It's the middle of the month. This means that I have the final figures for October 2018 and that I can finally publish them.
October is often a rocky month. (I've recently noticed that I say this for almost every month for one reason or another.) There is the annual FinCon trip that seems to extend to a full week with packaging, planning, etc. It often takes me a few days after FinCon to get back to the heart of the matter. My wife's work is focused on open enrollment in health care, so this is an important time for her.
Fortunately, children are settling into their school schedule. October has little vacation, so it's a sit-down schedule. It's almost as if the universe is balancing.
I will randomly add other personal family events throughout the email.
Let's move on to good things:
Update on Alternative Revenue: October 2018
For those who do not know the term "alternative income", I started using it about 12 years ago to be deliberately vague. I needed something to cover the small income I earned on blogs, as I developed my personal loan portfolio as a source of income. (P2P has worked for a while, but I'm fed up with it in recent years.) Blog revenues can be very erratic, but they also have a residual nature. Some popular bloggers still struggle to classify the nature of income. I think that alternative income was more passive in 2007 before social media, podcasting and video. Today, it seems that all bloggers talk about jostling (for example, acting fast, not embarrassing people) and by that, they mean "to be everywhere". I feel alone in being silly enough to keep writing blog posts … t have cool "pinnable" pictures.
Last month, I sowed for the first time images from last month. I have seen other bloggers do it and readers tend to like it. My only rule here is that I will show food images if the presentation is amazing, like a current 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 a passive investment and these jostling. The best way to think about it is income when you do not directly trade your time for cash. This report concerns all my alternative income. To include my investments in this paradigm, I have to falsify the numbers a bit. You'll see what I mean as you go along … or you'll see a more detailed explanation in January 2017.
Last month, in September 2018, my alternative income was $ 6,537.81. That's down about $ 600 from August, a drop in the bucket.
Be that as it may, September is nowadays an old story, so let's move on to the most recent history: October.
Alternative income of lazy man – October 2018
By examining our alternative income, I divide it into 3 main sources … each with its own caveats.
1. Blogging Income + Dog Sitting
My "real world" friends asked me, "What are you doing?" I'm not a fan of the question … because it's just rude. I think he usually sorts or ranks someone. My "software engineer" answers have received very different reactions from those of "dog guard". Nevertheless, an answer is required. I turn between all the things I do. What are these things:
I guess the best answer is that I'm a dad who stays at home. Children go to school about 6 hours a day. So, my "non-dad thing" is 30 hours a week. This gives me time to do some family shopping (shopping, cooking, washing up, laundry, walking my own dog, etc.) and dog sitting and blogging fill gaps.
At blogging conventions, a popular question is, "Are you a full-time blogger?" I answer yes, but then explain that I spend very little time blogging. I do not think most people understand the idea of not having a full-time job, but having a full activity. I do a lot, a lot more now than I ever did in a full-time job. If you really want to read a lot more, it gives you even more. I think everyone assumes that Boss Lazy Man will tell Employee Lazy Man to take a day off the blog to do things that are not blogs. It's not really how it works. People in standard jobs have a lot of isolation and can say, "You see, my boss says I am not available."
I've had too many words on it, but if you want a very short list of what I'm doing, check out my "Now" page.
I do not publicly publish the difference between the income of a blog and the income of a sitting dog. The one impacts the other. When I have a lot of dogs, I do not have as much time or interest in blogging. When I blog a lot, it's usually because I do not have too many dogs to sit down … and there's no other disaster going on.
You may be wondering now: "Is not alternative income DO NOT trading time for money? " TRADE time for money? It's a solid point. However, I do not do it directly. Let me explain:
Sitting dogs is not a job that takes a lot of time … at least with the number of dogs I have in general However, there is a lot more overhead than you think between booking of a dog and his encounter with a dog. The important difference with dog care is that I can "double up" and make money on the other hand, like blogs, at the same time. It's very different from being an Uber pilot. Police tend to frown while blogging and driving. (Hmmm, maybe if I had a voice recorder and translation software, I could write drafts … Nah … I'm sure customers would not want to go over my children's child seats. Studies also show that Uber drivers earn well below the minimum wage when accounting for their expenses.)
If you are interested in dog sitting, I wrote a very detailed article on the subject: Advantages and Disadvantages 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!]
Blogs usually take a lot longer than sitting dogs. (The summer months are the exception). However, it is also not a direct exchange of time for money. If I write an article for the blog today (like this one!), I do not necessarily get substantial money. The money I earn by blogging now is the direct result of our reputation and our collection of nearly 2,500 items over 12 years.
October was a month of extremely low dog care, as I mentioned at the beginning. Few people travel on Columbus Day.
Blog revenue was also slightly below average. I can not put my finger a specific reason for which. It could be just a rap in the radar.
Regarding blogs, I would like to add that everything is not a question of money. I highly recommend personal finance blogs. I would not want to create the biggest blog in the world. Instead, I would think of it as a way to stay responsible. It worked for me. Here's how to start blogging with any type of blog that might interest you.
In September, these two categories combined for a total of $ 3,312.81. But for October it was …
Total blogging and custody revenue: $ 2,528.83
There is really nothing positive about the movement of these two numbers. Fortunately, the month of November seems much better with the dog sitting because of the Thanksgiving holiday. Hope we will have a good end of the year.
In addition to dogs and blogs, October was the third month I spent a lot of time on the two new freelance jobs. Their income is similar to that of blogs and dog care, but I do not include them because there is really no alternative to them. I always feel the need to mention them, because it's MUCH that I do not blog. Guaranteed income can be much better than dogs and blogs. It's also a good thing to raise more than $ 2,500 in revenue, even though I have all the other things I do.
2. Rental income
Here's where I need to fudge the numbers. Sorry, but it's necessary.
We have three rental properties in our accidental "empire" of real estate. ("Empire" is quoted in quotes for a reason – it's a joke.) They all have a fixed mortgage of 15 years. That means we're not bringing in more money now, but we're paying off those mortgages faster than most people. In 9 years, we should be able to collect an estimated $ 40,000 a year (in today's dollars, after spending).
So here's why I have to fool the numbers. For the purposes of this report, it makes no sense to count properties as zero income. I do not want this report to push me to a bad decision. It might make me sell them and invest the money differently so that the numbers look better. For example, if someone offered you a million dollars in 10 years or 10 dollars a year now, you would expect the million (I hope). However, for this report, the $ 10 a year would give you better numbers.
This is an extreme example, but it shows how the short-term plan is sometimes the enemy of the long-term plan.
Here's how I decided to cheat the numbers.
I add all the values and equity of the properties. Zillow is accurate for these condos because it has many data points. Then I calculate a value / equity ratio. In short, it is the percentage of the value of the property we own in relation to the bank. Then I calculate the rents of all properties as if they belonged freely and clearly. Thus, we can say that we "trivialize" (in the purest sense of the term) a percentage of the rent that we might expect to have in the future (rents are generally inflation in the simplest sense).
If you're confused (and you probably are), this article on calculating cash flows from real estate without cash flow explains it in more detail.
Here are the numbers for October. We have 51.80% of the shares in our properties with an estimated combined rent of $ 3,350. (This figure includes insurance, property taxes and condo fees.) We were able to increase rents a little earlier this year because the rental market was good and we gave way to new tenants.
If you multiply the USD 3,350 by 51.80%, you get USD 1,722 in "falsified" monthly alternative income. When I started tracking (early 2017), we owned only 36.4% of properties and their rents were lower. The calculation worked at $ 1,174 at the time. So, in 21 months, we saw the number increase by $ 548 / month. It's like offering an annual increase of $ 6,500 until the end of time.
As the years go by, the ratio will rise to 100% of the $ 3,350 monthly rent, which is resistant to inflation. This brings us to the $ 40,000 annual I mentioned above.
[[[[TD Bank opened a new branch nearby and organized a big party. We had free pumpkins, saving us a few dollars by picking them up at the grocery store. In related news, I learned that TD Bank is not the same as the TD broker Ameritrade.]
In the previous report, rental income amounted to $ 1,703. This number is generally evolving slowly, so we will take the $ 19 increase. This number changes only if one of the following two things occurs: 1) The value of the properties increases. 2) We charge more for rent. I do not control the housing market, so I can not change too much here. Tenants are usually stranded for at least a year. The monthly mortgage repayment creates equity each month. That's where we saw the gains in October.
Slow and steady wins the race for real estate. In previous reports, I was hoping that by the end of the year, 50 per cent of equity would be $ 3,325 or $ 166,250 per month. As the properties have appreciated, we have already exceeded this limit. Perhaps we could reach 53% for $ 1762.25 of falsified money by the end of 2018.
Total income from rental properties: $ 1,722
3. Dividend income
As for the "income" of a rental property, I will play a number game. You can decide if the game is right. I always appreciate the comments!
We are not trying to put our money into dividend stocks, but I'm going to imagine we're doing it for this exercise. In fact, we have a large majority in index funds, but I select stocks with a small percentage of our portfolio. Although index funds pay dividends, this is not their main objective. I also simulate the numbers in another way. The money I'm talking about here is in our retirement accounts, so it's not something we would call "income".
Even though all this money is in retirement accounts, we could remove the money and use it. We would have tax penalties so we will not do it. However, like mortgages on the rental property, this is a real value that deserves to be taken into account. My goal here is to capture almost 20 years of pension contributions for the most part.
[[[[We were invited to a cocktail party at the Ida Lewis's Yacht Club. Ida Lewis is perhaps the most amazing person you have probably never heard of. I know she's done more at the age of 12 than I will in my life. It was a pleasure to be in the same building.]
Just like rental income, we can pretend that the portfolio would win if we invest all the money in stocks or dividend indices. To pretend, I felt that we could earn 2.50% of dividends. Most people estimate a risk free withdrawal rate of 4%, but the withdrawal is not our plan here. We think only of the liquidity that these investments could bring back to our living expenses.
October was a very bad month for our portfolios. The stock market has dropped a bit. We are almost exactly where we started the year with our stock portfolio. Given the big clues, I think most people are probably in the same boat. The final result is:
Total dividend income: $ 1,460
Last month it was $ 1,522, so we lost $ 62 in theoretical monthly cash with theoretical dividends. This may not seem like much, but that number does not usually change much. A drop of $ 62 is very important. We are on the long term so it does not matter.
Very close to passive income
Most people consider the income of a rental property as a rather passive income. This is not because you have to deal with tenants. However, when things are going well, there may be no "work" every two months. For the sake of argument, I think we can agree that it is "more" passive than writing blog articles and sitting dogs. I spend a lot more time on the last one than the old one.
Of course, the dividend income is completely passive, so I do not need to argue too much.
This "income very close to passive income" category is a combination of "rental income" and "dividend income". (Yes, that's a lot of quotes.)
[[[[We went to the zoo to see hundreds, maybe thousands of pumpkin carved art as above. It's amazing. Although it costs a bit, we saved money with our zoo membership. In addition, the money they collect helps to fund the zoo, which is definitely worth it.]
At the beginning of the year, dividend income was slightly ahead ($ 48) on the income from the rental property. It's like the debate on actions against real estate, but for our personal finances. Now the difference is $ 312 in favor of "real estate income". The real estate starts to take off decisively.
The stock market rises and falls, so dividends also fluctuate. Rental income continues to grow as mortgages are always repaid monthly. The stock market can evolve much faster than the real estate market. Anyway, I like that both work for us.
Income very close to passive income in October: $ 3,183
Last month it was $ 3,225, so $ 42 less. This is the first time this has happened in 18 months of reporting. In total, it rose from USD 2,354 in January 2017 in total. Since then, it has grown from an estimated annual income of $ 28,252 from these two sources to $ 38,191. It should be noted that once again, these are dummy figures that are not yet "real". However, I am looking forward to the fact that in 9 years, investment properties will be repaid. Add to the growth of the stock market (from a conservative 4%) and this number could reach 80K a year. I estimate that our long-term expenses are about $ 35,000 per year with the house paid.
I have ignored some minor (but important) details. Details such as our investments are in retirement accounts.
Final alternative income
Adding "dogs and blogs" to "income very close to passive income", this month we have an investment of $ 5,710.83 in monthly "alternative" income. That would be $ 68,529.96 a year. I was more excited when that figure was $ 88,000 and I did not think it would increase from there.
Nevertheless, this largely hypothetical amount of $ 68,529.96 per year on investments, the writing of a blog and the care of dogs is fantastic. In the long run, we can get by with almost half of that income. It does not include the income of the pharmacist who earns my wife's bread, her potential military pension if she retires next year, or any self-employment that I did for several months.
This is the part of the article where I mention that I still hope to write a book to increase my alternative income. I had always thought it was an eBook, but if a reader knew an editor, I would appreciate the connection. Seriously … it seems that everyone in personal finance has a book contract other than me. I think I can make a convincing argument for a book that you would see in a bookstore … that is, if the libraries still exist when I finish writing it.
Update of net worth
Since I do not share the actual figures of our net worth, it's not very exciting. That's why it's just a footnote.
I sincerely believe that net worth is one of the most important figures in personal finance. It is therefore interesting to share it in one way or another. Showing relative growth can be useful, I think? (Let me know in the comments.)
I use Personal Capital to track my net worth, which makes the job easier. It's free and you should try. For full disclosure, I could earn a few dollars if you do it.
In October, our net worth fell by 0.90%. Ouch! Two consecutive months of decline. Do not the markets know they have to go up, so I only write positive and encouraging articles?
For the year, our net worth increased by 8.78%. It seems that the goal for the year will be double-digit. I use the term objective in an approximate way because a large part of our net worth is invested in markets that we do not control.
As a reminder, the percentages can be odd … Imagine yourself with a person with a $ 100 net worth found a $ 100 bill on the ground. Instantly, it doubles its net worth. As our net worth increases, the percentage of growth will also decrease. Do you prefer growth of one million dollars of 10% growth rather than 100% of 20%, is not it?
How was your October? Let me know in the comments.