This is the third installment tracking of my alternative income streams plan and progress. I find myself enjoying these updates more than I do others. I think it’s because I seem to be making progress every couple of weeks. My net worth statement isn’t improving due to my actions since it’s largely geared toward the stock and real estate markets. With my investments in these alternative income streams the results are more predictable.
Since my blog is getting a little more traction, I’m starting to see small amounts of gains in that area. It’s barely enough to pay for my Vonage bill, but it’s something. I’ve been plowing more money into Prosper. Plowing might not be the correct word as I’ve been waiting for some loans to verified as much as 9 days now. As a reminder, I’m adjusting income downward for risk (in the case with Prosper) and taxes.

As you see in the update, in a month I’m making some good progress. I should be able to reduce the necessary expenses a lot more next update or two. I can make a payment towards my HELOC, but I’m just waiting to be back from vacation and put my financial house in order.

I know it hasn’t been that long since I previously posted my alternative income streams plan and progress. However, I’m doing fairly well keeping expenses down and as long as I’m making progress, I might as well do it once every two weeks. If it seems like I’m making unrealistic progress, it’s because my fiancee and I are making the kind of income that you often see in Millionaires in the Making.

The numbers below are a little deceiving. As you may be able to tell, I’ve reduced my necessary expenses. A large portion is an adjustment to the grocery bill. We just haven’t had the need to by as much food since I get free lunch at work. Also, I’ve found that since my commute is almost all highway, I’m getting further than I thought on my transportation costs. Because of this I’ve gone back and restated my goal which is now $1699. Lastly, I eliminated $10 by paying off $1000 from my Heloc.

My Alternative Income is up due to some more loans in Prosper. Again, I’m adjusting that income downward for risk and taxes. I’ve also thrown in the gains from other bank interest (which isn’t much or I’d apply it money my HELOC) as well as this blog (which again isn’t much). It’s comforting to know that I’m almost at the point where my cell phone could be paid off every month. Not that I’d do that, I want my money to continue to compound.

As you see in the update, I’m $19 closer to my goal. I’m not sure if I’ll be able to continue the progress. First, it’s been so good, there’s bound to be some drop off. Second, now that my company is getting a 401K, I’m going to spend the rest of this year maxing that out. I also have to save for my Roth IRA. I’ve got net worth goals to think about as well.

Instead of just having one goal based on net worth, I’m finding it increasingly important to have my eyes on another prize. I want to have enough income coming from places outside my day job to cover all my typical month expenses. This way if I get downsized, as I did when the Internet bubble bust, I can get by. This may sound like a doomsday scenario, but as we are a two income family, I don’t expect it to be the problem that it once was.

Here are my preferences for alternative incomes:

1. Passive income such as that from bank interest is ideal. This requires no time or effort on my part.
2. Incomes such as that from that my investment property is very good. This requires some maintenance on my part, but it’s not daily.
3. Incomes such as that from this blog is fine, but is still good, but less valuable. It does require significant time for the money, however, since I enjoy it and can do it while watching TV in my underwear, it’s good quality.
4. I’ll add other ways I can earn alternative incomes here as I think them up.

My current revenue streams:

1. Prosper.com – I’m a big believer of this site because I thought it up back in 1999. There’s just too many middlemen in banking. There’s too many in real estate as well, but that’s changing too.
2. Bank Interest – No explanation needed on this one, but in general, I think I can do better in Prosper.com.
3. This blog – I’d do better working at Starbucks or Wal-Mart, but it still qualifies as an alternative revenue stream.
4. My investment property – This may not actually be an “investment” for quite some time as I’ll lose $550 a month in the first year. However, I’m taking a long term view of things.

I can attack this goal in two directions, bottom up or top down. I can increase my alternative income streams or I can reduce my expenses. I hope to do a lot from the bottom up and a little from the top down. There is only so much I can slice out of the necessary expenses. One big one is my HELOC, which I used to ask my fiancee to marry me. Some may condemn HELOCs, but that was one of the best decisions I made. Even from a financial perspective, we each save a lot more money living together than we did separately.

Here are my monthly necessarily expenses are:

$1,049 – Housing (including my current rent and mortgage on investment property minus the incoming rent)
$325 – Transportation
$143 – HELOC
$125 – Groceries
$43 – Internet + Cable
$27 – Gas and Electricity
$30 – Cell Phone
$25 – Property insurance
$7 – Home Phone

$1,774.00 – Total

My current alternate income (after taxes) from the aforementioned services:

$17.00

So I’m only 0.96% of my way there – this is going to be quite the journey.

I had been writing about my goal of getting my passive income to the point of covering my necessary expenses. I should have substituted “passive income” with “alternative income streams.” Blogging is really anything but passive. It’s a lot of work.

The thing is that it’s fun work, so it doesn’t appear to be work at all. There is also a passive aspect of it. Lifehacker.com is very popular blog that I follow and it makes money even when the people are done for the day. I think that’s a large reason why I had grouped income from my blog as “passive income.”

So are there degrees of work and degrees of passive income? Maybe Five Cent Nickel said it best, “I’ve wondered about this myself – If I were to stop writing, how quickly (and how far) would my revenue fall? In that sense, blogging probably isn’t passive income. However, if I can do it while watching TV and unwinding at the end of the day, then it’s not really work.”

I stumbled upon Finance Junkie’s Plugged in Finance site today. It looks like the plan that I thought was so original – growing my passive income using Prosper.com as my main vehicle – is already being implemented.

Looking on his status, it appears that he’s much further than I am to getting out of the rat race. Because he is pretty close to my age, it stands to reason that I’ve got my work cut out. However, I went back to look at his first post and it seems we differ in accounting philosophies.

1) He is counting himself and his wife, where as I’m not involving my fiancee in my goal – at least for now.
2) If I did count my fiancee, I could add her military pension into the mix, but I don’t want to make that make that assumption at this point.
3) Stock and Bond assets. I’m not sure if he’s counting his retirement accounts, but I don’t want to add that in as I can’t access it without penalty until long after I’ve achieved my goal (I hope).

My point to all this is that retirement income can get added in when I get a lot closer to those years. I’ve got some time before that.