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.

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

For me August will be known as the month where a week of productivity went to a short vacation and a death in the family. As far as deaths go, it was really a best case scenario. We all have to go sometime, I have a hard time coming up with a better than way in your sleep to join your spouse of 71 years.

It will also be known as the month we introduced our Pokemon crazy kids to Pokemon Go. Our whole family got a little addicted to it just like everyone did a couple of years ago. It’s not unusual for me to be a couple years behind the norm. Maybe someday I’ll Snapgram or Instachat with the rest of the world.

The Pokemon craze in the household is all-consuming. I feel like I should write an article about the educational benefits of Pokemon for my kids. I know you come here for personal finance information, so maybe it will be a weekend article sometime.

Let’s get to the good stuff. (Regular readers may notice that I have a template for this article, but new readers will need all this information for it to make sense.)

Alternative Income Update: August 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.

Actually, this month I’m going to try to do something a little different and sprinkle in images from the past month. I’ve seen other bloggers do this. 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 don’t 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, July 2018, my alternative income added up to $7,129.29. July was just a slight drop off from June, the best month of the year.

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

Lazy Man’s Alternative Income – August 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.

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.

August was the best month of the year for sitting dogs. The locals took advantage of kids being out of school, while the strong tourist season brought in more business. If it wasn’t for the lost week mentioned at the top, I probably could have set an all-time record. I’m not looking to set records though. I’d rather enjoy the summer months.

Blogging income was slightly below average in August. I was too busy with dogs and other things to fish through the 100 spammy advertising inquiries for the few good ones.

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 July, these two categories combined for a year high of $3,953.29. But for August it was…

Total Blogging + Dog Sitting Income: $3,888.78

It’s amazing to me with the two types of income complement each other.

In addition to the dogs and blogs, August was the first 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 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.

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 August. We have 50.67% of the equity in our properties with an estimated combined rent of $3,325. (This number is after insurance, property taxes, and condo fees.) We were able to raise the rents earlier this year a little bit as the rental market has been good and we turned over to new tenants.

Yay, we own more than 50% of our rental properties.

If you multiply $3,325 by 50.67% you get $1,685 in “fudged” monthly alternative income. At the beginning of 2017, we only owned 36.4% of the properties and they had lower rents. The math worked out to $1,174 back then. So in 19 months, we’ve seen the number grow $511/mo. 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 $1,650. This number usually moves slowly, but for the second month in a row, it was a very large $35. 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.

In August, Zillow upped the value of the properties significantly. We are finally starting to see a recovery since the crash in 2009, but there’s still a ways to go for it to get to the highs of 2006.

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 a little early. Maybe we can get to 53% for $1762.25 for fudged money by the end of the of 2018 and push for 60% by the end of 2019.

Total Rental Property Income: $1,685

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!

But first:

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.

August was a slightly positive month for our portfolios. The stock market just went up a little bit. We also invested more money. The end result is:

Total Dividend Income: $1,531

Last month, it was $1526, so we gained $5 of theoretical monthly money from theoretical dividends. That will barely by us a sub at Subway, but at least it is moving in the right direction. Like the rental property number, slow and steady wins this race.

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.)

It’s interesting to me that these two numbers are so close for us. It’s like the stocks vs. real estate debate, but for our personal finances. I think of it as putting them in an arena to fight out which is the strongest. The dividend income started out the year with a big, nearly $50, lead. In June the real property income is up over the dividends by $105.

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.

July’s Very Close to Passive Income: $3,216

Last month it was $3,176, so it’s up another $40! That’s grown from a combined $2,354 in January 2017. Since then, this has gone from an estimated annual income of $28,252 from these two sources to $38,592. Investing (in this bull market) is awesome! It’s worth noting that, once again, these are fudged numbers that aren’t “real” yet. However, looking forward to 9 years from now when the investment properties are paid off and how the stock market might grow (assuming a conservative 4%), this number could reach 80K a year. I estimate our long-term expenses to be around $35,000 a year (with the house paid off).

Yes we ignored some minor (but important) details. Details such as our investments being in retirement accounts and an unwillingness to sell some rental properties to pay off others. It’s possible that these two could cover our future expenses (without drawing down on principle).

Final Alternative Income

Adding up “dogs and blogs” to the “very close to passive income”, this month we on the investment stuff had $7,104.78 in monthly “alternative” income. That would be $85,257.36 a year. I’m excited even if it is a little fudgey math. That number is down $25 from last month. I couldn’t have gotten it so consistent if I had tried.

That largely hypothetical $85,257 a year on investments, writing on a blog, and taking care of dogs is fantastic. In the long term, we can get by on half of that income, and it doesn’t include any of my wife’s bread-winning pharmacist income, her potential military pension if she retires next year, or any of the freelance work I’ve been doing.

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 August, our net worth grew 0.85%. Yay! That’s a year to-date-gain of 10.35% this year. 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.

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

July is in the books. Now it’s the time of the month that I pause and think, “I can’t remember what I ate for dinner last night… how am I going to remember last month?” LOL.

I think July, 2018 will always be known as the month of fighting for air conditioning. We had central installed in 2013 and I think we’ve had to have it repaired around 5 times now – an average of about once a year. We had Restivo’s by about 3 times in July and finally by the end of the month, they were able to get the system they installed working as multiple parts failed this time.

It was also a month where my 5-year old went to a wilderness camp while my 4-year old went to a more traditional camp. That meant for a bit more driving and an earlier pick-up (day ending at 3PM instead of 4:30PM). These are also my wife’s busiest months. When she had time off we tried to make the most of it. Summer in Newport, Rhode Island is a special time and it really feels like you are living the island life.

Let’s get to the good stuff. (Regular readers may notice that I have a template for this article, but new readers will need all this information for it to make sense.)

Alternative Income Update: July 2018

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

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, June, my alternative income added up to $7,403.28. June was the best month of the year, despite the fact that I was away on vacation or on adventures with kids for half the month. I had also started a freelance customer support gig that wasn’t included in the numbers (but certainly takes time).

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

Lazy Man’s Alternative Income – July 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 break out blogging income vs. dog sitting income. One impacts the other. When I have a lot of dogs, I don’t have as much time or the focus to blog. When I’m blogging a lot, it’s usually because I don’t have too many dogs to sit… and there isn’t some other great catastrophe going on. (Sometimes it feels like life is a series of catastrophes. Fortunately, for me, they’ve been minor. I’m sure I’m not alone in feeling that it’s just one thing after another derailing your progress.)

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

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

Like June, July was a great month for sitting dogs. The locals took advantage of kids being out of school, while the strong tourist season brought in more business. July has always been one of the best months, so this was no surprise.

Blogging income was solidly above average in July. There was a minor hit as my advertising company noted that budgets at the end of Q2 (June) are historically more than the start of Q3 (July)

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 June, these two categories combined for a year high of $4,280.06. But for July it was…

Total Blogging + Dog Sitting Income: $3,953.29

As you can tell the needle didn’t move much. That’s great considering everything else on my plate.

In addition to the dogs and blogs, in July I added some straight-up, freelancing work. I’m not including it as it is plain old, regular income. I feel it is important to mention it, because it’s another thing that I’m focusing on. At the end of the month, more ongoing freelance work fell into my lap. Between the two gigs, it could be as much annually as the dogs and blogs.

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 July. We have 49.64% of the equity in our properties with an estimated combined rent of $3,325. (This number is after insurance, property taxes, and condo fees.) We were able to raise the rents earlier this year a little bit as the rental market has been good and we turned over to new tenants.

Ugh… so close to 50%. We’ve made more progress in this than I thought we would this year.

If you multiply $3,325 by 49.64% you get $1,650 in “fudged” monthly alternative income. At the beginning of 2017, we only owned 36.4% of the properties and they had lower rents. The math worked out to $1,174 back then. So in 18 months, we’ve seen the number grow $476/mo. 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 $1,614. This number usually moves slowly, but a $36 montly jump 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, 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.

In July, Zillow upped the value of the properties significantly. We are finally starting to see a recovery since the crash in 2009, but there’s still a ways to go for it to get to the highs of 2006.

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. I’ll knock on wood, but we might blow it away if the housing market continues to appreciate. Maybe we can get to 53% for $1762.25 for fudged money.

Total Rental Property Income: $1,650

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.

July was another solid month for our portfolios. The stock market did it’s thing in going up. We did our thing in putting more money into it. The end result is:

Total Dividend Income: $1,526

Last month, it was $1509, so we gained $17 of theoretical monthly money from theoretical dividends. Like the rental property number, slow and steady wins this race. This keeps moving in the right direction.

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.)

It’s interesting to me that these two numbers are so close for us. It’s like the stocks vs. real estate debate, but for our personal finances. I think of it as putting them in an arena to fight out which is the strongest. The dividend income started out the year with a big, nearly $50, lead. In June the real property income is up over the dividends by $105.

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

July’s Very Close to Passive Income: $3,176

Last month it was $3,123, so it’s up another $53! That’s grown from a combined $2,354 in January 2017. Since then, this has gone from an estimated annual income of $28,252 from these sources to $38,115. Investing (in this bull market) is awesome! It’s worth noting that, once again, these are fudged numbers that aren’t “real” yet. However, looking forward to 9 years from now when the investment properties are paid off and how the stock market might grow (assuming a conservative 4%), this number could reach 80K a year. I estimate our long-term expenses to be around $35,000 a year (with the house paid off).

Yes we ignored some minor (but important) details. Details such as our investments being in retirement accounts and an unwillingness to sell some rental properties to pay off others. It’s possible that these two could cover our future expenses (without drawing down on principle).

Final Alternative Income

Adding up “dogs and blogs” to the “very close to passive income”, this month we on the investment stuff had $7,129.29 in monthly “alternative” income. That would be $85,551.48 a year. I’m excited even if it is a little fudgey math.

That largely hypothetical $85,551 a year on investments, writing on a blog, and taking care of dogs is fantastic. In the long term, we can get by on half of that income, and it doesn’t include any of my wife’s bread-winning pharmacist income or her potential military pension if she retires next year.

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

Net Worth Update

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

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 July, our net worth grew 0.73%. Yay! That’s a year to-date-gain of 9.42% in our net worth this year. 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 the numbers get bigger, I’d expect percentage to come down.

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