It’s almost the middle of the month. That means that I have the final numbers on December 2018 alternative income. I always wait a few days because tenant checks are coming in and we are paying off mortgages at the start of the month. With the money passing back and forth, it’s easiest to let everything settle.

January was a difficult for me, but a lot of other people had it worse. The government shutdown hit almost all of my wife’s peers, but she wasn’t affected. A natural gas malfunction/shortage/scandal/investigation left thousands of families in the our town and a surrounding town without heat, but we weren’t affected by it (other than the kids’ school being closed). I was fighting through some of the final legal paperwork on a lawsuit that I won which I had thought was in the past.

There were plenty of good times in January too. My youngest turned 5 and had a birthday party. The kids had their last ice skating lesson. They decided that ice skating wasn’t for them. (I think they were tired of the lessons and needed a little more free skating, which we’ll try.) I legally gambled on sports and won $115 over the last two Patriots games. The boys discovered that they like going bowling at the local military base. It’s a great, frugal activity that’s fun for the whole family.

While I didn’t formally make any resolutions this year, I’ve started to eat a little healthier. I haven’t had the best diet for a long time, so I’m trying to take baby steps and build on it. So far it’s working. I’m hoping to get my yearly goals out this week. I’m still trying to sort out what reasonably possible in the time I have available. We’ll get to that in a little bit.

Finally, when the school was closed, I got to put together a whole homeschool curriculum using all the learning tools we have. We did a fair amount of Osmo Genius Kit, which is probably the best value we’ve gotten from any toy (except for a cardboard box). I also had real instruction time and we took breaks to watch the old Schoolhouse Rock on TV… just to keep it fresh. One of the benefits of being self-employed is that when there is a problem like school being closed, it’s not a huge problem.

I’ll be randomly inserting some pictures from the past month.

Regular readers probably know that I use 90% of last month’s Alternative Income article to make this one. Someday, I hope to separate the most of the explanations to a FAQ and then just give you the new details.

Before we get started, there’s a surprise update near the bottom of this article.

Alternative Income Update: January 2019

For those that don’t know the term, “alternative income”, I started using it around 13 years ago to be purposely vague. I needed something to cover the small amount of blogging income I was making, while I growing my peer-to-peer lending portfolio as an income stream. (The P2P worked for a bit, but I’ve soured on it over the last few years.) Blogging income can be very erratic, but there’s a residual nature to it as well. I think alternative income was more passive back in 2007 before social media, podcasting, and video. Today it seems like every blogger talks of hustling (as in moving quickly, not grifting people) and by that they mean “being everywhere.” I feel like the only one dumb enough to just keep writing blog posts… blog posts that often don’t have cool “pinnable” images.

In general, I call alternative income everything that comes from passive investment and these side hustles. The best way to think of it is income where you aren’t directly trading your time for money. I think you’ll get the idea as we go along. It’s very subjective though, so your view of alternative income may be very different than mine.

To include my investments into this paradigm, I have to fudge the numbers a bit. You’ll see what I mean as we go along… or you can see a more detailed explanation back in January, 2017.

The last month I reported, December 2018, my alternative income added up to $5,505.44. That was a particularly week month since half of it was consumed by a vacation to Aruba, the holidays, and a home renovation.

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

Lazy Man’s Alternative Income – January 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

My “real world” friends have asked me, “What do you do?” I’m not a fan of the question… because it’s simply rude. I feel it’s used to size up or pigeonhole someone. My responses of “software engineer” has received very differently reactions than “dog sitter.” Nonetheless, some response is required. I rotate among all the things that I do. What are those things?

I suppose the best answer is that I’m a stay-at-home dad. The kids go to school for about 8 hours a day during the week. My “non-Dad stuff” is 40 hours a week. That gives me time to do some basic family errands (shopping, cooking, dishes, laundry, walking my own dog, etc.) and dog sitting and blogging fills in the gaps. Over the last several months, I’ve taken two extra paying side gigs. I’m a blog editor for one company and a customer support representative for a different company. That might seem like a demotion from my software engineering days, but the hours are flexible and the pay is good. With these two jobs, it’s certainly easier to convince people that I “work.”

If you want a very short list of what I’m doing check out my “Now” page.

At blogging conventions a popular question is “Are you a full-time blogger?” I say yes, but then explain that I spend very few hours blogging. I don’t think most people grasp the concept of not having a full-time job, but still having a full slate of activity. Even before the new contract jobs, I was doing much, much more than I ever did at a full-time job. I think everyone assumes that Boss Lazy Man will tell Employee Lazy Man to take the day off from the blog to do non-blogging stuff. That’s not really how it works. People with standard jobs have a lot of insulation where they can say, “See, my boss says that I’m not available.”

I apologize for the soapboxing.

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. And both are impacted by how much time I spend on the contract side gigs which varies month-to-month.

You may be asking right now, “Isn’t alternative income about NOT trading time for money?” Isn’t dog sitting and blogging TRADING time for money? That’s a solid point. However, I don’t do it directly. Let me explain:

Sitting dogs itself isn’t a time-intensive job… at least with the number of dogs I typically have. However, there is considerably more overhead than you might think between booking dogs and meeting dogs for suitability. The important differentiation with dog sitting is that I can “double-dip” and earn money from another side hustle, such as blogging, at the same time. It’s very different than being an Uber driver. The police tend to frown on blogging and driving.

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

Blogging is usually much more time-intensive than sitting dogs. (The busy summer months are the exception). However, it isn’t directly trading time for money either. If I write an article for the blog today (such as this one!), I don’t necessarily get any significant money for it. The money I make from blogging now is a direct result of having built a reputation and a collection of nearly 2500 articles over 13 years of blogging.

January’s dog sitting was half of the average of 2018. Ouch. There aren’t a lot of travel days in January. We just had a few of our regular clients take a long weekend here and there.

Blogging income in January was so bad that it would have been the worst month of 2018. With all the other stuff going on, I didn’t write very much.

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.

In December, these two categories combined for a total of $2,368.44, a very low number due to travel and holidays. In January, it was:

Total Blogging + Dog Sitting Income: $1,806.23

Yikes! Bad blogging income + bad dog sitting income adds up to a bad alternative income month.

That would be the lowest in all of 2018. That might be depressing, but I have three reasons to be happy:

1. February has been going well at least for dog sitting so far. I haven’t looked at blogging yet.
2. Nearly $2000 a month from my 3rd priority (after family flexibility and the contract side gigs) isn’t bad at all.
3. The surprise news at the bottom.

2. Rental Property Income

Here is where I need to fudge the numbers. Sorry, but it’s necessary.

We have three rental properties in our real estate accidental “empire”. (“Empire” is in quotes for a reason – it is a joke.) They are all on 15-year fixed mortgages. This means that we don’t make money on them now, but we are paying down those mortgages more quickly than most people. In 9 years, we should be able to collect an estimated income of $40,000 a year (in today’s dollars, after expenses) on them.

So here’s why I have to fudge the numbers. For the purposes of this report, it doesn’t make sense to count the properties as zero income. I don’t want this report to push me towards a bad decision. It might make me sell them and invest the money differently just to make the numbers look better. For example, if someone offered you a million dollars in 10 years or $10 per year right now, you’d wait for the million (I hope). However, for this report, the $10 per year would give you better numbers.

It’s an extreme example, but it shows how sometimes the short-term plan is the enemy of the long-term plan.

Here’s how I’ve decided to fudge the numbers.

I add up all the properties’ equity and estimated value. Zillow is very accurate for these condos – it has a lot of data points to work with. Next I calculate an equity-to-value ratio. In short, this is the percentage of the property value that we own vs. the bank. Then I calculate the rents of all the properties as if they were owned free and clear. Thus we can say that we are “banking” (in a completely fudgey sense) a percentage of the rent that we would expect to have in the future. Since rents are typically rise in line with inflation over the long term, we don’t have to adjust the numbers.

If you are confused (and you probably are), this article on calculating cash flow of cash flowless real estate explains it in more detail… $40,000 now will be $80,000 in the future, but still have roughly the same $40,000 buying power of today.

Here are the numbers for January. We have 53.84% 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 53.84% you get $1,790 in “fudged” 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 24 months, we’ve seen the number grow $616/mo. That’s like giving ourselves an annual $7,392 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 above.

In the previous report, the rental property income was $1,765. This number usually moves slowly and the $35 increase this month is huge. This number only changes if one of two things happen: 1) The properties go up in value. 2) We charge more for rent. I don’t control the housing market. Tenants are typically locked in for at least a year. The monthly paying down of the mortgages creates some equity each month. We typically gain $22,000 in equity from just the tenants paying down the mortgages. In January we saw the property values go up giving us most of the big boost.

Total Rental Property Income: $1,790

3. Dividend Income

Like the rental property “income”, I’m going to play a game with the numbers. You can decide if the game is fair. I always appreciate comments!

We don’t focus on putting our money in dividend stocks, but I’m going to imagine that we do for sake of this exercise. In reality we a vast majority in index funds, but I do some stock picking with a small percentage of our portfolio. Though the index funds do pay dividends, it’s not their core goal. I’m also fudging the numbers in another way. The money I’m referring to here is in our retirement accounts, so it isn’t something that we would tap as “income.”

Even though all this money is in retirement accounts, we could pull the money out and use it. We’d get tax penalties so we won’t do that. However, like the mortgages on the rental property, there’s real value here that I feel should be accounted for. My goal here is to capture the nearly 20 years of mostly maxing out retirement contributions.

Just like the rental income, we can pretend what the portfolio would earn if we moved all the money into dividend stocks or indexes. For the sake of pretending, I estimated that we could earn 2.50% in dividends. Most people estimate a 4% safe withdrawal rate, but withdrawal is not our plan here. We are only thinking about the cash that these investments could yield to pay for our living expenses.

January was a great month for our portfolios. After 4 months of seeing the stock market bring our portfolio down, it turned around in a big way.

Total Dividend Income: $1,478

Last month, it was $1372, so we gained $106 of theoretical monthly money from theoretical dividends. We aren’t far from the highs of middle of last year. I don’t have high expectations for the stock market this year, so we’ll see how it goes. Fortunately, we should be able to grow this a good amount this year. (That’s foreshadowing to the surprise news at the bottom.)

Very Close to Passive Income

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

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

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

At the start of last year dividends and rental income were almost the same. By the end, rental property income bolted $393 ahead of the stock market income. While real estate decisively won the battle in 2018, the dividends are doing better in 2019. That $393 difference has been cut down to $312 in just one month.

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. In any case, I like having both of them working for us.

December’s Very Close to Passive Income: $3,269

Last month it was $3,137, so it’s up $132. That’s an all-time 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 $39,223. 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 a year or more.

I have ignored some minor (but important) details. Details such as our investments being in retirement accounts and paying taxes.

Final Alternative Income

Adding up “dogs and blogs” to the “very close to passive income”, this month we on the investment stuff had $5,074.23 in monthly “alternative” income. That would be $60,890.76 a year. Last year it averaged almost exactly $75,000. The lack of blogging income and dog sitting really hurt the projections. Fortunately, that’s looking a little better for February.

That largely hypothetical ~$60K a year on investments, writing on a blog, and taking care of dogs feels a little like a dream (probably because it is). In the long term, we can get by on less than half of that income. That doesn’t include any of my wife’s bread-winning pharmacist income, her potential military pension if she retires next year, or any of that freelance work I’ve been doing over the last several months.

This is the part of the article where I mention that I’m still hoping to write a book to boost my alternative income. I had always planned it to be an eBook, but if any readers out there know a publisher, I’d appreciate the hook-up. Seriously… it seems everyone in personal finance is getting a book deal except for me. I think I can make a compelling argument for a book that you’d see in a bookstore… that is if bookstores still exist by the time I’m done writing it.

Net Worth Update

Normally, this isn’t very exciting as I don’t share the exact numbers of our net worth. However, this is where I have that surprise that I mentioned above. But first… I’m going to tease you a little longer.

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.

At the beginning of the month, I sold a website (no, not this one) for a significant gain.

As a result of that, a strong investment market, and some checks from my freelancing gigs, our net worth went up 14.88% in January! Sometimes it’s hard to find that kind of gain in a whole year.

Right now the cash from the sale isn’t invested very well. It’s just in a money market fund. I’m going to be working on that throughout the month. As the money gets invested better, I’ll count it in the theoretical dividends number and we’ll see a boost there..

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?

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

It’s past the middle of the month. That means that I am very late in presenting the final numbers on December 2018.

Was December even a month? It certainly didn’t feel like it. December always seems to fly by because the last 10 days are a wash with Christmas and New Years. This year we went on our annual vacation to Aruba on the 15th, coming back on the 22nd. On the 26th we started a fairly major home renovation. So as far as productive “work” went, it was literally half a month. Subtract out the time to pack for the trip, shop for Christmas, wrap, and get everything else done for the holidays (we hosted a small Christmas at our house), it was closer to 10 working days.

I can’t tell if I’m complaining about it or not, so I don’t know what you must think. I suppose I’m complaining about the rush of everything. However, what’s not to like about a week in Aruba and seeing the joy of your 5 and 6 year old open up their presents. This year, we probably try to do the vacation another time.

I’ll be randomly adding other personal family events throughout. This way you can choose what’s more boring: these financial numbers or some random guy’s family events. It’s not going to easy.

Regular readers probably know that I use 90% of the previous article to make this one. Someday, I hope to separate the most of the explanations to a FAQ and then just give you the new details.

Let’s get started:

Alternative Income Update: December 2018

For those that don’t know the term, “alternative income”, I started using it around 12 years ago to be purposely vague. I needed something to cover the small amount of blogging income I was making, while I growing my peer-to-peer lending portfolio as an income stream. (The P2P worked for a bit, but I’ve soured on it over the last few years.) Blogging income can be very erratic, but there’s a residual nature to it as well. Some popular bloggers are still struggling to categorize the nature of the income. I think alternative income was more passive back in 2007 before social media, podcasting, and video. Today it seems like every blogger talks of hustling (as in moving quickly, not grifting people) and by that they mean “being everywhere.” I feel like the only one dumb enough to just keep writing blog posts… blog posts that often don’t have cool “pinnable” images.

The last few months, I have sprinkled in images from the past month. I’ve seen other bloggers do it and readers tend to like it. My only rule here is that I’ll only show pictures of food if the presentation is amazing, such as an actual size Leaning Tower of Pisa made of grapes and toothpicks. (I will never understand why people take pictures of their food.)

In general, I call alternative income everything that comes from passive investment and these side hustles. The best way to think of it is income where you aren’t directly trading your time for money. This report is about all my alternative income. To include my investments into that paradigm, I have to fudge the numbers a bit. You’ll see what I mean as we go along… or you can see a more detailed explanation back in January, 2017.

The last month I reported, November 2018, my alternative income added up to $6,786.37. That was more than usual with a lot of dog sitting clients over Thanksgiving (and sweet holiday rates).

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

Lazy Man’s Alternative Income – December 2018

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

1. Blogging + Dog Sitting Income

My “real world” friends have asked me, “What do you do?” I’m not a fan of the question… because it’s simply rude. I feel it’s used to size up or pigeonhole someone. My responses of “software engineer” has received very differently reactions than “dog sitter.” Nonetheless, some response is required. I rotate among all the things that I do. What are those things?

This was a sunset in Aruba. I was completely unprepared but was able to run onto the beach with my phone and catch it at the last second.

I suppose the best answer is that I’m a stay-at-home dad. The kids go to school for about 8 hours a day during the week. My “non-Dad stuff” is 40 hours a week. That gives me time to do some basic family errands (shopping, cooking, dishes, laundry, walking my own dog, etc.) and dog sitting and blogging fills in the gaps. Over the last several months, I’ve taken two extra paying side gigs. I’m a blog editor for one company and I’m a customer support representative for a different company. That might seem like a demotion from my software engineering days, but the hours are flexible and the pay is good. With these two jobs, it’s certainly easier to convince people that I work.

If you want a very short list of what I’m doing check out my “Now” page.

At blogging conventions a popular question is “Are you a full-time blogger?” I say yes, but then explain that I spend very few hours blogging. I don’t think most people grasp the concept of not having a full-time job, but still having a full slate of activity. Even before the new contract jobs, I was doing much, much more than I ever did at a full-time job. I think everyone assumes that Boss Lazy Man will tell Employee Lazy Man to take the day off from the blog to do non-blogging stuff. That’s not really how it works. People with standard jobs have a lot of insulation where they can say, “See, my boss says that I’m not available.”

Time to move off that soapbox.

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. And both are impacted by how much time I spend on the contract side gigs.

You may be asking right now, “Isn’t alternative income about NOT trading time for money?” Isn’t dog sitting and blogging TRADING time for money? That’s a solid point. However, I don’t do it directly. Let me explain:

Sitting dogs itself isn’t a time-intensive job… at least with the number of dogs I typically have. However, there is considerably more overhead than you might think between booking dogs and meeting dogs for suitability. The important differentiation with dog sitting is that I can “double-dip” and earn money from another side hustle, such as blogging, at the same time. It’s very different than being an Uber driver. The police tend to frown on blogging and driving.

If you are interested in dog sitting, I wrote a very detailed article on the subject: Pros and Cons of Dog Sitting on Rover.

The Pokemon stuffed animals were shocked by the presents on Christmas. Vulpix unfairly got a present from one of my son’s. I fear the other Pokemon are plotting a Vulpixicide.

Blogging is usually much more time-intensive than sitting dogs. (The summer months are the exception). However, it isn’t directly trading time for money either. If I write an article for the blog today (such as this one!), I don’t necessarily get any significant money for it. The money I make from blogging now is a direct result of having built a reputation and a collection of nearly 2500 articles over 13 years of blogging.

December was the worst month for dog-sitting of the entire year. It was terrible. Between vacation, the holidays, and the home renovation, I wasn’t available to do much dog sitting. It’s a bit of a shame, because it could have been a very good month as other people travel and leave their dogs behind.

Blogging income was almost exactly the average. It’s doesn’t get any more boring than that.

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.

In November, these two categories combined for a total of $3,626.37 an above average number. But for December it was…

Total Blogging + Dog Sitting Income: $2,368.44

That’s the lowest of the year. I thought I’d be more disappointed in the low number, but I think most people would be very happy with nearly $2500 month from what is essentially their 3rd priority (after family flexibility and the contract side gigs).

2. Rental Property Income

Here is where I need to fudge the numbers. Sorry, but it’s necessary.

We have three rental properties in our real estate accidental “empire”. (“Empire” is in quotes for a reason – it is a joke.) They are all on 15-year fixed mortgages. This means that we don’t make money on them now, but we are paying down those mortgages more quickly than most people. In 9 years, we should be able to collect an estimated income of $40,000 a year (in today’s dollars, after expenses) on them.

This is the water slide where we spent most of our time in Aruba. The kids are hiding in a little cave area in this picture.

So here’s why I have to fudge the numbers. For the purposes of this report, it doesn’t make sense to count the properties as zero income. I don’t want this report to push me towards a bad decision. It might make me sell them and invest the money differently just to make the numbers look better. For example, if someone offered you a million dollars in 10 years or $10 per year right now, you’d wait for the million (I hope). However, for this report, the $10 per year would give you better numbers.

It’s an extreme example, but it shows how sometimes the short-term plan is the enemy of the long-term plan.

Here’s how I’ve decided to fudge the numbers.

I add up all the properties equity and values. Zillow is very accurate for these condos – it has a lot of data points to work with. Next I calculate an equity-to-value ratio. In short, this is the percentage of the property value that we own vs. the bank. Then I calculate the rents of all the properties as if they were owned free and clear. Thus we can say that we are “banking” (in a completely fudgey sense) a percentage of the rent that we would expect to have in the future (rents are typically in line with inflation in the simplest sense).

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

Here are the numbers for December. We have 53.07% 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.

I brought Chad Carson’s Real Estate Book with me. I need to review it sometime soon before I forget all the comments I had… and there were a lot!

If you multiply $3,325 by 53.07% you get $1,765 in “fudged” 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 23 months, we’ve seen the number grow $591/mo. That’s like giving ourselves an annual $7,092 raise until the end of time.

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 I mentioned above.

In the previous report, the rental property income was $1,743. This number usually moves slowly, so we’ll take the $22 increase. This number only changes if one of two things happen: 1) The properties go up in value. 2) We charge more for rent. I don’t control the housing market. Tenants are typically locked in for at least a year. The monthly paying down of the mortgages creates some equity each month. That’s where we saw the gains in December as the values of the properties stayed mostly the same.

Slow and steady wins the real estate race. In previous reports, I hoped that by the end of this year, we’d be looking at having 50% of the equity with $3,325 in rent or $1662.50 a month in fudged alternative income. As the properties have appreciated, we passed that mark earlier than I expected.

Total Rental Property Income: $1,765

3. Dividend Income

Like the rental property “income”, I’m going to play a game with the numbers. You can decide if the game is fair. I always appreciate comments!

We don’t focus on putting our money in dividend stocks, but I’m going to imagine that we do for sake of this exercise. In reality we a vast majority in index funds, but I do some stock picking with a small percentage of our portfolio. Though the index funds do pay dividends, it’s not their core goal. I’m also fudging the numbers in another way. The money I’m referring to here is in our retirement accounts, so it isn’t something that we would tap as “income.”

Even though all this money is in retirement accounts, we could pull the money out and use it. We’d get tax penalties so we won’t do that. However, like the mortgages on the rental property, there’s real value here that I feel should be accounted for. My goal here is to capture the nearly 20 years of mostly maxing out retirement contributions.

Just like the rental income, we can pretend what the portfolio would earn if we moved all the money into dividend stocks or indexes. For the sake of pretending, I estimated that we could earn 2.50% in dividends. Most people estimate a 4% safe withdrawal rate, but withdrawal is not our plan here. We are only thinking about the cash that these investments could yield to pay for our living expenses.

We are still opening and playing with some presents (especially the robots that require a little more time to learn.) However, Osmo seems to be by far the best toy. I plan to write a review at some point.

December was another poor month for our portfolios. The stock market went down quite a bit. We were saved a bit by the fact that I calculate the numbers around the 5th of the month when all the rent is (hopefully) collected and mortgages are paid off . Our holdings are down from where we started at the beginning of the year. I think most people are probably in the same boat. The end result is:

Total Dividend Income: $1,372

Last month, it was $1417, so we lost $45 of theoretical monthly money from theoretical dividends. In the last three months we’ve lost $150/mo. That’s a lot, but it’s still just a drop in the bucket compared to what the stock market has given us over the last 9 years. It’s already bounced back a bit over the last 10 days since I captured these numbers.

Very Close to Passive Income

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

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

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

At the start of the year, the dividend income was slightly ahead ($48) of the rental property income. It’s like the stocks vs. real estate debate, but for our personal finances. Now the difference is $393 in favor of the “real property income.” Real estate has decisively won the battle in 2018.

Jake loved his Christmas duck. He would have liked the real thing a little more, but he can never catch them.

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

December’s Very Close to Passive Income: $3,137

Last month it was $3,159, so it’s down $22. It didn’t go down for the first 18 months of reports and now it’s gone down each of the last three months. However, 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 $37,645. 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 $80K a year.

I have ignored some minor (but important) details. Details such as our investments being in retirement accounts.

Final Alternative Income

Adding up “dogs and blogs” to the “very close to passive income”, this month we on the investment stuff had $5,505.44 in monthly “alternative” income. That would be $66,065.28 a year. Last month it was $81,436.44, so the lack of dog sitting really hurt the projections. The short term fluctuations are just noise of how well “dogs and blogs” did in any particular month.

That largely hypothetical ~$66K a year on investments, writing on a blog, and taking care of dogs feels a little like a dream (probably because it is). In the long term, we can get by on less than half of that income. That doesn’t include any of my wife’s bread-winning pharmacist income, her potential military pension if she retires next year, or any of that freelance work I’ve been doing over the last several months.

This is the part of the article where I mention that I’m still hoping to write a book to boost my alternative income. I had always planned it to be an eBook, but if any readers out there know a publisher, I’d appreciate the hook-up. Seriously… it seems everyone in personal finance is getting a book deal except for me. I think I can make a compelling argument for a book that you’d see in a bookstore… that is if bookstores still exist by the time I’m done writing it.

Net Worth Update

Since I don’t share real numbers of our net worth, this isn’t very exciting. That’s why it’s just a footnote.

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.

In December, our net worth went DOWN 0.43%. Ouch! That’s 4 consecutive months of going backwards. Don’t the markets know that they always have to go up so I write nothing but positive, encouraging articles?

In 2018, our net worth was up 7.31%. It’s easy to feel negatively about that after seeing it going up an average of 17% for a large number of years. However, with stocks down for the year, it highlights the power of diversification in real estate and saving overall. I seen other bloggers report losses of the net worth over 2018.

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?

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

It’s the middle of the month. That means that I have the final numbers on November 2018.

November is often a rocky month. (That’s the standard opening for every month.) The Thanksgiving/Black Friday/Cyber Monday is often the busiest time of year, because it’s the convergence of five things for me. It’s time that I should be spending with family. It’s the time of year when I should be blogging about the deals. It’s the time of the year where I like to take advantage of as many of those (online) deals as I can. It’s one of the busiest dog-sitting days of the year because it’s a big travel weekend. Finally, my wife’s birthday is usually a few days after Thanksgiving, so I need to get everything prepared for that.

I’m exhausted just recapping all that.

The rest of the month was focused on relatively boring (to you) stuff. The kids started ice skating and continued their swim lessons. We saw a special movie as a family (more on that later). The circuit breaker switch on our solar panels broke, so we weren’t getting credit for generating power for a month. (It was easily reset and the data all repopulated and backfilled, so everything was normal.) My wife continued her most difficult MBA class yet.

I’ll be randomly adding other personal family events throughout. This way you can choose what’s more boring: the financial numbers or some random guy’s family events.

It’s not going to easy, so let’s get started:

Alternative Income Update: November 2018

For those that don’t know the term, “alternative income”, I started using it around 12 years ago to be purposely vague. I needed something to cover the small amount of blogging income I was making, while I growing my peer-to-peer lending portfolio as an income stream. (The P2P worked for a bit, but I’ve soured on it over the last few years.) Blogging income can be very erratic, but there’s a residual nature to it as well. Some popular bloggers are still struggling to categorize the nature of the income. I think alternative income was more passive back in 2007 before social media, podcasting, and video. Today it seems like every blogger talks of hustling (as in moving quickly, not grifting people) and by that they mean “being everywhere.” I feel like the only one dumb enough to just keep writing blog posts… blog posts that often don’t have cool “pinnable” images.

The last few months, I have sprinkled in images from the past month. I’ve seen other bloggers do it and readers tend to like it. My only rule here is that I’ll only show pictures of food if the presentation is amazing, such as an actual size Leaning Tower of Pisa made of grapes and toothpicks. (I will never understand why people take pictures of their food.)

In general, I call alternative income everything that comes from passive investment and these side hustles. The best way to think of it is income where you aren’t directly trading your time for money. This report is about all my alternative income. To include my investments into that paradigm, I have to fudge the numbers a bit. You’ll see what I mean as we go along… or you can see a more detailed explanation back in January, 2017.

The last month I reported, October 2018, my alternative income added up to $5,710.83. That’s a drop-off of around $800 from September. It was very much below average, largely because there were few dogs to sit with no big travel holidays in October.

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

Lazy Man’s Alternative Income – November 2018

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

1. Blogging + Dog Sitting Income

My “real world” friends have asked me, “What do you do?” I’m not a fan of the question… because it’s simply rude. I feel it’s used to size up or pigeonhole someone. My responses of “software engineer” has received very differently reactions than “dog sitter.” Nonetheless, some response is required. I rotate among all the things that I do. What are those things:

I suppose the best answer is that I’m a stay-at-home dad. The kids go to school for about 6 hours a day. So my “non-Dad stuff” is 30 hours a week. That gives me time to do some basic family errands (shopping, cooking, dishes, laundry, walking my own dog, etc.) and dog sitting and blogging fills in the gaps.

At blogging conventions a popular question is “Are you a full-time blogger?” I say yes, but then explain that I spend very few hours blogging. I don’t think most people grasp the concept of not having a full-time job, but still having a full slate of activity. I’m doing much, much more now than I ever did at a full-time job. If you really cared to read much more this gives you even more on that. I think everyone assumes that Boss Lazy Man will tell Employee Lazy Man to take the day off from the blog to do non-blogging stuff. That’s not really how it works. People with standard jobs have a lot of insulation where they can say, “See, my boss says that I’m not available.”

I’ve spent too many words on it, but if you want a very short list of what I’m doing check out my “Now” page.

The kids’ ice skating lessons are going quite well. They are much better than I am already. I don’t know how to fit in all the activities I’d like to introduce them to. They seem to want to give everything a try.

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… and there isn’t some other great catastrophe going on.

You may be asking right now, “Isn’t alternative income about NOT trading time for money?” Isn’t dog sitting and blogging TRADING time for money? That’s a solid point. However, I don’t do it directly. Let me explain:

Sitting dogs itself isn’t a time-intensive job… at least with the number of dogs I typically have. However, there is considerably more overhead than you might think between booking dogs and meeting dogs for suitability. The important differentiation with dog sitting is that I can “double-dip” and earn money from another side hustle, such as blogging, at the same time. It’s very different than being an Uber driver. The police tend to frown on blogging and driving. (Hmmm, maybe if I had a voice recorder and translation software I could compose some rough drafts. Nah… I’m sure clients wouldn’t want to climb over my kids’ child seats. Also studies show that Uber drivers make far below minimum wage when accounting for their expenses.)

If you are interested in dog sitting, I wrote a very detailed article on the subject: Pros and Cons of Dog Sitting on Rover.

Blogging is usually much more time-intensive than sitting dogs. (The summer months are the exception). However, it isn’t directly trading time for money either. If I write an article for the blog today (such as this one!), I don’t necessarily get any significant money for it. The money I make from blogging now is a direct result of having built a reputation and a collection of nearly 2500 articles over 12 years of blogging.

November was a great dog-sitting month due to the Thanksgiving holiday. I had one client say that my prices were too low as the kennel was charging twice as much. I’m happy with what I charge and it’s competitive with other Rover sitters in my area.

Blogging income was a little below average. I think most merchants were focused on Black Friday/Cyber Monday sales and not looking to place individual ads. Seems counter-intuitive, but that’s the best I can come up with. Maybe it’s a blip on the radar because December is looking very good so far.

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.

In October, these two categories combined for a total of $2,528.83, which was almost the yearly low. But for November it was…

Total Blogging + Dog Sitting Income: $3,506.59

That’s a little better than average, so I’ll take it. Cue the New Year’s Resolution for 2019 to actively try to grow it. (I write that all the time and part of me just has to be happy with what it is considering the other responsibilities.)

In addition to the dogs and blogs, November was the 4th month where I spent significant time on the two new ongoing freelance jobs. The income from them has often been similar to the blogging and dog sitting. However, I don’t include them, because there’s nothing alternative about them at all. I still feel the need to mention them, because it’s A LOT time that I’m not blogging.

2. Rental Property Income

Here is where I need to fudge the numbers. Sorry, but it’s necessary.

We have three rental properties in our real estate accidental “empire”. (“Empire” is in quotes for a reason – it is a joke.) They are all on 15-year fixed mortgages. This means that we don’t make money on them now, but we are paying down those mortgages more quickly than most people. In 9 years, we should be able to collect an estimated income of $40,000 a year (in today’s dollars, after expenses) on them.

So here’s why I have to fudge the numbers. For the purposes of this report, it doesn’t make sense to count the properties as zero income. I don’t want this report to push me towards a bad decision. It might make me sell them and invest the money differently just to make the numbers look better. For example, if someone offered you a million dollars in 10 years or $10 per year right now, you’d wait for the million (I hope). However, for this report, the $10 per year would give you better numbers.

It’s an extreme example, but it shows how sometimes the short-term plan is the enemy of the long-term plan.

We went to our first Fathom Event, which was the US debut of Pokemon – Power of Us. The kids love everything Pokemon and it was a treat to see it on the big screen. It was a good movie if that’s the kind of thing you like. The had an intro with an interview with the director of all the Pokemon movies which was interesting.

Finally, we got to see the trailer for I Want to Eat Your Pancreas. My wife and I were puzzled by what we saw, but it actually looks interesting.

Here’s how I’ve decided to fudge the numbers.

I add up all the properties equity and values. Zillow is accurate for these condos – it has a lot of data points to work with. Next I calculate an equity-to-value ratio. In short, this is the percentage of the property value that we own vs. the bank. Then I calculate the rents of all the properties as if they were owned free and clear. Thus we can say that we are “banking” (in a completely fudgey sense) a percentage of the rent that we would expect to have in the future (rents are typically in line with inflation in the simplest sense).

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

Here are the numbers for November. We have 52.41% of the equity in our properties with an estimated combined rent of $3,375. (This number is after insurance, property taxes, and condo fees.) We were able to raise the rents earlier this year a little bit as the rental market has been good and we turned over to new tenants.

If you multiply $3,375 by 52.41% you get $1,768 in “fudged” 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 22 months, we’ve seen the number grow $594/mo. That’s like giving ourselves an annual $7138 raise until the end of time.

As the years march on, the ratio will grow to 100% of the $3,375 monthly inflation-resistant rent. That’s what gets us to that annual $40,000 I mentioned above.

In the previous report, the rental property income was $1,722. This number usually moves slowly, so we’ll take the $21 increase. This number only changes if one of two things happen: 1) The properties go up in value. 2) We charge more for rent. I don’t control the housing market, so I can’t change much here. Tenants are typically locked in for at least a year. The monthly paying down of the mortgages creates some equity each month. That’s where we saw the gains in November.

Slow and steady wins the real estate race. In previous reports, I hoped that by the end of this year, we’d be looking at having 50% of the equity with $3,325 in rent or $1662.50 a month in fudged alternative income. As the properties have appreciated, we’ve passed that mark earlier than I expected.

Total Rental Property Income: $1,743

3. Dividend Income

Like the rental property “income”, I’m going to play a game with the numbers. You can decide if the game is fair. I always appreciate comments!

We don’t focus on putting our money in dividend stocks, but I’m going to imagine that we do for sake of this exercise. In reality we a vast majority in index funds, but I do some stock picking with a small percentage of our portfolio. Though the index funds do pay dividends, it’s not their core goal. I’m also fudging the numbers in another way. The money I’m referring to here is in our retirement accounts, so it isn’t something that we would tap as “income.”

Even though all this money is in retirement accounts, we could pull the money out and use it. We’d get tax penalties so we won’t do that. However, like the mortgages on the rental property, there’s real value here that I feel should be accounted for. My goal here is to capture the nearly 20 years of mostly maxing out retirement contributions.

Just like the rental income, we can pretend what the portfolio would earn if we moved all the money into dividend stocks or indexes. For the sake of pretending, I estimated that we could earn 2.50% in dividends. Most people estimate a 4% safe withdrawal rate, but withdrawal is not our plan here. We are only thinking about the cash that these investments could yield to pay for our living expenses.

We went to IKEA and bought two Kallaxes like this. We’ve only optimized the space 30% or so, but it’s still a big difference in organizing everything. Once we put together a plan, it will be really useful.

November was a very poor month for our portfolios. The stock market went down quite a bit. Our holdings are down from where we started at the beginning of the year. I think most people are probably in the same boat (through December 7th). The end result is:

Total Dividend Income: $1,417

Last month, it was $1460, so we lost $43 of theoretical monthly money from theoretical dividends. In the last two months we’ve lost $105/mo. That’s a lot, but it’s still just a drop in the bucket compared to what the stock market has given us over the last 9 years. I’ve also seen how quick it can bounce back.

Very Close to Passive Income

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

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

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

At the start of the year, the dividend income was slightly ahead ($48) of the rental property income. It’s like the stocks vs. real estate debate, but for our personal finances. Now the difference is $326 in favor of the “real property income.” Real estate has decisively won the battle in 2018.

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

November’s Very Close to Passive Income: $3,159

Last month it was $3,225, so it’s down $24. It didn’t go down for the first 18 months of reports and now it’s gone down twice in two months. However, 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 $37,908. 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 $80K a year.

I have ignored some minor (but important) details. Details such as our investments being in retirement accounts.

Final Alternative Income

Adding up “dogs and blogs” to the “very close to passive income”, this month we on the investment stuff had $6,666.59 in monthly “alternative” income. That would be $79,999.02
a year (so close to 80K!). Last month it was $68,529.96, so this is closer to where I’d like to see it. The short term fluctuations are just noise of how well “dogs and blogs” did in any particular month.

That largely hypothetical ~$80K a year on investments, writing on a blog, and taking care of dogs feels a little like a dream (probably because it is). In the long term, we can get by on less than half of that income. That doesn’t include any of my wife’s bread-winning pharmacist income, her potential military pension if she retires next year, or any of that freelance work I’ve been doing over the last several months.

This is the part of the article where I mention that I’m still hoping to write a book to boost my alternative income. I had always planned it to be an eBook, but if any readers out there know a publisher, I’d appreciate the hook-up. Seriously… it seems everyone in personal finance is getting a book deal except for me. I think I can make a compelling argument for a book that you’d see in a bookstore… that is if bookstores still exist by the time I’m done writing it.

Net Worth Update

Since I don’t share real numbers of our net worth, this isn’t very exciting. That’s why it’s just a footnote.

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.

In November, our net worth went DOWN 1% exactly. Ouch! That’s 3 consecutive months of going backwards. Don’t the markets know that they always have to go up so I write nothing but positive, encouraging articles?

For the year our net worth is up 7.77%. It’s easy to feel negatively about that after seeing it going up an average of 17% for a large number of years. However, with our stocks down for the year, it highlights the power of diversification in real estate and saving overall.

I always have to reminder 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?

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

It’s the middle of the month. That means that I have the final numbers on October 2018 and can finally put this out there.

October is often a rocky month. (I’ve recently noticed that I say that for almost all the months for one reason or another.) There’s the annual FinCon trip which seems to stretch to a full week with packing, planning, etc. It often takes me a few days after FinCon to get back in the swing of things. My wife’s job is focused on health care open enrollment, so it’s an important time for her.

Fortunately, the kids are settling into their school schedule. October has few travel holidays so it’s a light dog-sitting schedule. It’s almost as if the universe balances itself.

I’ll be randomly adding other personal family events throughout the update.

Let’s get to the good stuff:

Alternative Income Update: October 2018

For those that don’t know the term, “alternative income”, I started using it around 12 years ago to be purposely vague. I needed something to cover the small amount of blogging income I was making, while I growing my peer-to-peer lending portfolio as an income stream. (The P2P worked for a bit, but I’ve soured on it over the last few years.) Blogging income can be very erratic, but there’s a residual nature to it as well. Some popular bloggers are still struggling to categorize the nature of the income. I think alternative income was more passive back in 2007 before social media, podcasting, and video. Today it seems like every blogger talks of hustling (as in moving quickly, not grifting people) and by that they mean “being everywhere.” I feel like the only one dumb enough to just keep writing blog posts… blog posts that often don’t have cool “pinnable” images.

Last month I sprinkled in images from the past month for the first time. I’ve seen other bloggers do it and readers tend to love it. My only rule here is that I’ll show pictures of food if the presentation is amazing, such as an actual size Leaning Tower of Pisa made of grapes and toothpicks. (I will never understand why people take pictures of their food.)

In general, I call alternative income everything that comes from passive investment and these side hustles. The best way to think of it is income where you aren’t directly trading your time for money. This report is about all my alternative income. To include my investments into that paradigm, I have to fudge the numbers a bit. You’ll see what I mean as we go along… or you can see a more detailed explanation back in January, 2017.

The last month I reported, September 2018, my alternative income added up to $6,537.81. That’s a drop-off of around $600 from August, which was a drop in the bucket.

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

Lazy Man’s Alternative Income – October 2018

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

1. Blogging + Dog Sitting Income

My “real world” friends have asked me, “What do you do?” I’m not a fan of the question… because it’s simply rude. I feel it’s used to size up or pigeonhole someone. My responses of “software engineer” has received very differently reactions than “dog sitter.” Nonetheless, some response is required. I rotate among all the things that I do. What are those things:

I suppose the best answer is that I’m a stay-at-home dad. The kids go to school for about 6 hours a day. So my “non-Dad stuff” is 30 hours a week. That gives me time to do some basic family errands (shopping, cooking, dishes, laundry, walking my own dog, etc.) and dog sitting and blogging fills in the gaps.

At blogging conventions a popular question is “Are you a full-time blogger?” I say yes, but then explain that I spend very few hours blogging. I don’t think most people grasp the concept of not having a full-time job, but still having a full slate of activity. I’m doing much, much more now than I ever did at a full-time job. If you really cared to read much more this gives you even more on that. I think everyone assumes that Boss Lazy Man will tell Employee Lazy Man to take the day off from the blog to do non-blogging stuff. That’s not really how it works. People with standard jobs have a lot of insulation where they can say, “See, my boss says that I’m not available.”

I’ve spent too many words on it, but if you want a very short list of what I’m doing check out my “Now” page.

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… and there isn’t some other great catastrophe going on.

You may be asking right now, “Isn’t alternative income about NOT trading time for money?” Isn’t dog sitting and blogging TRADING time for money? That’s a solid point. However, I don’t do it directly. Let me explain:

Sitting dogs itself isn’t a time-intensive job… at least with the number of dogs I typically have. However, there is considerably more overhead than you might think between booking dogs and meeting dogs for suitability. The important differentiation with dog sitting is that I can “double-dip” and earn money from another side hustle, such as blogging, at the same time. It’s very different than being an Uber driver. The police tend to frown on blogging and driving. (Hmmm, maybe if I had a voice recorder and translation software I could compose some rough drafts. Nah… I’m sure clients wouldn’t want to climb over my kids’ child seats. Also studies show that Uber drivers make far below minimum wage when accounting for their expenses.)

If you are interested in dog sitting, I wrote a very detailed article on the subject: Pros and Cons of Dog Sitting on Rover.

[I got these those Squirtle and Charizard slippers new on Ebay for the kids. They love everything Pokemon, so I became an instant hero. They were around $8 each including shipping from China. What a great time to be alive!]

Blogging is usually much more time-intensive than sitting dogs. (The summer months are the exception). However, it isn’t directly trading time for money either. If I write an article for the blog today (such as this one!), I don’t necessarily get any significant money for it. The money I make from blogging now is a direct result of having built a reputation and a collection of nearly 2500 articles over 12 years of blogging.

October was an extremely weak dog-sitting month as I mentioned at the outset. Not too many people travel on Columbus Day.

Blogging income was a little below average as well. I can’t put my finger one specific reason why. It could be just a blip in radar.

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.

In September, these two categories combined for a total of $3,312.81. But for October it was…

Total Blogging + Dog Sitting Income: $2,528.83

There’s really nothing positive about the movement of these two numbers. Fortunately, November is looking much better with the dog sitting due to the Thanksgiving holiday. Hopefully we’ll have a strong end to the year.

In addition to the dogs and blogs, October was the third month where I spent significant time on the two new ongoing freelance jobs. The income from them is similar to the blogging and dog sitting, but I don’t include them, because there’s really nothing alternative about them at all. I still feel the need to mention them, because it’s A LOT time that I’m not blogging. Guaranteed income can be a lot better than dogs and blogs. It’s also certainly good to bring in more income than $2,500 even though I’ve got all the other stuff I’m doing.

2. Rental Property Income

Here is where I need to fudge the numbers. Sorry, but it’s necessary.

We have three rental properties in our real estate accidental “empire”. (“Empire” is in quotes for a reason – it is a joke.) They are all on 15-year fixed mortgages. This means that we don’t make money on them now, but we are paying down those mortgages more quickly than most people. In 9 years, we should be able to collect an estimated income of $40,000 a year (in today’s dollars, after expenses) on them.

So here’s why I have to fudge the numbers. For the purposes of this report, it doesn’t make sense to count the properties as zero income. I don’t want this report to push me towards a bad decision. It might make me sell them and invest the money differently just to make the numbers look better. For example, if someone offered you a million dollars in 10 years or $10 per year right now, you’d wait for the million (I hope). However, for this report, the $10 per year would give you better numbers.

It’s an extreme example, but it shows how sometimes the short-term plan is the enemy of the long-term plan.

Here’s how I’ve decided to fudge the numbers.

I add up all the properties equity and values. Zillow is accurate for these condos as it has a lot of data points to work with. Next I calculate an equity-to-value ratio. In short, this is the percentage of the property value that we own vs. the bank. Then I calculate the rents of all the properties as if they were owned free and clear. Thus we can say that we are “banking” (in a completely fudgey sense) a percentage of the rent that we would expect to have in the future (rents are typically in line with inflation in the simplest sense).

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

Here are the numbers for October. We have 51.80% of the equity in our properties with an estimated combined rent of $3,350. (This number is after insurance, property taxes, and condo fees.) We were able to raise the rents earlier this year a little bit as the rental market has been good and we turned over to new tenants.

If you multiply $3,350 by 51.80% you get $1,722 in “fudged” 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 21 months, we’ve seen the number grow $548/mo. That’s like giving ourselves an annual $6500 raise until the end of time.

As the years march on, the ratio will grow to 100% of the $3,350 monthly inflation-resistant rent. That’s what gets us to that annual $40,000 I mentioned above.

[TD Bank opened a new branch nearby and had a big party. We got free pumpkins, saving us a couple of dollars from picking them up the grocery store. In related news, I learned that TD Bank is not the same as TD Ameritrade brokerage.]

In the previous report, the rental property income was $1,703. This number usually moves slowly, so we’ll take the $19 increase. This number only changes if one of two things happen: 1) The properties go up in value. 2) We charge more for rent. I don’t control the housing market, so I can’t change much here. Tenants are typically locked in for at least a year. The monthly paying down of the mortgages creates some equity each month. That’s where we saw the gains in October.

Slow and steady wins the real estate race. In previous reports, I hoped that by the end of this year, we’d be looking at having 50% of the equity with $3,325 in rent or $1662.50 a month in fudged alternative income. As the properties have appreciated, we’ve passed that mark earlier. Maybe we can get to 53% for $1762.25 for fudged money by the end of the of 2018.

Total Rental Property Income: $1,722

3. Dividend Income

Like the rental property “income”, I’m going to play a game with the numbers. You can decide if the game is fair. I always appreciate comments!

We don’t focus on putting our money in dividend stocks, but I’m going to imagine that we do for sake of this exercise. In reality we a vast majority in index funds, but I do some stock picking with a small percentage of our portfolio. Though the index funds do pay dividends, it’s not their core goal. I’m also fudging the numbers in another way. The money I’m referring to here is in our retirement accounts, so it isn’t something that we would tap as “income.”

Even though all this money is in retirement accounts, we could pull the money out and use it. We’d get tax penalties so we won’t do that. However, like the mortgages on the rental property, there’s real value here that I feel should be accounted for. My goal here is to capture the nearly 20 years of mostly maxing out retirement contributions.

[We were invited to a cocktail party at the Ida Lewis’ Yacht Club. Ida Lewis is perhaps the most amazing person you’ve likely never heard of. I know she accomplished more by age 12 than I will in my entire lifetime. It was quite a treat to be in the same building.]

Just like the rental income, we can pretend what the portfolio would earn if we moved all the money into dividend stocks or indexes. For the sake of pretending, I estimated that we could earn 2.50% in dividends. Most people estimate a 4% safe withdrawal rate, but withdrawal is not our plan here. We are only thinking about the cash that these investments could yield to pay for our living expenses.

October was a very poor month for our portfolios. The stock market went down quite a bit. We are almost exactly where we started the year with our stock portfolio. Given the big indices, I think most people are probably in the same boat. The end result is:

Total Dividend Income: $1,460

Last month, it was $1522, so we lost $62 of theoretical monthly money from theoretical dividends. That might not seem like a lot, but this number usually doesn’t change much, so a drop of $62 is very significant. We are in it for the long haul, so it isn’t a big deal.

Very Close to Passive Income

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

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

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

[We went to the zoo to see hundreds, maybe thousands of carved pumpkin art like the above. It’s amazing. Although it is a little expensive, we saved some money with our zoo membership. Also, the money they raise helps fund the zoo, definitely something worth our money.]

At the start of the year, the dividend income was slightly ahead ($48) of the rental property income. It’s like the stocks vs. real estate debate, but for our personal finances. Now the difference is $312 in favor of the “real property income.” Real estate is starting to decisively pull away.

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

October’s Very Close to Passive Income: $3,183

Last month it was $3,225, so it’s down $42. That’s the first time this has gone down in 18 months of reports. Overall 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 $38,191. 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 investment properties are paid off. Add in stock market growth (of a conservative 4%) and this number could reach 80K a year. I estimate our long-term expenses to be around $35,000 a year with the house paid off.

I have ignored some minor (but important) details. Details such as our investments being in retirement accounts.

Final Alternative Income

Adding up “dogs and blogs” to the “very close to passive income”, this month we on the investment stuff had $5,710.83 in monthly “alternative” income. That would be $68,529.96 a year. I was more excited when this number was $88,000 and looking like it would only go up from there.

Still, that largely hypothetical $68,529.96 a year on investments, writing on a blog, and taking care of dogs is fantastic. In the long term, we can get by on almost half of that income. That doesn’t include any of my wife’s bread-winning pharmacist income, her potential military pension if she retires next year, or any of that freelance work I’ve been doing I’ve been doing over the last several months.

This is the part of the article where I mention that I’m still hoping to write a book to boost my alternative income. I had always planned it to be an eBook, but if any readers out there know a publisher, I’d appreciate the hook-up. Seriously… it seems everyone in personal finance is getting a book deal except for me. I think I can make a compelling argument for a book that you’d see in a bookstore… that is if bookstores still exist by the time I’m done writing it.

Net Worth Update

Since I don’t share real numbers of our net worth, this isn’t very exciting. That’s why it’s just a footnote.

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.

In October, our net worth went DOWN 0.90%. Ouch! That’s two consecutive months of going backwards. Don’t the markets know that they always have to go up so I write nothing but positive, encouraging articles?

For the year our net worth is up 8.78%. It’s looking like the goal for the year will be double digits. I use the term goal loosely, because so much of our net worth is invested in markets that we don’t control.

As a reminder, 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?

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