree in addition to her Pharm. D. due to new regulations.

They put more effort in the Space Force. That doesn’t look too good now.

She had to cancel her trip to the annual pharmacy conference. That means that she might have to earn continuing education credits some other way. No one is really thinking about that now, but I bet some will be surprised surprised to lose their license later on this year. She’s been trying to get through airlines and hotels for 4-5 days now to cancel and it’s just a busy signal.

Me

I’m very good with the kids. As you can tell from the above, the USPHS has really piled the work on my wife over the last 3-4 years, so I do almost everything with the kids. However, it gets to be too much for me if it’s too long of a time without a break. They never nap and for a long time constantly needed help with stuff.

I often find impossible to get much blogging done with them around. I have no quiet place to focus on writing. The interuptions break up my flow whenever I feel like I’m putting two decent sentences together. However, I’m using this time to teach them how to be more independent. They can get snacks and drinks themselves. They are pros at working the TV and tablets now. Things are a lot better now than they’ve been in the past – as long as I can limit the fighting.

Besides the loss in blogging time (and likely revenue), there’s likely going to be a loss in dog sitting business. Dog sitting income is best when people travel – school vacations, long weekends, and summer. If people don’t travel, they won’t need to book their dogs to stay here.

I also do customer support for a company based out Silicon Valley. They are largely virtual with many international customers. This should continue to be a strong income for the near future.

Losing the majority of two incomes, and having to still pay the school $2200 a month is a big financial blow.

Local Economy

Most businesses are going to suffer for a long time. That’s a given. Everyone’s local economony is going to feel it.

However, our area, Newport, Rhode Island is a tourist town. They do 75-80% of the year’s business in the summer restaurant and hotel industry. If there’s a rainy Memorial Day weekend, restuarants close forever. That’s not an exaggeration.

Maybe it could be worse. Maybe our city could be where they build cruise ships. It’s very close to the worst situation many could imagine for businesses.

Final Thoughts

This is a not an easy time for anyone. There are certainly people who have it a lot worse than us. People who have tested positive. People have family members who tested positive. Families who rely on day care to bring in a single income and are looking at losing both. It’s impossible to enumerate them all, so it’s hardly worth trying.

We’ll lose some significant income sitting dogs. We’ll do more supporting of great teachers and the local economony than we may get back in return. We’ll lose a significant amount of money in the stock market. However, the key to all that is that it’s all just money. Because I’ve been writing about money and managing it for so long, these aren’t completely and forever life-changing. In the the grand scheme of things, as long as we can healthy we’ll be fine.

As for the blog, I’ll continue to do my best to keep it updated with the most relevant information. Today’s update about our family was necessary, because this blog is about our money journey and this is certainly part of that. However, I’m committed to helping you with your money journey.

I know a lot of parents are being put in difficult situations. Losing day care and staying home to educate kids isn’t easy. I need mental health breaks. You need mental breaks. The kids need to relax and have a little fun too.

Fortunately, I have a couple of articles that can help do all that for you, while keeping the kids learning:

There’s the best educational streaming shows for preschoolers. This isn’t meant to replace an educational curriculum, but these shows can give everyone a break.
If you have Hulu, you can stream multiple Teen Titans Go! episodes about money: 401ks, compound interest, landlording, currencies, and pyramid schemes. I suggest some parental guidance with this show as it’s for older children. However, it’s rare for a kids’ show to introduce the topic of a 401k or compound interest and give you something to build a discussion on… all while making it hilarious.

If you know someone who is staying at home with their kids’ school closed, maybe send them one of those articles. It could be the lifeline they need to get a little sanity back.

Alternative Income Update: December 2019 ($7,503.87)

January 16, 2020 by Lazy Man Leave a Comment

This is Samsung augmented reality emoji me.

We’re well into 2020, but I have to take one last look at 2019 to close it out. It always takes some time to get the final numbers together, especially when a tenant puts her rent check in the mail on the 11th. Usually, I can get this report together a little earlier, but at day 16, we’re having arguably our second day of health this year in the family. We’ve already been to the hospital 3 times, which was about 2 more times than 2019.

I’m sure that December is a busy month for everyone. For us, it’s no exception. My wife’s birthday starts the month and the rest of family’s follows. With the holidays happening in the middle of the week this year, it seemed like all the time before and after were days off. By the time everything was done, it seemed like the entire month was one week. And of course that week I had a mental breakdown. All this means that I have more pictures than usual this month.

That’s enough lead-in… let’s get to the Alternative Income report. I’ll mix in some personal 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 likely have a lot of questions. They way I calculate these numbers does require some explanation.

Lazy Man’s Alternative Income – Novemeber 2019

I categorize our alternative income into 3 main sources that are largely represented in my passive income pyramid. I ignore the bottom section of career/job – that’s not passive or alternative. 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 sources of very passive income.

1. Blogging + Dog Sitting Income

The last month I reported, November, was the worst blogging and dog sitting month I’ve had since the start of the year. We traveled to Aruba and didn’t take dogs over Thanksgiving – one of the busiest dog sitting times.

December’s dog sitting was simply below average. I’ll take it because it was much, much better than November.

Wife’s birthday brunch at Castle Hill, the fanciest place in Newport. The kids almost behaved themselves thanks to chocolate chip pancakes

Blogging income for December rebounded as well and was just slightly below average for the year. Part of me feels like it should be easy to make money as the end of the year has a rush of advertisers spending money. Another part of me is realistic that website traffic takes a nosedive because people are living their very busy lives.

In November, these combined for a total of $1,570.39. In December, it was:

Total Blogging + Dog Sitting Income: $2,605.87

I’ll take the thousand dollar rebound. It brings things closer to the average that I expect. This kind of income jumps all over the place, which is why I include a 3-month average (in red) in the chart below.

2. Rental Property Income

Zillow estimated our rental properties were worth a little more than last month. We saw a lot of appreciation in 2019 – about 10%. As with every month, we paid off a few thousand dollars of mortgage debt.

Santa Boat Family — Rare picture of the whole family waiting for Santa to arrive on his boat to light up the city’s Christmas Tree

We now have 60.20% of the equity in our properties with a combined rent of $3,325 after insurance, property taxes, condo fees, and estimated maintenance. I use that number because it represents our net gain. Very soon, I’ll need to update that number since we get more in rent now… but the condo fees are more.

If you multiply $3,325 by 60.20% you get $2,002 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 35 months, we’ve seen the number grow $828/mo. That’s like giving ourselves an annual $9,936 raise until the end of time from where we were nearly 3 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 above.

Christmas Tree Kids — I didn’t have to put the Christmas Tree together this year. Big win!

In the previous report, the rental property income was $1,983. 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. We had a change of tenant and raised rates, but I need to do the math to see if the $3,325 number is still accurate. To come up with that number, I make some assumptions in estimating after insurance, property taxes, condo fees, and estimated maintenance.

Total Rental Property Income: $2,002

3. Dividend Income

The stocks markets have been doing so well that even my wife has noticed. That has happened only about 3 times in the decade… and the stock markets had done very well overall. However, by the time was all said and done our investments were worth almost exactly what they were the month before. Of course we all knew the end of the year was going to do well. It certainly feels like the markets went up at least the 5% that was predicted.

Space Saving Bed — In my wife’s family, there’s a tradition of getting a bed for Christmas. Youngest loved this from Ikea. Play/storage space underneath!

For this section, I assume we will earn 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. If I wanted to simply retire on this dividend income, I would get Sure Dividend’s newsletter to try to get closer to a 4% average dividend yield. That link to the newsletter has a special discount rate and in full disclosure I make a few dollars if you sign up for it.

In December, we continued to get a profit sharing check since I bought (a lot of) a company. This investment income is essentially the same as dividend income. It is taxed differently, but for the purposes of this report, it makes sense to group together all stock ownership in this bucket.

Total Dividend-ish Income: $2,896.00

Last month, it was $2,813. So at $2,896, we’ve got a huge jump of $83. The stock market continues to hit new highs all the time. This can’t continue forever, but I’ll enjoy it while it lasts.

Castle Tiles — We’re saving up for architecture school. I hope MIT is cheap in 2030

Annualized, this is $34,755. If our mortgage was paid off, this could cover all our necessary expenses by itself. Of course, because most of our investments are in retirement accounts, we can’t use this income for now. We’ll let continue to compound for at least another 15 years, but hopefully a lot longer.

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 my rockstar career hasn’t taken off yet).

Age Six — Me and my son at age 6. Our turtles could be twins.

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.

I love having both types of income working together for us. I think everyone in FIRE should have stocks and real estate income streams. The diversification gives me great confidence that we’ll be better prepared than most people in the case of an unfortunate economic 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. Of course a bad economy may impact both at the same time, but that’s what an emergency fund is for.

Christmas Eve Story Time — The kids read me a story on Christmas Eve before going to bed. I hope my wife didn’t pay too much for the matching pajamas that they’ll wear only a few times.

Very Close to Passive Income: $4,898

Last month it was $4,796, so it’s up $102. Most good months, this goes up $15-$30 a month. This is a huge, huge jump, especially in terms of passive income. I started Lazy Man and Money with the tagline of “Making my money work, so I don’t have to” and it is working overtime. A passive income of $58,773 is incredible. It’s about double what I estimate we’d need to live on.

This very close to passive income has grown from $2,354 in January 2017 – or an annual income of $28,252. It’s worth noting that, once again, these are fudged numbers that aren’t “real” yet. However, I’m looking forward to 7 years from now when the mortgages on the investment properties (and our primary residence) are paid off. Add in stock market growth (of a conservative 4%) and this number could be real, non-fudged $100K/year.

Final Alternative Income

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

Alternative Income: $7,503.87

In November it was $6,366.39, so this is a solid step forward. Annualized, the $7,503.87 in monthly income is $90,046.44. I have been trying to get this number consistently over $100,000. It didn’t happen in 2019, but it’s great upward momentum heading into 2020.

That largely hypothetical annual income for writing on a blog, taking care of dogs, and investments feels like a dream. In the long term, $90K+ would be a lot more income than we’d need. Here’s what our necessary expenses look like… for the next 45 years. You never know what bad news is lurking around the corner, but this gives us the financial flexibility to fight it.

Osmo Coding Awbie — Kids working together to learn coding with Osmo Awbie.

None of the numbers here include my wife’s bread-winning pharmacist income, her vested military pension (more passive income), or the freelance work I’ve been doing over the last year (which isn’t passive at all). That’s the fuel that drives the passive income engine.

As always, I’m still hoping to write a book someday – just to add some more passive-ish income. I may tip my toe into self-publishing sometime next year. I would love to talk to a real a publisher, but I don’t want to take on the “job” of writing. That’s probably a deal breaker. 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.

Our net worth jumped 2.73% for the month. The stock market has been hitting new highs almost every day. For the 3rd or 4th months, Zillow gave our primary residence a big boost in value. After years of it feeling vastly undervalued to other areas locally, we’re starting see the gap close. Our primary residence has jumped over 11% for the year and about 6% in the last few months. Some people don’t count primary residence value much in net worth, but I believe it has value. We can always downsize or move to a cheaper place and pocket the difference.

My 7 year old learns the LOGO programming language with Artie 3000

Over the entire year our net worth is up 34.49%. That’s clearly banana pants crazy. At that rate we’d double our net worth every 2 years (rule of 69). And in fewer than 20 years, we’d be billionaires. These years are rare, so I’ll take it for what it is. Also, at age 43, I’m expecting to live long enough to witness more than a few crashes. When those crashes come, please remind me about 2019.

I feel it’s important to acknowledge that everyone is in a different place in their financial journey. I’ve been blogging about personal finance for 13 years. FIRE wasn’t a thing back then, but it’s in the news all the time now. We naturally may be further along in that journey than some younger readers who may be beginning their journey. Don’t be discouraged by some of the numbers above if you are just starting out. Pleaes try to use it as motivation for what may be possible (depending on your circumstances). I had a number of years where I was ecstatic simply to save for retirement. May the markets be forever in your favor (ummm… maybe not the best reference).

There’s a big wild card in calculating our net worth. Now that my wife’s pension is vested, it’s reasonable to ask whether to include a pension in your net worth. I decided that it does make sense to include it. She could have earned more direct monetary compensation if she didn’t work for the government. That would have boosted all the numbers across the board. Calculating pension value is not easy, but here’s the best way to know what a pension is worth. In the end, it seems my wife’s pension may be worth $2.28 million. However, like most of the money mentioned in this article, this isn’t money we can spend.

Because the pension would ridiculously dominate our net worth, I’ll note two separate numbers in my internal spreadsheet. I don’t share the numbers anyway, aside from these hints, so I don’t think it should matter much to you. It’s not like I’m suggesting that you might want to make financial based on a pension.

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

Tough One to Hit Publish On

December 20, 2019 by Lazy Man 19 Comments

So it’s that time of year when everyone is happy about the holidays. Or at least they are able to put on the appearances of being happy. I wonder if the reality is more like this SNL skit:

The kids’ school does a lot of extra events this time of year, so the schedule is helter skelter, “Pick up kids early, drop them off in pajamas, have a special snack prepared, bring ingredients for ginderbread house making.” That’s just a few of the things. Yesterday there was a school play which required the kids get in “special dress” and the result was similar to this SNL skit from this weekend:

Since school is dismissing early my wife came up with a good idea to invite some of the kids’ school friends over for lunch and a play date. We’ve been missing the social connection (her especially, I think), so I figure that this would be a good idea. Unfortunately, our lives are pretty hectic (isn’t everyone’s?) so the house has a billion half-finished projects and we’re overwhelmed with clutter and toys. (In fairness, my STEM toy addiction probably hasn’t made matters better.) We’ve got so many toys that the kids don’t even play with their brand new Nintendo Switch that they saved up for. It’s only going to get worse as I kept finding deals throughout the holiday season.

The biggest thing that is going on with me is that I think I’m just depressed. It’s hard to write that and we’ll see if I hit the publish button. The combination of the short days of the year and it being 15 degrees is simply not a good mix for me. It’s probably some kind of S.A.D. (seasonal affective disorder). I don’t want to leave the house or walk the dog or any of the things that would probably be healthy.

Behind the scenes, we have a condo turnover that is just terrible. It’s hard when people move out in November or December in cold states. No one wants to move. We’ve lowered the price, but the real estate agent keeps on asking us to do more and more work. It’s getting to be too much deal with contractor after contractor. With it being a couple of months now (and probably more without a Christmas miracle), it’s hard to pour more money into it.

I’ve had a difficult time online as well – and almost everything I do is online. I had this great idea to review every year of the decade. That kind of article takes 8-10 hours minimum, which is hard to put together. I’m not sure if people get value from it, because few people leave comments on blogs any more. I think it’s just the nature of their being so much content out there that no one has the time to read it all and comment. Everyone else has their own endless todo list, right?

The online income isn’t getting better (which makes sense, because I have less time to blog), but when it does come, it comes with maddening invoicing instructions. It used to be that everyone put an email address and an amount in Paypal and it was done in 30 seconds. I spent nearly half a day with one client after they were making so many changes and special requests, I was wondering they ever intended to pay me at all.

I’m certainly not being helped by the news cycle. I don’t go into politics here very often, but I’ve been transparent about which side I’m on now that the chasm has grown so far apart. I find it difficult to root for someone whose platform of bullying and helping foreign interests is put ahead of America and real problems like student loans, healthcare costs, and climate change. I grew only more sad watching the democratic debate last night and thinking, “It’s a shame that we can’t have any of these intelligent, articulate leaders representing our country.

Usually, I have a few safe havens, like being able to celebrate the Patriots’ success. However, they haven’t had their success (despite the great record) or late. They are banged up and don’t seem to have the offensive talent any more. And to make things worse the local news is buzzing about taping issue with the general conscious seeming to be that because they were deemed guilty before, they’ll be deemed even more guilty now. I’m sure no one would have any sympathy for a Patriots’ fan (nor should they), but it was a constant source of good online news for me for a long time now.

This is also one of the busiest times for my wife. She’s got to file for military promotion. She compares to doing college applications, but in this case, there’s one school – Harvard. So you better have cured cancer in the last year, or the promotion isn’t happening. Even if you did, you better cross every “t” and dot every “i” and make sure all 74 of your bosses signed off on it and wrote a glowing 10 page review. Then you’ll have checked off one of the 5 or 6 areas that they judge.

Personally, I don’t if she should ever even try, but if you fall at the bottom of list, you could get discharged. It sounds like a more and more competitive rat race, and I think she’s at the point where it’s just not worth running it any more.

I don’t know what the end take-away is from all this. I think most of it is temporary and may just be in my head. One of the things that helped was just writing up. I know that a lot of other people are feeling it too. In the grand scheme of things these may be small potatoes in comparison. I think there will be some natural time off with the Christmas holiday and then things on this blog will hopefully pick up before the New Year.

Alternative Income Update: November 2019 ($6,366.39)

January 8, 2020 by Lazy Man 4 Comments

The decade is rapidly coming to a close. After this month’s report, I’ll have just one more, coming after the new year.

November started with a great friends’ son’s Bar Mitzvah party. Before the party started, my wife and I spotted Massachusetts Senator Ed Markey in the lobby of the hotel we were staying at. The party was even more interesting. There was a moment (which I can’t tell you about in full detail) that was about as jaw-dropping as Taylor Swift writing a custom song to congratulate the young man. Everyone in the audience was like, “Did we really see what we think we saw? That couldn’t have been real?” It was.

My wife took some time away with her friends over Veterans Day. That left me with the kids for a couple of days. They got to explore their first computer (a Kano that they built – pictures below). We had Happy Meals and Applebees dinners. We put together Pokemon Mega Construx. We watched classic Japanese Anime (My Neighbor Tortoro). We visited a nearly 100 year old tower that is a national landmark (also pictures below). We did a lot more as I tried to cram everything I could into the weekend.

November was also eventful because we vacationed in Aruba, using the timeshare that my wife bought long, long ago.

We originally booked the trip around Thanksgiving to limit the days the kids miss at school, but flights got too expensive. It was around $2000 more. We changed our trip go from Wednesday to Wednesday to save a lot of money. It’s probably obvious to nearly every reader that Thanksgiving travel is more expensive. We’ve never done it, so it didn’t occur to us. We are learning all the time.

We closed out the month with a Thanksgiving dinner with family… and me spending way too much money on Black Friday/Cyber Monday shopping.

That’s enough lead-in… let’s get to the Alternative Income report. 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!) Usually, I have more pictures, but it was a light month with not a lot of variety.

If you are a new reader, you’re going to want to refer to my Alternative Income FAQ as you’ll likely have a lot of questions. They way I calculate these numbers does require some explanation.

Lazy Man’s Alternative Income – November 2019

1. Blogging + Dog Sitting Income

The last month I reported, October, was the worst blogging and dog sitting month I’ve had since the start of the year. Between the start of school, my travel for FinCon, my wife’s travel for work, we were busy.

November’s dog sitting was terrible – far, far below what it usually is. Last year’s November was one of our best months due to a busy Thanksgiving holiday. This year, we were traveling, so we missed almost the month’s entire business.

Blogging income for November was also down, but just a tiny bit. I can’t complain because it seems like half the month was preparing for vacation, having vacation, or recovering from vacation.

In October, these combined for a total of $2,476.44. In November, it was:

Total Blogging + Dog Sitting Income: $1,570.39

Romantic Pool — We found an AirBnb to extend our stay in Aruba – $140 a night to share this pool, but we were only ones for a couple of nights.

The months of June and July at $5000 are looking really good now. Fortunately December is looking better. We’ll have to see how it ends up though, because I’m not sure if we’ll sit dogs over Christmas and I know Internet traffic will be down then.

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 less than last month. We’ve seen a lot of appreciation this year, so it’s not surprising to give back some of those gains. As with every month, we paid off a few thousand dollars of mortgage debt. That helped us keep about the same of equity.

We now have 59.65% of the equity in our properties with a combined rent of $3,325 after insurance, property taxes, condo fees, and estimated maintenance. I use that number because it represents our net gain.

If you multiply $3,325 by 59.65% you get $1,983 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 34 months, we’ve seen the number grow $809/mo. That’s like giving ourselves an annual $9,708 raise until the end of time from where we were nearly 3 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.

Kids Pool — The kids love this cave at the hotel pool in Aruba

In the previous report, the rental property income was $1,978. 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. We’ve got a change of tenant soon, and we’ll be raising rents to match that. In January, I’ll revisit all the assumptions that go into that $3,325 estimate after insurance, property taxes, condo fees, and estimated maintenance.

Total Rental Property Income: $1,983

3. Dividend Income

The stocks markets have been pretty volatile over the last month. However, by the time was all said and done our investments were worth almost exactly what they were the month before.

For this section, I assume we will earn 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.

In November, we continued to get a profit sharing check since I bought (a lot of) a company. This investment income is essentially the same as dividend income. It is taxed differently, but for the purposes of this report, it makes sense to group together all stock ownership in this bucket.

Total Dividend Income: $2,813.00

Last month, it was $2,789. So at $2813, we’ve got a modest jump of $24. The stock market seems to hit new highs all the time. I was briefly scared that the Tariff Man was going to temporarily torpedo this report like he did 4-5 times before this year. Fortunately, things recovered quickly and so far the tariff stuff has just been temporary fluctuations.

Romantic Dinner — My wife and I enjoyed our romantic dinner at Papamiento in Aruba

If this stayed steady it would be $33,756 in investment income a year. If our mortgage was paid off, this may cover our necessary expenses alone. Of course, because most of our investments are in retirement accounts, we can’t simply use this income right now. It will have to keep on compounding another 15 years or so.

Very Close to Passive Income

It is great to have both types of income working together for us. The diversification gives me great confidence that we’ll be better prepared than most people in the case of an unfortunate economic 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. Of course a bad economy may impact both at the same time, but that’s what an emergency fund is for.

Very Close to Passive Income: $4,796

Last month it was $3,767, so it’s up $32. That may not seem like much, but slow and steay wins the race. That $32 erases some of our smaller bills. This passive income now consistently over the average of my dog sitting and blogging. That’s the goal as more and more income moves to the top of the passive income pyramid. However, it would be better if dog sitting and blogging challenged it more.

Kids Castle — This local tower is open only once a year (on Veteran’s Day), so of course we had to climb it.

This very close to passive income has grown from $2,354 in January 2017 – or an annual income of $28,252. Our passive income is now more than double that at $57,522. It’s worth noting that, once again, these are fudged numbers that aren’t “real” yet. However, I’m looking forward to 8 years from now when the mortgages on the investment properties (and our primary residence) are paid off. Add in stock market growth (of a conservative 4%) and this number should be real/non-fudged $100K/year.

Final Alternative Income

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

November’s Alternative Income: $6,366.39

In October it was nearly $7250, so this is a step backwards. Annualized, the $6,366.39 in monthly income would be $76,396.66. I have been trying to get this number consistently over $100,000. It doesn’t look it’s going to happen this year. If I can finish above $80K, I’ll consider that a win. It’s going to be close and perhaps come down to the last month. Maybe 2020 is the year I can get that average over $100,000.

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 necessary expenses for the next 45 years roughly look like.

Kano Computer — Kano, kids, and command lines. This is a good first computer to play with.

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.

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 not just suggesting it because I’m getting rich off it.

Our net worth jumped 1.21%. The big reason? The stock market has been hitting new highs almost every day. Also, Zillow gave our primary residence a big boost in value. If that sounds familiar, that was exactly the same reason last month. Our primary residence has jumped 5% in the last couple of months. Some people don’t count primary residence value much in net worth, but I believe it has value. We can always downsize or move to a cheaper place and pocket the difference and get real cash.

Over the entire year our net worth is up 30.92%, which is crazy. At that rate we’d nearly double our net worth every 2.5 years. And in 25 years, we’d be billionaires. This is probably a once-in-a-lifetime year though. Also, at age 43, I’m expecting to live long enough to witness more than a few crashes. When those crashes come, please remind me about 2019.

Finally, it’s important to remember that everyone is in a different place in their financial journey. I’ve been blogging about personal finance for 13 years. We naturally may be further along in that journey than some younger readers who may be beginning their journey. Don’t be discouraged by some of the numbers above if you are just starting out. Use it as motivation for what may be possible (depending on your circumstances).

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 most of the money mentioned in this article, it isn’t immediately spendable cash.

That pension would ridiculously dominate our net worth, so I’ll note two separate numbers in my internal spreadsheet. Since I don’t share the numbers anyway, except for these hints, it shouldn’t matter much to you.

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