Investing Archives - Lazy Man and Money

More Fees, More Fees, and… No Fees?

October 10, 2019 by Lazy Man 8 Comments

Over the past week or so, I couldn’t help but notice that there’s been a cluster of news reporting around fees. What I found interesting is that two industries’ fees keep going up and up… and the third industries’ fees have gone to zero. Specifically, ATM and cable company fees continue to rise, while brokerage trading fees are disappearing.

As consumers of these services, being aware of these trends can help us make wiser financial decisions. Of course, it’s not always clear what’s going on behind the scenes, so let’s take a look at each in more detail.

ATM Fees Keep Rising

ATM fees have reached a new all-time high. According to this this USA Today article, the average cost of an ATM withdrawal is $4.72. That’s crazy.

I haven’t been following ATM fees too much because, as the article notes, fewer people are using cash nowadays. My bank, USAA, reimburses us for ATM fees since they don’t have a network of their own. However, for a significant percentage of people, this can be a pretty big hit. That’s why I recommend having a bank that reimburses some or all of the ATM fees if at all possible.

Cable Companies Hide Increasing Fees from Consumers

The headline from Ars Technica was shocking, Cable companies use hidden fees to raise prices 24% a month. Or maybe it’s not shocking since we are talking about the cable industry here. I’ve written about Cox’s banana pants pricing, anti-competitive behavior, and shady pricing tricks.

I don’t mean to single out Cox, Comcast wasn’t any better when I had them as a cable service. Consumer satisfaction surveys repeated show that people hate their cable provider. The system was designed to eliminate competition, so most consumers must accept whatever pricing and terms they can get if they want high-speed internet.

I’ll now step off that soapbox and get back to the news of the 24% increase a month. The news mostly comes down to disclosure, but there’s some interesting fees in there too. For the disclosure part, if a company sells you on a service for $99 it should be $99. If there are government taxes involved, they could clearly state exactly what those are up-front in the advertisement. It shouldn’t be, “$99, plus fees that happen to be ~25% more.”

The interesting fees that I mentioned above are not necessarily government fees. For example there’s broadcast TV fees, which is what you pay to watch NBC, ABC, CBS, etc. that you could get for free with antennas. This is a touchy subject for me. I don’t think I should have to pay for something free just because of a technology hack.

Another fee mentioned is the regional sports fees. I watch a lot of regional sports, so I don’t mind paying for it, but they used to be part of the cable package. For people who don’t watch regional sports this is just wasted money. An easy solution would be to make it a package you can optionally buy. However, why give people the choice when you can just charge them all?

It’s worth reading the full Consumer Reports PDF here.

Brokerage Fees Go Zero

In the last couple of weeks, a group of brokerages have eliminated fees for trading stocks completely. It seems like it started with Interactive Brokers Group, but I’m not familiar with them. The big news was Schwab going commission free. TD Ameritrade and E*Trade followed suit. Then Ally Invest joined the party. Literally hours ago (as I write this) Fidelity decided they’d go commission free too.

I’m old enough to remember when a stock trade could cost hundreds of dollars. Typically it was done over a phone call (gasp!) with a stock broker. You had to deal with messy fractions. With the expansion of the internet in the mid-late 1990s, E*Trade and other brokerages brought stock trading to the masses with commissions that ranged from around $10-15 a trade.

I feel this movement to commission-free trades is another revolution. I hope that it encourages more people to invest. Some people are very fee adverse (*raises hand*) and this removes that. It’s also one less thing to explain to someone new to investing.

Part of the reason of the drop to zero commission fees is the success that Robinhood has had. It’s hard to get someone to pay for something when someone else is giving it away free. That’s specifically why I opened a Robinhood account for my kids years ago. As we’ve learned in other areas of technology, something free sometimes costs you in other ways.

Consumer Reports highlights a couple of the catches:

They are trying to get new customers to sell them products with higher fees. That’s something to be aware of.
You may not earn a good interest rate on the spare cash in your account. The brokerages can use all that money and earn more interest. The good news is that with zero commissions, you could invest almost all the extra cash into a very conservative investment like Vanguard Total Bond Market ETF (NASDAQ: BND) paying a 2.5% yield (or interest rate for practical purposes). That’s what I’ll be doing.

I don’t mind these catches at all since I can control both cases well.

Final Thoughts

I find it interesting how all these fees are trending. The cable company fees are going up because of a lack of competition (among other things). The brokerage fees are going down because of fierce competition. This isn’t a surprise, but the contrast of the two industries makes it clear that regulation matters greatly.

The outlier is the ATM fees. They are going up because fewer people are using cash. It seems like that would mean that they have to physically fill the machine with cash less often. That’s logically what the fees should go towards. If that’s the case, the fees shouldn’t have to increase. I suppose the fees should also cover the rent for the physical space they take up which is a fixed cost.

The movement of these fees have been gradual over time. If not for all the news coming out at the same time, I wonder if I wouldn’t have even noticed it? Sometimes, it’s helpful to step back and look at something fresh and think about how we got to where we are.

What’s Your True Investment Rate?

July 31, 2019 by Lazy Man 6 Comments

Usually, when I start an article, I have an idea where it’s going until the end. This is not one of those articles.

Part of the reason is that things have been busy over the last couple of weeks. I’ll explain more in the monthly report, but our dog sitting has reached new records. At the same time, my wife has been spending more time office. I honestly feel like my kids, at age 5 and 6, are more competent than their camp director or counselors (but I try to go easy on them as managing many kids can’t be easy.) Finally, I’m feeling that summer is passing us by as it does every year. It will be back to school in about a month.

The topic of school is a large part of what I wanted to cover today, but first I want to review some FIRE basics. Most FIRE people would say that your savings rate is what impacts you the most about being able to FIRE (be Financially Independent and/or Retire Early). Some bloggers are saving as much as 50% of their income and investing it. With the power of compound interest and 10-20 years, they’ve got a nice nest egg to retire on. That would be a accurate, though oversimplified version of our financial situation.

Our situation is a lot more complicated with my irregular freelance, side hustles, and businesses (blogging and dog sitting), and our investment properties. For this reason, I don’t bother to calculate our savings rate. Instead, I’ve recented used a net worth growth to income ratio. They are both high numbers for us, so that’s a good thing. For most people a savings rate would be easier to calculate.

Spending vs. Saving vs. Investing

You’d think after blogging about these for 13 years, I’d be clearly able to delinate all these things. It’s not always so easy. In fact, there are mashups of them like “spaving”, which is loosely defined as spending money to save.

It possible to have a high savings rate, but not invest it. For example, maybe you love the safety of having cash in the bank, but it’s not paying a good interest rate. Technically, you may be investing on that savings account, but it’s called a savings account for a reason. A high savings rate doesn’t mean a high investing rate.

In our situation, we have a good savings rate. If anything, we may invest too much and it might be better to keep more liquid cash on hand.

I suspect that for most FIRE bloggers, once they get a nice cushion of liquid cash in their emergency, they invest a vast majority of the rest. When I read some blogs, it seems like most of that 50% gets invested. You’ll see the typical brokerage and retirement accounts mentioned: 401k, Roth IRA, SEP-IRA, TSP, solo 401k. Occassionally, you even see a 529 plan for bloggers with kids.

These are all great investment vehicles. We have them too. As explained above, we have a lot of unusual things about our financial lives.

What About “Invest in Yourself?”

For the last few years, we’ve paid around $30,000 a year for school. You may notice that I didn’t wrote “paid” not “spend.” What I really mean to say is that we invested an extra $30,000 in education.

With my wife graduating in about a week, we’ll be down to around $22,000 for the next few years for just the kids. My wife’s investment was for an MBA to add to her Pharm. D. (We’ve messed up our health system so bad that we are asking our pharmacists to have masters in business as well.) It’s too early to tell if that MBA will pay off, but the “powers that be” at her employment have seemed to change course on valuing it when it comes to promotion time. I could write another 3000 words on the topic, but it wouldn’t help anyone and possibly cause more problems.

If my wife moves on from the military to the private sector, the degree will have a large ROI. However, she may choose to just retire, now that she has her pension.

The other $22,000 is a private school for our two kids. We’re “spaving” a huge percent of the typical costs with my wife’s military status. It’s still a lot more than an average private elementary school. Obviously we think it’s an exceptional school. Would you pay half price if you got into Stanford or Harvard? It’s not an easy question at the elementary school level.

What if that money was put in a 529 plan? Almost everyone would agree that’s investing, right? So is this different? What if it leads to a scholarship down the line?

In almost all these cases, they qualify as the old adage of “investing in yourself”, except it’s literally the people closest to me.

It feels like the rest of the community would consider this as spending, no different than if we spent an extra $22,000 on a sports car.

However, if I were start to really calculate our savings rate and investing rate, I’d create a “True Investment Rate” that included school tuition. It’s not in a brokerage account, but that doesn’t mean it’s any less valuable.

What do you think? This is a complicated topic and I’m sure people have different feelings. I can see a lot of gray areas. Is a vacation to Paris museums an education investment? Are tennis lessons an investment?

In the end, I don’t think the characterizations matter. You are the judge of what’s the best value for your money. I find value internally knowing that the money is invested in personal development that matters deeply to us. For a long time, I felt like we should be saving even more in brokerage accounts or wondering why we don’t feel rich. Once I started to think of education spend as investing, my outlook changed dramatically.

How To Create Truly Passive Income With The Dividend Kings

July 9, 2019 by Lazy Man Leave a Comment

With the market hitting new highs, I’ve become cautious as I don’t believe stocks can continue to grow like they have been. I’ve become very interested in stocks that have a history of paying out dividend income in good times and in bad. I am fortunate to have dividend expert Bob Ciura of Sure Dividend contribute this guest post. The top pick has been on my short watchlist of 40 stocks for some time.

Income investors are best served by focusing on stocks that pay high dividend yields with sustainable payouts and strong business models. The Dividend Kings are an excellent place to look for stocks with sustainable dividends, as these companies have maintained extremely long track records of dividend growth. Dividend Kings have raised their dividends each year for over 50 consecutive years.

One of the benefits of dividend stocks that you can hold for the long run is that they provide truly passive income. You need to do very little work other than occasionally checking in on the stock’s underlying business performance. Your dividend income just keeps rolling in. That’s why Lazy Man And Money puts investment income at the top of the Passive Income Pyramid.

The following three stocks have all increased their dividends to shareholders for at least 50 years in a row. Each is a member of the Dividend Kings, and has a dividend yield above 3%.

1. The Coca-Cola Company (KO)

Coca-Cola is the world’s largest beverage company. It owns or licenses more than 500 unique non-alcoholic brands, in over 200 countries around the world. Coca-Cola has a market capitalization of $220 billion, and the company generates annual revenue of $35 billion.

Coca-Cola’s massive and diversified beverage product line has helped the company in a difficult environment for soda. Consumption of soda has declined for an extended period in the United States, as consumers reach for healthier drinks with fewer calories and less sugar. Fortunately, Coca-Cola is right there to serve the changing consumer preferences with a wide product portfolio beyond its flagship sodas. In recent years, Coca-Cola has branched out to energy drinks, water, teas, juice, and other products, which have helped return it to growth.

Coca-Cola reported first-quarter earnings that beat expectations. Organic sales, which excludes currency fluctuations, rose 6% against a consensus for a 4% increase. Unit case volume was up 4% as weakness in North America was more than offset by international strength. Comparable earnings-per-share increased 2% to $0.48 despite an 11% currency headwind. Earnings-per-share included a $0.02 benefit from timing, primarily from the bottler inventory build related to Brexit. Coca-Cola expects 2019 to be another year of steady growth, with a forecast of 4% organic sales growth and 12% to 13% in total sales growth.

Coca-Cola is growing revenue, and recent acquisitions will add to that growth. Last year, Coca-Cola acquired Costa Coffee for $5.1 billion. Costa is a global coffee drink maker, and also operates a chain of nearly 4,000 coffee shops. Coca-Cola has expanded its beverage portfolio to include drinks that cater to the health-and-wellness trend, such as adding natural drinks like Kombucha. It also made an investment in sports drink manufacturer BodyArmor.

Coca-Cola has increased its dividend for 57 years in a row. The stock has a current dividend yield of 3.1%, and there should be continued dividend increases each year.

2. Emerson Electric (EMR)

Emerson Electric was founded in Missouri in 1890 and since that time, it has evolved through organic growth, as well as strategic acquisitions and divestitures, from a regional manufacturer of electric motors and fans into a $41 billion diversified global leader in technology and engineering. Its global customer base affords it $19 billion in annual revenue.

Emerson spent the last few years restructuring its business, pointing itself toward higher-growth areas while selling off businesses no longer deemed to be part of the company’s growth strategy. For example, in 2016 Emerson divested its network power and other power businesses for over $5 billion, which it used to reinvest in organic growth and acquisitions. Emerson utilized more than $2 billion on acquisitions in 2018, including the A.E. Valves acquisition and the acquisition of GE’s Intelligent Platforms business.

These moves have put Emerson back on track. Emerson reported strong results for the most recent quarter. Revenue increased 8%, while underlying sales rose 4%. Acquisitions contributed half of Emerson’s total revenue growth last quarter. Underlying sales growth was due to strength in the North America air conditioning and global professional tool markets. Operating cash flow increased 7% in the second quarter, while free cash flow rose 3% to $414 million. EPS came in at $0.84, up 11% compared with the same quarter last year.

These moves have paid off for Emerson, as the company expects 2019 to be a very strong year. Net sales are expected to increase 7%-10% for the year, with acquisitions contributing 5% of full-year sales growth. Organic sales, excluding the impact of foreign exchange, are expected to rise 4%-7% this year. EPS growth is expected in a range of 4%-8% for fiscal 2019.

For the full fiscal year, Emerson expects adjusted EPS in a range of $3.60 to $3.70. Still, fiscal 2019 will be another highly profitable year for the company, which fuels its long history of dividend increases. Emerson stock yields 3%, and the company has increased its dividend for 62 years in a row.

3. Federal Realty Investment Corp. (FRT)

Federal Realty is a Real Estate Investment Trust, or REIT, which means it owns real estate properties which it leases for rental income. Federal Realty primarily owns shopping centers. However, it also operates in redevelopment of multi-purpose properties including retail, apartments, and condominiums. Its major markets are Washington, D.C., New York, Philadelphia, Boston, San Francisco, and Los Angeles. It also has properties in Miami and Chicago as a result of recent expansion. Federal Realty has a market capitalization of $9.9 billion.

Federal Realty reported first-quarter earnings that showed another quarter of steady growth. Funds from operation (FFO) per share was $1.56, in-line with expectations and up by 2.6% year-over-year. Total revenue was also up year-over-year by 3.4%. Meanwhile, same-store operating income increased 3.5% year-over-year, comparable portfolio leasing was at 94.6%, and achieved cash basis rollover growth of comparable spaces was 10%, reflecting a very healthy business. Due to the results that were relatively in-line with expectations, management maintained FFO per share guidance of $6.38 at the midpoint for the full year.

Federal Realty’s future growth will be based on raising rents on existing properties, as well as contributions from new properties. As a REIT, Federal Realty routinely acquires new properties, which means it is critical for REITs to have strong balance sheets and financial flexibility. Indeed, Federal Realty has a high credit rating of A- from Standard & Poor’s, which helps lower its cost of capital.

With an expected FFO payout ratio of 64% for 2019, Federal Realty should have little trouble continuing to raise its dividend going forward. Federal Realty stock has a 3.1% dividend yield, and the company has increased its dividend for 51 consecutive years.

This article discussed 3 Dividend Kings to fill out the top of your Passive Income Pyramid. To see our favorite dividend growth stocks today, start your free trial of The Sure Dividend Newsletter.

The Sure Dividend Newsletter includes our Top 10 dividend growth stock buys each month, a portfolio building guide, and more. As a bonus, Lazy Man & Money Readers can save $31 off on The Sure Dividend Newsletter by starting their free trial at this link.

Reviewing Two Years of Stock Picks

June 6, 2019 by Lazy Man 7 Comments

Today’s article is going to be a quicker one. I’ve been attacked by the allergy monster over the last couple of days. When I’m not sneezing, I’m just trying to get a breath of air in.

I feel like I’m falling behind on everything and with this being the last week of school for the kids, there won’t be much catching up next week. Some blogger dads were talking about what they wanted for Father’s Day and I think everyone universally said the same thing, “Some time off!”

Today, I wanted to do something that’s a little controversial – review stock picks. I’m a big believer in index funds. It’s the “Laziest” path to wealth. For many people, investing advice can be as simple as just keep buying up shares of Index 500 ETF stock. I’m a little more diversified, but that’s my general investing philosophy as well…

… except that I like to have some fun too!

I can’t shake the idea that there are people out there who bought Amazon at $3 a share and are enjoying it at $1700 a share now. How can that feel anything less than awesome, right?

I know that I’m not going to find the next Amazon. Even if I did, I’d probably sell it at $6 and collect my sweet 100% return – while I miss out on the $1700 per share gains.

That doesn’t stop me from taking a little side money, looking for some big companies that aren’t doing so well, and investing with the hope that they’ll double my money. Every now and again, I write an article about stocks that I think could do just that.

Let’s review and see those stocks have done:

Five “Bargain” Stocks to Consider Buying Now

I wrote his on August 24, 2017. The dates on my articles reflect the last time they were updated, so it’s easiest to use the first comment date as a guideline for when the article was written.

The stocks I picked at the time were: Under Armour, IBM, SNAP, Chipotle, and Twitter. They each has some kind of sad story to tell. Under Armour had the death of retail. IBM had years of no growth. SNAP looked like it was going to lose to Instagram. Chipotle had people getting sick from their food. No one knew how Twitter was going to grow or make money.

Besides their sad story, they had two things in common, they were household names and I didn’t see them folding up shop any time soon.

Here’s what their performance looks like:

Stock	Symbol	Invested	Price Then	Shares	Price Now	Value Now	Growth
Under Armour	UAA	$1,000.00	$16.68	59.95	$25.73	$1,542.57	54.26%
IBM	IBM	$1,000.00	$140.50	7.12	$131.46	$935.66	-6.43%
Chipotle	CMG	$1,000.00	$307.00	3.26	$687.40	$2,239.09	123.91%
Snapchat	SNAP	$1,000.00	$14.00	71.43	$13.51	$965.00	-3.50%
Twitter	TWTR	$1,000.00	$16.89	59.21	$36.48	$2,159.86	115.99%
		$5,000.00				$7,842.17	56.84%

I think it would be safe to say that Under Armour, Chipotle, and Twitter were home runs while IBM and SNAP were flops.

Actually, I don’t view IBM or SNAP as big flops. IBM has paid out around a 5% dividend during that time, which isn’t factored into this pure stock price view. SNAP would get under $5 a share. I loaded up at around $6 and change and today have seen it double. It’s one of my most successful stocks.

I had personally already loaded up on Twitter stock at around $15. So while the price did get to around $47 and has been off of that for awhile, I am comfortable with it in the mid-30s.

Finally, I did buy Chipotle almost as soon as I published the article and sold it when it doubled. I never bought Under Armour, but thought about it as it went very low before doubling to today’s stock price.

With a total performance of around a 57% gain over nearly two years (plus dividends), I feel like these calls would have worked out well.

Sky-high Market? Seven Value Stocks to Consider

This was a fun article, because it was nearly exactly 1 year ago on June 10th. I started it off by explaining it was our “summer hole”, which is the time when the kids get out of school, but camp hasn’t started. That gap is getting easier to manage as the kids get more self-sufficient at ages 5 and 6, but it was tough when they were very little.

For this article, I was looking at a stock market that had reached new highs. I was concerned that valuations were just out of control. Some of these valuations came from big tech stocks. I thought it might be safer to move to old school stocks with a solid history of paying big dividends. There was no expectation of hitting a big home run here, because these consumer staple stocks aren’t likely to experience incredible growth.

The stocks I considered a year ago were: GE, Colgate-Palmolive, Johnson & Johnson, Proctor and Gamble, IBM (again), AT&T, and Disney. Here’s a look at how they performed if you invested $1,000 in each. Remember that these are mostly big dividend paying stocks and those aren’t included in this simple formula*.

Stock	Symbol	Invested	Price Then	Shares	Price Now	Value Now	Growth
GE	GE	$1,000.00	$13.11	76.28	$9.90	$755.15	-24.49%
Colgate-Palmolive	CL	$1,000.00	$61.71	16.20	$73.20	$1,186.19	18.62%
Johnson & Johnson	JNJ	$1,000.00	$120.83	8.28	$136.90	$1,133.00	13.30%
Proctor & Gamble	PG	$1,000.00	$74.69	13.39	$107.42	$1,438.21	43.82%
IBM	IBM	$1,000.00	$139.46	7.17	$131.49	$942.85	-5.71%
AT&T	T	$1,000.00	$31.78	31.47	$32.10	$1,010.07	1.01%
Disney	DIS	$1,000.00	$102.36	9.77	$136.74	$1,335.87	33.59%
		$7,000.00				$7,801.34	11.45%

In the last year, the S&P 500 has returned 1.73%, so 11.5% returns plus dividends is much better than I expected.

The only stock you really wanted to avoid on this list was GE. Guess which stock I bought the most of? GE! What buzzard’s luck! Due to some dollar cost averaging, I’m not down that much, but they also cut their dividend to a penny.

I also bought Proctor and Gamble, but I ended up selling it after it went up around 15% or 20% soon after I bought it. Since I invest in retirement accounts, I don’t care to hold for long-term capital gains. I also still hold IBM, which just keeps paying that dividend.

I’m most surprised by Johnson and Johnson being up over the last year. I thought the lawsuits from the baby powder buried them.

I’m kicking myself for missing out on investing on Disney. I mentioned a year ago that their Disney+ service is going to be big. However, I got wrapped up their mess of an ESPN division. I also didn’t have cash on the sidelines and didn’t feel strongly about selling other investments to buy into Disney.

Lessons to take away from stock picking

It’s difficult for me to reconcile stock picking. On one hand, I know it is better to index. On the other hand, it seems like I generally do pretty well. I’m not sure this is enough of a sample size to say that for sure though.

Also, I know that I sell my winners early, so even though P&G might be up 44% above, it wouldn’t have been that way for me. At the same time, I have loss aversion, so I continue to cling on to GE hoping that some day it will return my love.

I’d like to hear from you in the comments. Does this review of all (good and bad) the stock picks over the last couple of years convince you? Did I maybe get lucky?

* Maybe someone can suggest a better tool that includes dividends in the comments?

My Kids Get Roth IRAs

May 5, 2019 by Lazy Man 8 Comments

My kids are getting a Roth IRA to jump-start them to an early retirement. How? Read On.

Yesterday, my dog walked me to a yard sale. I’m used to be walked places by him since he’s a sled dog. Rarely is there anything very interesting. This time was different:

Found a bunch of a games at a yard sale. Picked out 8 classics. The seller wanted a dollar a game. I offered a $20 and she was so excited. pic.twitter.com/15pn17PJew

— LazyManAndMoney (@LazyManAndMoney) April 28, 2019

Someone asked why I negotiated up at a yard sale. If someone is going to save me $50-60 in something that will give our family literally hundreds of hours of entertainment, I don’t mind giving him/her an extra Hamilton. It makes the seller’s day and keeps the money in the community. My day (with the savings) and my kids’ days were already happy. It’s a rare, feel-good case where everyone wins.

It was later that evening, during a family game of Rack-o where I had a revelation – my wife was going to win the game. I had a pretty poor board and I pinned myself into needing a couple of specific numbers. Although there were four of us playing, it was a simple matter of process of elimination…

… the other two players were my 5 and 6 year old sons. The game is 8+, so there were no expectations that they would be able to play a strategic game. So jokingly, said that they were a “couple of buffoons.” Everyone laughed because buffoon is a funny word, especially for a 5 and 6 year old.

That’s a long Grandpa Simpson Story way of saying that I hired my sons to do real work. I’m going to pay them real money. They’ll start funding their retirement plan this year.

Kids and Roth IRAs

It’s difficult for a child as young as ours to build wealth. They get money on birthdays and Christmas. Occasionally they give my wife a toy to sell on Ebay. We recently started to have them do some chores around the house for extra money.

Their ability to earn extra money is very limited. The US Internal Revenue Service (IRS) makes it clear that only earned income can be used for a Roth IRA. The problem is that my baby modeling idea never took off. I also don’t see people lining up to purchase their wonderful Pokemon art creations.

For a more detailed look at kids and Roth IRAs, CNBC has a helpful video. It’s especially powerful to see the amazing growth of compound interest over 55 years. Who wouldn’t want 3.4 million in one of their accounts?

So how are they going to earn this money to comply with the IRS’ demands for funding a Roth IRA. I’m going to pay them. Unfortunately, the IRS doesn’t let you pay them for household chores. For many people that’s a show-stopper for kids this age.

However, I make money dog sitting on Rover.com. It’s a very significant amount too since I can “double dip” at home doing other freelancing gigs.

I’ve been doing this for three and a half years now, so the kids have grown up with a couple of extra dogs around. They’ve become naturally curious about feeding dogs. They love to play fetch with the dogs. Recently, we’ve introduced them to picking up the dog droppings. It’s a chore that their peers do for allowance. However, for the family dog sitting business it’s a core part of the job.

Feeding dogs, playing with dogs, keeping the water bowl filled, and picking up after the dogs is most of the dog sitting job. These are all things that my kids can do. Occasionally I have to give them medicine, but that’s about the only thing that I need to do 100% myself. The IRS should have no issue with me subcontracting out some of the work to them. In fact, I did some math on what a professional pooper scooper company costs and it seems like it could be thousands a year for the amount of dogs we have and how often they’d have to come.

My kids are going to go into the dog sitting business. I haven’t figured out exactly what I will pay them. I think the professional pooper scooper service may be a good guide. My kids aren’t professionals, but the service doesn’t fill the water bowls or play with the dogs.

Contributing to a Roth IRA at this age is very, very powerful. Money grows quite a bit with 60 years of compounding until they reach ages 65 and 66. If they were to earn 7% interest over that long period of time, a single dollar would be nearly $58. So $1000 in a Roth IRA would be worth $58,000. Of course, at 3.5% inflation over that time, you’d need $7,878 to have the buying power of $1,000 today.

When you crunch those numbers, it gives them a real post-inflation gain of 7x their money. Theoretically, if they could earn the $6000 Roth IRA limit, they’d set themselves up with $42,000 in retirement. Of course, that would be an extreme amount of dog care and that wouldn’t be reasonable.

In addition to the Roth IRA, we’ll be paying them some real spending money. They are saving up for a Nintendo Switch, so we’re going to be creating a chart of their progress.

Finally, in the next couple of years, I’m hoping they can participate in some of blogging work. Perhaps later this year or next year, I’ll introduce a bi-weekly kids article. I’ll interview them and get their perspective on what money-related thoughts they have. I’ll then explore how we are parenting their use of money. This is just a seed of an idea. I need to think a little more about how this would work. Of course, I’d pay them for their time and insight.

Impact on Our Taxes

I have to check on this with our tax planning, but I think we’d make out well with this too. We’d be able to write off the amount we are paying, just as we would a professional service. Of course our kids would have to report the income, but it would be too low for them to be taxed on it. As best I can tell, this (small amount money) wouldn’t be taxed all and, since it is going into a Roth IRA would never be taxed.

I think it gets more complicated with them helping out with the blog since it’s an S-Corp. I may have to set-up payroll and things like that which get a little tricky. I’ll definitely need some professional tax guidance on that.

Again, I’m not sure if my understanding of that is accurate, so please check with your own tax professionals before trying anything like this.

After all, the real buffoon in the game was me. My 6 year old won handily.

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