Lazy Man and Money

Lazy Man’s Mid-Life Financial Check-Up

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Recently Kosmo gave himself a midlife financial check-up. While I’ve been writing about my financial life for a number of years here, a lot of the details are scattered throughout the site. I think it’s valuable to put it all in one place and give it a look.

One thing to keep in mind as you read this, is that I’ve been writing about my financial journey for 13 years now. I suspect that because you are reading this, your financial life is probably in a good place. However, I’ve found that writing about personal finance may have kept my focus on money more than the average person. It also helps to have a very successful pharmacist wife and some other fortunate circumstances.

This is all to say… don’t be discouraged if your financial life isn’t in the same place. We are typically all at different places in our financial journeys with different sets of challenges.

Having said that Kosmo is an interesting comparison for me personally because we are essentially the same age (43 and 42, respectively), have two children, and share some common interests. There’s going to be some similarity here.

As Kosmo put it, at age 43 (or 42 for me), we’re halfway through this journey on this blue/green marble. (Although it recently feels to me more like a “horrible, rotten slog towards rigor mortis” that he quoted from Sam Miller.)

I’ll use roughly the same template that Kosmo put out. I think it does its job well.

Employment

Employment is an area that has been nebulous for years for me. I work on this website, sit dogs, and edit a corporate blog, and do customer service for a cloud service company. However, I think my main job is taking care of the kids and household. My wife’s military pharmacy job has become more demanding in the last couple of years and she’s added other responsibilities like getting her master’s degree online.

She’s looking to take a gap year in the next year or two and simply refocus on parts of her life that aren’t about work. I completely support this, but financially it may need we need to be lean with our money for a bit. The good news is that with her master’s degree, when/if she does go back to work, she’ll be in position to do something in pharmacology business management that makes my head spin. However, I guess it pays a lot of money.

Fortunately when she retires from her military position, there will be a pension and good healthcare options.

So we have some options here. I had planned this in my head for a dozen years and though things have changed with the kids, it’s not uncharted territory.

Immediate cash flow

We have actually been living paycheck to paycheck for quite some time. It’s a little embarrassing to say that as a personal finance writer.

However, we also spend $23,000 on the kids private school and another $8,000 a year on my wife’s online master’s degree. We have 4 mortgages that are at 15-year fixed rates (refinanced at low 2012 levels). We do collect rent on 3 of them, but they barely break even. We sacrifice a little cash flow for bigging gains in building equity and appreciation. We’ve had some surprise condo assessments that haven’t made it much easier. Our own primary residence with mortgage, maintenance, taxes, etc. is around $36,000 a year.

Add up the education ($31,000), rentals (~$3,000), and primary residence ($36,000) and we have about $70,000 in big expenses each year. That’s all after tax money. In any kind of financial emergency, we could make some changes (postpone education, refinance to 30 year mortgages). We have our cars paid off. I’m a very frugal grocery shopper. We do have a bigger than normal vacation budget, which is another place we could make some changes.

With the big expenses, it has been difficult to increase savings. We also put a lot of money in our retirement accounts. Some people say that counts in savings, but it’s not in a way that helps with immediate cash flow.

I look at the big expenses as quality investments in our family.

Mortgage

I covered a lot of this above, but I can go a little deeper. All the 15-year mortgages with finish up around 2027 (within a few months or so). At that time, the 3 rental properties should start to throw off enough money to pay off almost all of our other living expenses (especially since the primary mortgage will be gone as well). By that time, we’ll be back on car payments as the cars in New England snow and salt don’t typically last 15 years. That should be manageable.

College

My wife and I did well with our college expenses back in the day. I got a full scholarship. My wife went to a state school that provided a very reasonably priced pharmacy degree… something that she was able to pay off not too long after college.

The kids will both get great scholarships due to all the money we’re paying for private school, right? If only it were that easy. My wife’s GI Bill will cover half of college expenses unless they go to private more expensive schools. We are saving a little extra money on the side, but as noted in the immediate cash flow section, our other expenses don’t allow for it. We’re hoping that the money from the rentals will cover any gaps. After all, we’ll still have my wife’s pension and hopefully the other income I’ve been able to bring in (though the form may change).

Would we be better putting the private school money in a college fund and going with public school? That’s an interesting question. I’m hoping that there’s an education snowball where investing young pays big dividends down the line. By the time you get to college, it feels like a large part of your education is decided. We’re also betting that we can do both.

We would also like for them to pay for part of their own way so that they have skin in the game. You can read more of my college thoughts: College Costs: What We Owe Each Other.

I’m not expecting that we’ll get any need-based financial aid, but I haven’t looked at the FAFSA too closely. I did note that our rental properties would probably prevent us from trying to be in a lower-income bracket (which we probably wouldn’t be anyway.)

Retirement

We had been maxing out our retirement accounts for a number of years, but the hope is to never need them. We may be able to do well with my side businesses, rentals, wife’s pension, plus whatever she decides to do that might make money. We expect there will be Social Security, even if it pays less, because some people will still be paying in. At age 70, we’ll probably have to take RMDs unless there’s a tax trick in there we can use. (Maybe something like a QLAC.)

Life Insurance

We have a good amount of life insurance. It’s term life to cover expenses through the kids’ age 20 or so. We’d probably need to work out a deal with the kids’ school if we wanted to continue that in the case of an untimely death.

It’s possible that we are far enough into financial independence that we might be able to get by without life insurance, but I can think of no good reason to leave that up to chance.

Once my wife gets to her pension, we’ll very likely purchase some pension insurance. It will reduce the amount of pension she’ll get, but it will be great piece of mind that our family has that amount of locked-in income.

Keeping my eye on the ball

I’m stealing Kosmo’s outline and this is an appropriate one. He’s tracked the growth of 529s against projected college, balances of various accounts at retirement, and estimated expenses. He has a set with and without Social Security.

That actually sounds little more than I’ve done. We’re further way from college. We have the GI safety net, rental properties, and some 529 savings. It’s kind of a melting pot of assets that should be significant.

“How much is college going to cost?” is another question entirely. I did some math in 2012 and it would be a good exercise to update that with 2019 numbers. (I’ll try to get to that soon.) With a little more wisdom, I realized that college planning is impossible, but you should do it anyway.

I keep a spreadsheet of expected balances at retirement like Kosmo and an estimated list of necessary expenses over the next 45 years. I did it for 45 years, because our expenses now are going to be drastically higher than in 2035 or so (no mortgages, no college expenses). That allows me to come up with some kind of average, which is a little more useful (even if we don’t live in the average at any particular time).

The main message of Kosmo’s here is that he’s done the planning and is continuing to plan.

That’s one of the reasons why I started and continue to write this blog. I’ve done the same. I’ve let you in on my financial thoughts and journey now for years. You can see an example of the things that work and things that didn’t work. Though your journey will be different, it’s possible that you incorporate some of the same things and achieve your own financial goals.

Overall, I’d say that things have gone a little better than I really could have expected them to be financially. While I had always wanted to retire early, I never had a net worth goal in mind. And at the time of starting the blog, I didn’t know all the things I didn’t know. That’s a good thing, because I learned quite a lot along the way.

Alternative Income Update: November 2018

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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.

Alternative Income Update: October 2018

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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.

Are you a Middleton?

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I never blog about people starting a new website, because that happens all… the… time…

Today I’m going to break that (self-imposed) rule. There’s a new website that I think you might want to follow: Meet the Middletons

That’s not the only rule I’m breaking. There’s a couple more, but I’ll get to in a bit. For now, let’s move forward.

What is Money Middletons?

The short answer is that it’s a money website for the middle class. Of course I still believe that Middle Class Income Numbers are a Myth. Fortunately, I don’t think the Middleton police is going to come knocking looking for income verification to make sure you are qualified to the club :-).

Money Middletons is crowd-sourced, which means you can make it what you want it to be. It’s curated by volunteers, so you know that people are invested in it. It’s also covering the best articles in personal finance, so you know that I will never be featured ;-).

There might be a longer answer to what Money Middletons is about, but it’s so much easier to click and see it for yourself.

About Those “Rules”

I think Stephonee (who is launching the website) was looking to make a big media push on Monday. I was distracted by some other stuff, but I hope it worked out well.

You probably don’t know Stephonee. She’s not exactly a household name. However, she’s one of the very, very few bloggers who have been writing about personal finance for the last 12 years like me. I’ve been a fan of Poorer Than You for more than a decade.

As part of the launch there were images and writing guidelines/ideas. You don’t care about logos right? I’ve never been one for writing guidelines either. I feel that blogging is supposed to be about raw writing.

So that’s it, just go to Money Middletons and enjoy.

Alternative Income Update: September 2018

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

September is always the “month of change” for us. The boys transition from summer camp to school, which dictates a whole new schedule. It’s also the busy season at my wife’s work. I think there was a span of two weeks where she was home for four consecutive waking hours only once.

Ouch.

While my wife was away, I took the kids to an extreme bouncy event on the military base. A dozen bouncy houses… and they bounced for hours. The kids also learned to swim! I’m not sure there’s a point in time that “swimming” happens, but the new swim school is amazing and it looks like swimming to me.


September was also the month our whole family went to FinCon in Orlando. Financially, it was a less-than-ideal plan. However, I wasn’t going to miss my son turning 6. It’s strange, but sometimes less-than-ideal plans work out far better than one could hope for. The kids got to spend a lot of time with mom, which was important after that busy stretch. They got to do the Crayola Experience and Legoland. We also put in nearly a full day at the hotel pool as a family.

Unfortunately we didn’t get to ride on that Patriots’ Jet.

There’s some truth to the rumors that I wore my bathing suit to a couple FinCon sessions. (It was dry.) One of the transformative things that happened when I turned 40 is that I stopped caring so much what other people thought. The FinCon sessions should have been in the pool anyway, right?

That’s a whole of TMI (on so many levels), so let’s get to the good stuff:

Alternative Income Update: September 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, August 2018, my alternative income added up to $7,104.78. August was just a $25 drop off from July, which was a drop in the bucket.

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

Lazy Man’s Alternative Income – September 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.

Sneaking a picture of the kids in here, just to make sure you are awake. Southwest made them a crown out of pretzel bags and dirty martini olive spikes (not sure there’s a name for them). In any case: LUV, right? (Not a sponsored post and I’m not a shareholder.)

At blogging conventions a popular question is “Are you a full-time blogger?” I say yes, but then explain that I spend many more hours doing things other than 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.

September was a weak dog-sitting month. Labor Day was busy, but after that people didn’t seem to go on vacation much. I also lost out on some business with FinCon and another weekend I had to take off.

Blogging income was above average in September. August was poor, so maybe advertisers were just waiting for the summer to end?

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 August, these two categories combined for a year high of $3,888.78. But for September it was…

Total Blogging + Dog Sitting Income: $3,312.81

While that’s a step backwards, it’s very close to the average for the year. It’s amazing to me with the two types of income complement each other.

In addition to the dogs and blogs, September was the second 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 September. We have 51.21% 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.

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

If you multiply $3,350 by 51.21% you get $1,703 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 20 months, we’ve seen the number grow $529/mo. 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.

In the previous report, the rental property income was $1,685. This number usually moves slowly, so we’ll take the $18 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 September.

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 62% by the end of 2019.

Total Rental Property Income: $1,703

Rental Income

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.

September was a poor month for our portfolios. The stock market went down a little bit. These numbers are from October 6th, so it’s before the big crash that we’ve seen lately. (October isn’t looking good.) The end result is:

Total Dividend Income: $1,522

Last month, it was $1531, so we lost $8 of theoretical monthly money from theoretical dividends. Yes, this is boring, but that’s the nature of this beast. Like the rental property number, slow and steady wins this race.

Dividend Income

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.

September’s Very Close to Passive Income: $3,225

Last month it was $3,216, so it’s up $9 in total. 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 $38,700. 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).

Passive Income

Final Alternative Income

Adding up “dogs and blogs” to the “very close to passive income”, this month we on the investment stuff had $6,537.81 in monthly “alternative” income. That would be $78,453.74 a year. I’m excited even if it is a little fudgey math. That number is down nearly $600 from last month. I couldn’t have gotten it so consistent if I had tried.

That largely hypothetical $78,453.74 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.

Alternative Income

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 September, our net worth went DOWN 0.53%. Boo! This is the first time it’s gone down in awhile. Almost all of it can be attributed to Zillow changing its view of the value of our primary residence. In other words, nothing that really means anything for us for the foreseeable future.

For the year our net worth is up 9.76%. With the market going south right now, this will probably go down quite a bit when I look at how October went.

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 September? Let me know in the comments.

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