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The short answer to that question is zero, because I don’t have a pension… however, my wife does. She completed 20 years of military service in March, but continues to work (for now).

Earlier this month, I asked the question “Should You Include Your Pension in Your Net Worth?” and found that opinions were generally mixed. Most (61% in my small Twitter poll) believed that you should include it. This is consistent with how finance professionals and divorce courts view it.

However, there are still plenty of people who feel that a pension shouldn’t be included in your net worth. They explained that a pension is future money that you don’t have and can’t gift in an estate.

I ended up deciding that I’ll keep two logs. One log will count all the traditional assets and liabilities used in a typical net worth calculation. The other log will include the value of a pension and this website. I don’t know if there’s any great value in keeping two logs, but there’s no harm and it is a little work once you calculate the values. Also it doesn’t matter since net worth numbers don’t drive any of our financial decisions.

The first question in the comments of the article was what I wanted to write about today.

“How do you value the pension?”

If you are going to include a pension in your net worth, you have to have a number to plug in there. Fortunately, there are a couple of different methods that we can compare and contrast. For the purposes of this article, I’ll be presuming a military pension, but your pension circumstances may vary. If you are in the military, you may also be interested in “When should you retire from the military?

1. Calculating Pension Value using Life Expectancy

The first idea that came to mind is to use the simplest math possible. My wife’s pension will be $[X] when she retires. Her life expectancy will be roughly [Y] years. The number of total pension dollar she’ll be paid is “$X * (Y – [current age])” The Social Security Administration has a life expectancy calculator that’s helpful.

Plugging my wife’s information into the calculator shows she is estimated to live another 41.7 years. That’s just as cold as I expected from the SSA. There are other life expectancy calculators that may be more accurate by factoring health and lifestyle behavior. This is good enough, especially because nothing is guaranteed.

My wife is a fairly high ranking officer (so proud!). If she retired tomorrow, her pension would be $55,462 per year. Simple math gives us: ($55,462 * 41.7) = $2,312,765.40 total pension dollars. (Since military pensions grow with inflation, we don’t have to worry about eating up the buying power.)

If my wife continues to work longer, you might think this method would value her total pension as being worth less. After all, she’ll have fewer expected years to collect. However, the pension will grow with more years of service.

2. Calculating Pension Value with with Annuities

On its most basic level, a pension is an annuity. Thus we could look at how much it would cost to buy an annuity equal to the monthly payout of the pension. I found a couple of calculators online, but they tried to get me to sign up and/or give personal information that I believe would lead to a sales pitch.

One showed that it would cost around $1,200,000 to produce the same $55,462 per year in income. I was surprised that it was so low. However, that $55,462 was not inflation-adjusted, so that $55,462 in 40 years from now is really worth $20,655 (assuming 2.5% inflation).

I next looked for inflation-adjusted annuities. Unfortunately, while they exist, they are harder to find and seemingly impossible without getting caught in the potential sales pitch.

For now, I’ll presume that the 1.2M in annuities without inflation protection would be about the same as the 2.3M number by using life expectancies when inflation protection is factored in. It at least seems plausibe.

3. Calculating Pension Value with Treasury Rates

A third way to look at a pension is by using Treasury Inflation-Protected Securities (TIPS). If someone gave you $1 million dollars and you put it in these, extremely safe investments, how much money would they generate each year. Current treasury rates between the 20-year and 30-year are very low, with an average of around 0.85%.

Thus we could say that hypothetical gift of a million dollars would yield only $8,500, a far cry from the $55,462 number we are aiming for. We need to work it backwards and take the $55,462 number and divide that by the 0.85% yield.

The result is that the pension is worth $6,524,941.18. That seems very wrong! It seems the problem is that interest rates are just too low.

What if we use another metric? The 10-year government bond rates is currently 2.33%. Using is makes the estimated value $2,380,343. Thus, if you invested $2,380,343 and were able to get a relatively safe 2.33% interest rate, you’d get $55,462 in interest.

However, the 10-year government bond rates are not inflation-protected. Twenty years from now, the $55,462 that you get back from that calculation will not have the same buying power.

4. Calculating Pension Value with a Finance Calculator

I found an interesting article on Sapling.com about calculating pension value. It uses a financial calculator, which is something that I’ve never been good at. It looks like this might be worth more value when you are looking at a point somewhere in the future when you get access to the pension. For us, it doesn’t seem to work since that date is not determined.

Final Thoughts on What a Pension is Worth

It’s hard to put a definitive number on what a pension is worth. However, considering that the first, second (after inflation-adjusting), and third calculation all came to about the same $2.3 million number, I will use that for the second net worth log.

That’s a very, very large number. It’s so big that it dwarfs much of our other financial assets – as you would expect. That’s why I’d keep it in a separate net worth log. It’s also a good time to reflect that I created this blog and have written about FIRE for the last 13 years because I knew my wife’s financial contribution wasn’t just her salary, but also a large stream of passive income. In 13 years of time, I haven’t been successful in creating $55K+ of annual passive income to match her. However, our alternative income is getting very close.

I don’t believe there’s a firm right or wrong answer to what a pension is worth. Fortunately, this is one area when a reasonable estimate is usually good enough.

The post What’s My Pension Worth? appeared first on Lazy Man and Money.

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There’s so much politics in the news nowadays that some really important stories are falling under the radar. For example, the NXIVM alleged “sex cult” MLM involving celebrity actresses and heiresses is getting very little attention. That particular link is just the latest news that came out yesterday. Stuff like that has been streaming out for a year or two now.

For a long time, I covered MLM scams as a side project here. MLMs fit well within personal finance territory because they bill themselves as a entrepreneurial opportunity to make extra income. They even fall within the area of FIRE (Financial Independence/Retire Early) because they pitch the idea of working for yourself with just a few hours of week.

Of course those claims are too good to be true and the real “opportunity” is to trap a dozen others in a money-losing pit to boost yourself out. Not only that, but MLMs are NOT businesses since they avoid many core basics of business.

After reviewing a few dozen MLMs on the site, I realized there was a pattern. Each one would say that their MLM is different or better, but except for minor inconsequential details, they were the same. In fact, there videos like this one (not made by me), that covers many of the basic ingredients:

How to Spot a Pyramid Scheme - YouTube

Of course John Oliver does the job with a lot more humor making it hilarious to watch:

Multilevel Marketing: Last Week Tonight with John Oliver (HBO) - YouTube

Because each MLM seemed so similar, I decided to posit a theory… that every MLM is a scam. I realized that this would be practically impossible to prove for two reasons:

Despite this, no one has been able to meet the challenge of showing me a legitimate MLM. A few have tried with hilarious failings such as the ViSalus scam.

However, what I wanted to show with that article is how they all could be scams. My idea was based on the fact that MLMs contribute fiercely among themselves for distributors. This is done in secret much of the time, but it leaks out through lawsuits that companies poach other distributors. This is almost always done by targetting someone high up and getting their entire recruited pyramid of people – sometimes referred to as a downline in MLM.

My theory was that a legitimate company basing commissions on sales and not recruiting is at a competitive disadvantage. It’s an impossible sales pitch to tell someone with a big pyramid of recruits that they have to make money selling product by knocking on doors or setting up yard sales. Thus, I presumed the reason why no one can name a legitimate MLM company is because one doesn’t exist because it can’t exist in the competitive environment. Specifically:

If you are going to try to run a legitimate MLM organization, how can you draw people to your business and compete in an environment of illegal pyramid schemes? You can’t. If everyone is allowed to put a pile of aces up their sleeves in a poker tournament and you play an honest game, you aren’t going to be in the tournament very long.

Imagine if there were no drug testing in the NFL. It would be extraordinarily difficult for a clean linebacker to compete for a job against a group that are extensive steroids users.

FTC Forces Advocare to Leave MLM

I’ve often said that if any MLM wants to prove it is a legitimate company they can simply switch to single-level commission sales. Take the recruiting out of it. If your commissions structure is good enough, you don’t need to pay people to recruit people to it. There are lots of people who make a very good living on affiliate sales. If you’ve read personal finance blogs, you’ve seen them for hosting or financial management software*. Those programs are free to join and there’s no recruiting to them.

It’s such an easy solution to the pyramid scheme problem that MLMs face that no one has questioned it. The MLM supporters just have to change the subject, because if it doesn’t have the pyramid scheme recruiting aspect, they don’t count it. And they are right, the pyramid scheme recruiting aspect is the multi-level in MLM.

The big news is that Advocare has decided to do what seems to be exactly what I proposed… remove the pyramid scheme aspect of their compensation plan.

I applaud this decision because my analysis lead me to have the opinion that AdvoCare was a scam.

At the end of last week, Advocare released the official statement that it “gave notice to its more than 100,000 Distributors… [that] AdvoCare will revise the business model to a single-level distribution model, paying compensation based solely on sales to direct customers.”

The reason for this change isn’t that Advocare decided it was best to get away from what appeared to be a pyramid scheme. Instead it cited that it has been in “confidential talks with the Federal Trade Commission about the AdvoCare business model and how AdvoCare compensates its Distributors.” The CEO futher declared that “Based on recent discussions, it became clear that this change is the only viable option.”

While it would be great to have all the details of those discussions, it sounds to me that the FTC has finally started to regulate the MLM industry and is applying the same test I suggested.

It’s also important to note that there’s a federal lawsuit that alleges AdvoCare is a pyramid scheme. The suit uses AdvoCare’s own numbers to show that only 2000 of the 600,000 distributors make more than a minimum wage income. So you have about 0.33% (1 in 300) of doing better than any minimum wage job.

In the past when an MLM aspect has been terminated a company has become a shell of itself. The FTC specifically detailed the loss of business that Burnlounge experienced. The FTC similarly brought Vemma’s scam to an end by forcing it focus on sales and not recruiting.

Interestingly, a bunch of MLM people left one MLM to make another MLM called Yevo. Before that company got too far along with their $5 a serving oatmeal, they switched away from the MLM structure. I had received an email that the FTC was cracking on them, but I couldn’t verify its accuracy, despite it making the most logical sense to me. I don’t think the company is still in business.

Like the others, $40 juice or $5 oatmeal doesn’t seem to sell without a pyramid recruiting “business” opportunity.

What’s the Reaction of Advocare Leaving MLM

There are some websites that cover MLM in detail and give additional commentary such as this article. Many MLM distributors visit and comment freely. I don’t want to promote some of them, because I believe they profit by promoting the scams as a regular business. However, I will say that most of the discussion has some very UPSET distributors.

On one hand, it’s hard to blame them. They’ve been told that building a recruited pyramid is a good, legal business. Now they are being told that they’ll have actually sell products themselves instead of the recruiting.

On the other hand, if they had been doing selling products instead of pyramid recruiting there’s no change. There’s nothing to be upset about.

Final Thoughts on AdvoCare

It would be really interesting if AdvoCare was a publicly traded company with earnings that we could review. We might never hear how this impacted their business. My guess is that you’ll see dramatically lower cost products that can compete on their merits. Usually, MLM products are overpriced, because they’re used as an admission ticket to the pyramid recruiting building scheme.

This is an extremely big deal in the pyramid scheme/MLM world. If it can happen to Advocare, it can happen to anyone.

It’s also a reminder that it’s a bad idea to attempt to build a “business” on recruiting downlines or “teams” of recruiters. Not only are the odds of success extremely bad, but any kind of “success” means you put a bunch of others in a financial hole. And sometimes you wake up one morning and find that you never really had a business anyway.

* I have affiliate links for personal finance management software and blog hosting too.

The post Advocare Forced by FTC to End its Scam appeared first on Lazy Man and Money.

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Everyone is a product of where they focus their time and energy, right? As you can tell from this blog, much of my focus is on personal finance, especially financial independence. In my personal life, much of my focus is parenting two boys, ages 5 and 6.

Getting them started on a path of financial independence is inevitable. Given their age, we are working with simple things like chore charts and saving money for special toys.

One of my biggest concerns is the changes in the world. When I growing up in the 80s, I knew programing a computer was the future. Nowadays, retail stores and newspapers are closing. The automotive industry may nearly disappear as robot, on-demand cars may mean car ownership and driver jobs are a thing of the past. Artificial intelligence promises to disrupt more markets.

I know that most people think new jobs will be created. That’s probably true, but who knows if enough good jobs will be created. It seems that the current trend is replacing journalist jobs with influencer jobs. That should concern us all.

We can’t change where the world is going, but we can help prepare my kids. Here are a few things that we’re doing:

Teach Core Life Skills

This is a no-brainer. Some skills never grow old and can directly influence your bottom line. Here are the first two skills that came to mind. If you can think of more, I’d appreciate it if you could please drop me a line in the comments.

1. Cooking

Food is often one of people’s largest expenses. It doesn’t have to be. Eating out at restaurants is expensive. If you know the basics of cooking, going out to eat is less appealing.

We’ve got the kids enrolled in an after-school cooking class. They might not be learning much, as I’m still waiting to be served breakfast in bed. However, they are enjoying it which is a big win at this stage.

In conjunction with learning cooking, I hope to teach the boys how to shop to save money. This will include updated versions of the following articles:

2. Handyman

I’m not handy at all. I can’t fix anything. I can barely work a screwdriver. If something breaks, I have to write a check.

That’s not good, especially for landlords like us. If you are good at fixing things and home improvement in general, you can create a lot of real estate opportunities with just sweat equity. You can fix up the house and move repeating the process over and over. You may even be able to keep the money tax-free.

Perhaps someday, one of their jobs could be a managing our real estate “empire” and we could pass money and equity to them over time. I haven’t figured out exactly how this arrangement would work, but in theory there’s an opportunity there.

For now, I just want my kids to be better than I am with any handyman stuff. Home Depot has “kid workshops” once a month, but we haven’t had a chance to get to one yet. They also have workshops for adults, so maybe it’s not too late for me to learn a thing or two to pass on.

Personal Finance

I don’t think I’ll have to focus on teaching them too much about personal finance. I half suspect that they’ll learn it from osmosis perhaps like I did from my mother. However, I can give them a couple of boosts.

If they don’t master personal finance from osmosis, they can fill in the gaps with my Ultimate Guide to Financial Freedom. I’m hopeful that when they are older they’ll give their old man 10-15 minutes to read the Cliff’s Notes to financial success.

As a practical matter, I recently wrote about their kid Roth IRAs which will give them a head start in saving for retirement.

Education

Education is one of the foundations for a high-earning career. We’re investing a lot in private school now in hopes that it will set them on a great path for the future.

I’m still not sure that’s an optimal investment. For example, an episode of Teen Titans Go! (one of my favorite kid shows) brings up the idea that investing in a rental property is better than college. I don’t agree, but it’s an interesting topic. Of course, the

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It’s the middle of the month, so that means that I have the final alternative income numbers for last month. It always takes awhile for the tenants to have their rent checks in and for us to get all the money moved.

April was another busy month for us. In addition to all the financial stuff below, there was a lot of family stuff going on. The kids are still taking swim classes and one moved up a level. We reached a crucial milestone where if they fell into a pool they wouldn’t drown (I think). The older, 6-year old was one of the stars of a school play, so we’ll probably be investing in children theater classes in a few months. The younger, 5-year old seems to have acting in his blood, but he’ll have to wait until he’s 7.

They accidentally got renewed in a cooking class after school, so we just rolled with that. It’s great money-saving skill to learn at a young age. However, it means that we have to miss the local chess club. In a text document somewhere I have some research into Android apps that may fill the gap as long as they are still interested.

This also happened:

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


Both kids asked me if they could learn Japanese so they can work at The Pokemon Company someday. We’ve got more than 20 straight days on Duolingo together. We’re also learning French because their school starts that in Kindergarten. We’ll have to plan a trip to Canada in a little bit.

I’ll mix in some pictures throughout the financial update, because numbers can be boring.

If you are a new reader, you’re going to want to refer to my Alternative Income FAQ as you’ll have a lot of questions.

Lazy Man’s Alternative Income – March 2019

In looking at our alternative income, I break it down to 3 main sources… each with their own caveats.

1. Blogging + Dog Sitting Income

This summed up our dog sitting in April:

I got 99 problems… pic.twitter.com/501wLKof1m

— LazyManAndMoney (@LazyManAndMoney) April 7, 2019


Sometimes it felt like we had 101 dogs during the month. It was just a tremendous month where we were at our limit for a little while.

Blogging income for April was far above average as well. For some reason, advertisers were coming out of the woodwork and business was great.

In March, we were on vacation and these combined for a total of $2,148.86. In April, it was:

Total Blogging + Dog Sitting Income: $4,975.38

Ba-BAM!!

That’s the best these categories have done since 2017 and it’s nearly double what I’ve been averaging for a long time. The only downside is that I don’t think I discovered a secret that could lead to sustained success.

Here’s a historic chart with the red line being a 3-month average:

2. Rental Property Income

Zillow kept the value of our rental properties about the same. Like every month, we paid off a couple thousand of mortgage debt. It was boring, but in a great, slow and steady way.

We now have 55.20% of the equity in our properties with an estimated combined rent of $3,325. The rent number is after insurance, property taxes, and condo fees. That’s so we can estimate what we’d really be taking home after expenses.

If you multiply $3,325 by 55.20% you get $1,835 in estimated 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 27 months, we’ve seen the number grow $661/mo. That’s like giving ourselves an annual $8,000 raise until the end of time from where we were just 2+ years ago.

The kids put on some fancy clothes for Easter Bunny.

As the years march on, the ratio will grow to 100% of the $3,325 monthly inflation-resistant rent. That’s what gets us to that annual $40,000 income I mentioned in the FAQ.

In the previous report, the rental property income was $1,819. This number always moves slowly. This number only changes if one of two things happen: 1) The properties go up in value. 2) We charge more for rent. Later this year, we should be able to raise the rents a bit.

Total Rental Property Income: $1,835

3. Dividend Income

April did nothing for our portfolios. The stock market soared in April, but I didn’t get to take the numbers until May 11 – after Trump escalated the trade war with China causing the markets to give up their gains

Total Dividend Income: $1,659

Last month, it was $1,656, so we gained $3 of theoretical monthly money from theoretical dividends. Earlier in the month, I think this would have been $1,700 or close to it. This is an all-time new record for us, but obviously not exciting.

Very Close to Passive Income

Our “very close to passive income” is a combination of rental property income and dividend income. If there were some residual income from books, movies, or music, we’d include that here (but we don’t have that).

The stock market goes up and down fast which makes the dividends calculation fluctuate a bit. The rental property income keeps going up because the mortgages are always getting paid down every month. Unless there’s a housing market crash, this should continue to happen.

The Kindergarten didn’t just act in the play, but made the sets. I was only useful at consuming paste at this age.

Having both types of income working together for us is great. The diversification gives me great confidence that we’ll be better prepared than most people in the case of an unfortunate event. We’ll still likely get rent checks if there’s a brief trade war in China. We’ll still get dividend checks if a tenant is late paying one month.

Very Close to Passive Income: $3,494

Last month it was $3,475, so it’s up $19. Last month was an all-time high, so we continue breaking records. 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 $41,933. 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 $85K/year or more.

Final Alternative Income

When you add up “dogs and blogs” to the “very close to passive income” you get:

December’s Very Close to Passive Income: $8,469.38

That would be $101,632.56 a year. I’ve been trying to get this number over $100,000 and we’re finally there. However, I don’t think we’ll stay over $100,000.

That largely hypothetical annual income for writing on a blog, and taking care of dogs, and investments feels a little like a dream. In the long term, that 100K+ would be a lot more income than we’d need. Here’s what our expenses for the next 45 years looks like.

This is what happens when you have a bazillion bad cavities. Pikachu and Squirtle for moral support.

These numbers don’t include any of my wife’s bread-winning pharmacist income, her NOW VESTED military pension or some of the freelance work I’ve been doing over the last several months.

As always, I’m still hoping to write a book someday. I’m probably going to tip my toe into self-publishing soon. I would love to talk to a real a publisher, but I don’t want to take on the “job” of writing. If you know someone who I could talk to contact me.

Net Worth Update

My net worth updates aren’t very exciting as I don’t share the exact numbers. That’s why it’s little more than a footnote here.

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.

With the stock market not doing much and Zillow valuing our rental properties the same, there wasn’t much to impact our net worth. However, a neighbor sold their home and I think it triggered to Zillow to update their math as the value of our home went up. Our total net worth went up 0.95%. For the year it’s up 20.76%, a large percentage of that was based on a website sale that I had at the beginning of the year.

I always have to remember that percentages can be weird due to the law of large numbers. Imagine someone with a net worth of $100 finds a $100 bill on the ground. Instantly it doubles his/her 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 ($100,000 gain) than 20% growth of a $100K ($20,000 gain), right?

There’s a big wild card in calculating our net worth. Now that my wife’s pension is vested, it’s reasonable to ask Should I Include a Pension in Our Net Worth?. I decided that it does make sense to do it. Later this month, I’m planning to write how to make such a calculation. It’s a big pension that’s potentially worth $2 million or more.

However, because that would ridiculously dominate our net worth, I think I’ll include it as two separate numbers in our spreadsheet. Since I don’t share the numbers anyway, except for these hints, it shouldn’t matter much.

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

The post Alternative Income Update: April 2019 ($8,469.38) appeared first on Lazy Man and Money.

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In late March my wife reached 20 years of military service qualifying for half of her basic pay. She hasn’t retired yet and as she continues to work the pension has the potential to rise exponentially.

Pensions are very rare nowadays. It seems like almost all companies have stopped offering them. Often companies have difficulties fulfilling those pension obligations. Pensions are still a part of many careers such as teaching, law enforcement, and firefighting. Typically those pensions are set by a state formula and each state is different. Sometimes states mismanage the pension fund. It seems that I’m often reading about how some corruption raided the pension fund.

Military pensions are indexed to inflation. They are also backed by the US federal government. As far as pensions go, it doesn’t get much better than that. We are grateful to have this tremendous financial benefit.

However, it does raise some interesting questions. Chief among them is:

Should we include the pension in our net worth?

I’ve been tracking my net worth with a spreadsheet since at least 2006*. What started as a very simple spreadsheet of a couple of bank and retirement accounts has expanded to incorporate my wife’s assets**, two kids assets, 3 rental properties, and a pile of formulas (liquid cash, real estate equity, and debt/net worth ratio, rule of 4%, etc.). I used to update it every quarter, but over the last 5 years, I’ve religiously updated it every month. It’s not a coincidence that I’ve been more motivated with this bull market

It’s been a tremendously helpful tool. However, like most tools, you can choose to use it how you want.

Some people choose are adamant that you can’t include the value of the your home in your net worth. They say that since you can’t use that money, it shouldn’t count. I never bought into that argument because there are options to access that home equity such as downsizing, getting a second mortgage, or a reverse mortgage. However, the biggest reason, I include the value of my home is that, if you own it, you don’t have to pay as much for your largest living expense. It’s mostly insurance, property tax, and maintenance.

But let’s get back to pensions. They are a little trickier. That’s money coming in the future. If you don’t have a pension, you can think of Social Security as something similar. Would you include the value of your Social Security benefit in your net worth? I don’t know anyone who does that. To take it a step further, I know very few of my personal finance blogging peers who factor Social Security into their retirement plans. Almost all would say it’s the cherry on top of the sundae, not the ice cream, hot fudge, nuts, and whip cream.

I decided I’d ask Twitter. My timeline typically consists of personal finance people, so it’s somewhat knowledgeable.

Would you include the value of a pension in your net worth? Why or why not?

— LazyManAndMoney (@LazyManAndMoney) April 16, 2019

While 44 votes may not be enough, a 61% majority gives a slight edge to “count pension in your net worth.”

I’d put myself in that 61%. A pension can save one from having to directly put as much money into their retirement savings. That can free up hundreds of dollars a month that other people would put into their retirement plans. Also as one lawyer pointed out, pensions are considered assets in divorce court.

As I continued down this rabbit hole, I felt more and more confident about my position in counting it as part of our net worth. However, then I thought about this website. It’s a business that brings in income. It’s an asset. Theoretically, I could sell it. I’m not sure who would want to buy it, but there are some guidelines of how much it would be worth.

Yet, it’s never occurred to me, before now, to count this website in my net worth. I’m not sure many personal finance bloggers do… unless they sell it and unlock that value.

At the end of the day, you can calculate your net worth however you want. It’s simply a number. It doesn’t change the underlying finances.

* I remember using Quicken before that, but I was too Lazy to import and categorize everything and moved to a new system.

** We keep some assets separate, but even if we didn’t, some finances simply can’t be combined like her TSP or Roth IRA.

The post Should You Include Your Pension in Your Net Worth? appeared first on Lazy Man and Money.

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For the first in forever, I’m at a loss on how much I should spend on a phone. In the past it was an easy decision.

My smart phone history started with a Handspring Treo 180 around 2002. I continued to upgrade to a new Treo whenever they came out, because carrying the internet in your pocket was awesome. (So was SD storage cards to hold videos, which some iCompanies still can’t figure out.) Sprint had a really cheap plan, so everything was great.

Things changed in 2009. That’s when the Palm Pre came out. I continued with various Palm Pre’s even getting an unreleased Pre 3.*

The best part about this upgrade cycle is that you could always sell the old phone on Ebay for around 70-75% of the new phone.

After 4 years with the Pre, I had to finally move on. Since Hewlett-Packard wasn’t going to support it, I had to make the choice that most people do: iOS or Android.

I voted with my wallet. Android won. Apple phones were way too expensive.

In October 2013 I went bought a Google Nexus 5. When that screen broke (Feb 2017), I moved to my current phone Moto X Pure.

I know what you are thinking, “Cool story, bro.”

While it’s not exciting, I can use this to look at a history of purchase prices of phones per year. The cost of new hardware for Treo era (7 years) was about $350… or $50 a year. The Palm Pre was $200 (after $100 mail-in rebate), which got me through another 4 years… or $50 a year. The Nexus 5 at $399 made me sick to my stomach, but I got 3.5 years or around $115 a year. My $300 Moto X Pure is more than 2 years old, so we’re approaching around $120 a year.

Recently my phone started feeling slow, very slow. My first thought that was it was time to upgrade. After all, the phone came out in 2015 which is old nowadays. However, I realized that the lethargy was likely due to the 100+ Chrome tabs or the pile of apps on it that I rarely use. I deleted a bunch of stuff and now manage just a few browser tabs. That seemed to buy me some time, but doesn’t have the same life it had when I first got it.

I can’t push off the decision forever. I want to have control how I use my phone… not have my phone control how I use it. I’m going to have upgrade at some point.

That’s when there’s that looming question:

How Much Should I Spend on a Cell Phone?

There are a few reasons why it is more difficult this time. First, there are more phones out there. My current phone was the only phone where I had to actually think about what I wanted and compare specifications and pricing.

The second reason is that phone prices are going up. The introduction of the $1000 iPhone and the $2000 Samsung folding phone disaster creates a lot of room for mid-range phones to charge $500.

However, by far the biggest reason why this is a difficult choice is an odd phenomenon. The choice is between a very good product at a very cheap price and an excellent product that is a lot more money. At first it seems obvious to me that I should go with the cheap option. However, because of how often a cell phone is used, that small difference between very good and excellent is greatly amplified.

For me, the choice is likely between three phones:

  1. Moto G6 – At $140 on Amazon, the Moto G6 is only a year old. Moving my phone up from a higher-end in 2015 technology to a mid-range 2018 is a good upgrade.
  2. Moto X4 – For only $120 on Amazon, the Moto X4 is a little older than the G6, but it’s higher-end phone. I think it’s a better phone for $20 less, but it could be up to personal preference.
  3. Google Pixel 3a – This phone is supposed to be announced and launched today so I don’t have a link. It’s a “lite” version of Google Pixel expensive flagship Pixel 3. It’s rumored to be priced at $399 – half the price of its big brother. With the same camera, it doesn’t compromise too much in other areas. I think it’s a happy medium between the very good at a very cheap price and the excellent at a very expensive price.

While the Pixel 3a is tempting, I have soured on it. It doesn’t feel like a bargain. The Pixel 3 was on sale a couple of weeks ago for $399 and I didn’t bite then. It’s hard to justify spending the same money for the light version today. The good news is that the Pixel 3a may be on sale when I upgrade my phone down the line.

If I had to make a choice today, I’d go with the Moto X4. I’m confident that I could be happy for a couple of years with it. At a price of $60 a year, it would be a very good value compared to some of my other phones. It would also be easy to justify giving it to one of the kids when it’s time to upgrade.

How Much Should You Spend on a Cell Phone?

Exactly $424.42… not a penny more or less. (Joking, of course.)

If you were expecting me to tell you want to do about anything, you’ve come to the wrong place. You know yourself best.

However, I can give you a couple of tips that have helped me. The first I’ve already written about. Looking at a phone as a cost per year may be helpful in making your choice. Some people may feel that $2 a day ($700+ a year) is a reasonable price for all the value they get out of their phone. I think I prefer to save the $500 and put it towards hiring a cleaning service.

The second tip is to consider the purchase in the context of your overall technology budget. I’m a big tech geek (hence the smartphone back in 2002), so I usually spend more than most people. My wife doesn’t care that much, so the low-end laptops and cell phones work for her. If I know that I’m going to spend half my internet on my cell phone, I might spend more on it. However, I am usually around my laptop, so that’s my priority.

Final Thoughts on Cell Phone Spending

We live in an era where cell phones aren’t advancing that much. They continue to get faster, more efficient chips, more memory, and better cameras. There aren’t a lot of new featuers. Some of the more recent phones have embraced wireless charging pioneered by my beloved Palm Pre (celebrating it’s 10-year birthday next month).

For us as consumers, there’s almost no wrong choice. It’s great to have very good phones available for less than $150. That’s the right choice for me, but for the first time in a long time, I understand why people spend a lot more.

* I started up the Palm Pre 3 last year and it still works great. The replaceable battery I bought very cheaply on Ebay allowed me to get all my pictures.

The post How Much Should I Spend on a Cell Phone? appeared first on Lazy Man and Money.

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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.

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.

This article contains affiliate links. I may receive compensation if you click on and choose to use one of the products or services.

The post I Hired Two Buffoons to Maximize their Roth IRAs appeared first on Lazy Man and Money.

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That’s a loaded question for three simple words, right?

The only way to get started is to come up with a definition of success. A couple of days ago, Joe from Retire by 40, asked, “What Does Success Mean to You?

That question indirectly leads us to a definition of success. You are going to have to create a definition for yourself. Maybe you must be a banker to be fulfilled in life. While that may work for a sitcom, chances are your definition of success is much deeper.

Is Money the Measure of Success?

This is a blog about money… it’s in the name. And most discussions of success are going to lead back to money. After all, in the impeccable wisdom of Liz Phair:

It’s nice to be liked
But it’s better by far to get paid
I know that most of the friends that I have
Don’t really see it that way
But if you can give ’em each one wish
How much do you want to bet?
They’d which success for themselves and their friends
And that would include lots of money
I would surely include lots of money
You’ve got to have sh**loads of M-O-N-E-why, money

As you might be able to tell, Ms. Phair values money as a great sign of success. However, I think we can agree that it isn’t the only sign of success.

Most people would consider Saint Teresa of Calcutta as very successful, but money wasn’t a part of that success. Additionally, we have all heard the stories of lottery winners who have been unhappy. Joe made the great point that the richest person in the world failed at marriage.

Joe did what I would have done. He made a spreadsheet of the qualities that he considered important to success. Hopefully he doesn’t mind that I share it here, because it makes it easier to see where I’m going with this:

In his article, Joe then goes through each one and gives a little explanation about why it’s important and why he gave it the score he did. He chose to score each of them equally on a scale of 1 to 10 and average them out.

I (obviously) loved the idea or I wouldn’t be writing about it today. However, I thought I could make a couple of improvements. I love to tinker, especially with spreadsheets.

The first thing I did was take notice that some things are related. Joe has money, material things, and experiences all listed. If money is high (which it is for him) he can trade some for material things. The reason he doesn’t is that he doesn’t value a lot of material things as high as he does his freedom, another item on his list.*

I’ve started to do some mind mapping recently and I’d group some of these related items together. There’s a Four Burners Theory that says you have to split your efforts across family, friends, work, and health. It’s almost impossible for everyone to have enough gas to have all of them on full power.

I decided blatantly steal borrow Joe’s list and put the items in some categories. It’s not perfect, because I’d rather get your thoughts on this draft and evolve it. (That’s a hint to please leave a comment.) I also decided to allot 100 points among all the categories. The categories with more points are more important to me.

For example, Ebenezer Scrooge might have 90 points in the money category… and he might award himself an 85 for his success in getting money. In this system, he will have likely rated himself a great success. Saint Teresa would likely have put most her points in the philanthropy and spirituality categories and rate herself as a great success.

Here’s what mine looks like:

The first thing you might notice is that my 1 to 100 scale only goes to 70. That’s because I’ve reserved the last 30 points for relationships, family and friends. I’ve decided to keep those private.

One important thing to keep in mind is that the numbers are very subjective. I just went with my gut and quickly filled up a 100 possible points. Then I spent 30 seconds thinking about whether I valued one thing more or less. In fact, I did this so quickly that just before publishing, I realized that I left health completely out of the spreadsheet. (It would have been an average 50% score.)

In the future, I may value material things less, but I bumped it up to an even number so that I could give myself half the points. In hindsight, the overall money category is worth the same amount as relationships (30 points), which needs some adjusting in a future draft.

Lazy Man’s Success Breakdown Money Category

We have a very nice house and some nice things. However, I’m inherently frugal. I don’t mind Dollar Tree utensils for cooking. I’m very happy to wear an old Patriots sweatshirt from 1993 most of the time. We do have a fancy OLED TV and a luxury SUV. We also have a futon from Wal-Mart and our bedroom furniture is what I got after graduating college.

We have plenty of good experiences which includes our trips to Aruba and Disney World. We live on an island that is 5 minutes from the beach. Our kids get (mostly) the best education money can buy.

We are doing well with our finances. I hope to update this old article this summer, but we should have $200,000 a year in retirement income after my wife’s pension, rental properties, investments, social security, and some hobbies that make money.

Work

Joe included his engineering career and his blogging career. I’ll do the same and throw in my dog sitting career. I wasn’t the best software engineer, but I had some big accomplishments I can be proud of. In 13 years of blogging, I’ve managed 12 million page views and have been nominated for a Lifetime Achievement Plutus Award. I haven’t been featured in Rockstar Finance and I am still Susan Lucci/Ash Ketchum when it comes to winning a Plutus Award.

This is life on the blogger roller coaster.

Others’ View

I didn’t know what to call this category of fame, power, and legacy, so “others’ view” was my best attempt. I don’t care to much for fame and only a little bit about power. I care more about legacy.

I rated myself highly on legacy for things that have mostly flown under the radar. They are the things that show up in the 12 million page views and that Lifetime Achievement nomination. I’d like to write more about this someday, but I’m a little humble. Also, I don’t want it to trigger too much fame.

Own View

I gave myself a 3 of 5 when it comes to philanthropy. Some would look at money that I’ve donated and say that 3 is generous. However, I’ve devoted thousands of hours to helping people not get tied up into pyramid schemes and other scams.

I need to work on spirituality. It should be a larger in both possible points and awarded points.

I was perhaps generous in giving myself a 6 in contentment. It’s something that I actively have to work on.

Freedom

Finally, I gave myself a freedom score of 6 of 8. Maybe freedom should have more possible points, but it shares some of the Money’s points. The score of 6 is based on our financial situation and ability to work from home in a variety of different ways. It’s not going to be perfect because it’s not like we can just pick up and go to France on a moment’s notice. It’s hard to be truly free when you are raising a 5 and 6 year old.

Final thoughts

So I scored 45 of the 70 points. That’s nearly 65%… a solid D grade. Part of the reason it isn’t higher is that I didn’t believe in giving myself a perfect score, as there’s always someone else doing it better. So realistically it is 45 of 59 (I did give myself perfect fame) which is more of a C.

If I go buy a few nice things, win a Plutus award, and meditate my way to higher contentment, I should be able to pull of a solid B.

Now I’m off to go look at my old, very popular how to be successful article and see how I can make it better.

* I may be projecting my thoughts about Joe, but it’s my interpretation after reading his blog for a long time. While I could be wrong, we can still move on as if it were true for the purposes of the exercise.

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Happy Earth Day! It’s hard to believe, but this month is exactly four years since we got solar panels installed and activated.

I was nervous about taking the plunge. We got a $16,000 Home Equity Line of Credit (HELOC) to pay for the panels. That’s a lot of money. And though I thought I understood everything about solar panels, you never truly know what you don’t know. Finally, I never know if I can trust local contractors that I’ll save money – they are interested in getting the job and it would be impossible to hold them accountable if they stretched the truth.

Fortunately, everything went according to plan and we’ve been extremely happy. (Knock on wood.)

One very important thing to note is that government funding via state grants and federal tax credits paid for another $16,000. Obviously state grants are going to depend where you live. I did very quick/rough research and it seems like the 30% federal tax credit is still around for 2019, but then it starts to become less in 2020 and 2021 before disappearing for residences/homes.

In short, if you are thinking about solar power, now may be the last chance to get the best price.

Before I get into our personal financial experience with solar power, the benefits to the environment have to be mentioned. Even if it financially break-even, why not do something that helps the environment? To date, our dashboard says that our panels have accomplished the equivalent of planting 686 trees. Using metrics from the EPA, planting one tree offsets the same amount of CO2 as 55.3 kilowatt-hours of clean energy production.

Put another way, our panels have generated the equivalent of 12,640,541 AA batteries. My math could be off, but I think that’s around 668,822 pounds of batteries. It’s a good thing our house doesn’t run on AA batteries.

Calculating the Value of our Solar Power

You can call it 686 trees or 12.6 million batteries, but scientists would say we’ve generated 37.9 megawatt-hours in 4 years. Thanks to the wonders of the metric system, we can say it’s 37,900 kilowatt-hours or kWh.

The reason why we care about the kilowatt-hours measurement is because that’s the unit your electric bill uses. In Rhode Island it costs 11 cents to create one kWh and 10 cents to deliver it. The costs are broken down into more excruciating detail, but I’ll spare you. So overall, using a kWh costs $0.21.

That’s actually the most expensive electricity in the continental United States. (For some reason their numbers are 22.67 cents, which is different than my bill, but it’s close enough.) The average bill in Rhode Island is $203.35. Ouch!

The 37,900 kWh that we’ve generated in 4 years would have cost us $7,985.53. We can round up that last nearly $15 and call it $8000… exactly half of $16,000 we financed. Roughly speaking we’ll have recouped our $16,000 in 4 more years. However to account for interest and inflation, let’s call it 5 years.

Thus after a total of 9 years, we’ll save roughly $2000 a year. (That’s based on easy math of the $8000 we saved already over 4 years.) It will be more as electricity prices rise over time due to inflation.

Our panels are guaranteed to be ~95% efficient for 25 years. It doesn’t mean that they won’t last longer, but that’s just the guarantee. By the time that guarantee is up we’ll have 16 years of free electricity. With inflation our electricity would likely cost around $3200 by the end. I’ll conservatively estimate that the savings come out to around $2500 a year over those 16 years.

That’s $40,000 in savings! If the system keeps working well, it could be more than $50,000.

For a handful of days of research and another few for doing the work, that’s quite the return on investment. It’s a year’s worth of income for many people. While your state will likely be less of a savings, it doesn’t mean you shouldn’t do it.

If you are thinking about getting solar power yourself, here’s a quick guide I wrote. It’s hard to get too specific because each state has its own tax credits as well as it’s own costs of power. If energy is cheap in your state, it could be a poor financial decision to get solar power. That’s why it can still save us money even though Rhode Island is not known for being sunny.

Have you explored solar power? Let me know what you think in the comments.

The post Four Years of Solar Power Reviewed appeared first on Lazy Man and Money.

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It’s past the middle of the month and that means I have the numbers (and time to process them) for last month’s alternative income.

This month I’m doing something a little different. The software engineer in me extracted 90% of the 2500 words that give background information each month and put them in a FAQ. For now, I’m including the FAQ in the beginning of the article. However, in future months, it will probably be a separate page… or maybe something that expands when you click on it. Please bear with me if there are some errors on this. It’s more complicated than it looks.

If you are a regular reader and just want to get to the numbers, there’s a link to jump you over the FAQ and to the month’s update

Before we get all the boring numbers, I need to give you March’s back story.

You’d think that the biggest thing that happened in March is that we spent two weeks in Orlando, Florida. (You’d be wrong.)

Indeed we did Disney World and Universal Studios. With two weeks, we took some much needed days off in between. Two weeks is a long time to be away with kids ages 5 and 6. I’ll write a longer article about the trip, but I’ll also share some highlights here because it was a large part of the month.

Going on vacation for two weeks is a great test of alternative income. If the alternative income stays high, I’ll probably continue to do well if I am home and earning money from hobbies.

You’d think that the biggest thing that happened in March is that I turned 43. (You’d be wrong.)

I had a great birthday, perhaps the best ever. My wife surprised me with a much-needed suit. I can finally donate the 20 year old ones that don’t fit anymore. I’m not sure where I’ll wear my new suit, but something usually comes up once a year or two.

You’d think that the biggest thing that happened in March is I received a Tweet from a HUGE celebrity who I have been a card-carrying fan club member for over 20 years. (You’d be wrong.)

I’ll be sharing that Tweet in this email.

You’d think that the biggest thing that happened in March was my wife reaching 20 years of military service and a pension worth around $55,000 a year.

This time you’d be right!

It’s obviously a huge deal – the whole inspiration for creating this blog. I’ll have more to write about this over time, but for now I’m just speechless and blessed.

Skip the FAQ and jump to the monthly update

Alternative Income FAQ

In 2006 I started tracking my alternative income on this website and continued it for years. Life intervened, as it does, and I stopped.

In January 2017, I publishing monthly reports again. Since most of the reports are very similar, I decided it would be best to create this FAQ for new readers. This will give you the background information to get you up to speed. This helps regular readers zero in on the monthly update of “what’s new.”

Q. What is “Alternative Income?”

A. I coined “alternative income” in 2006 to be purposely vague.

I needed something to cover the small amount of blogging income I was making. On one hand, blogging is not passive income – it’s work. On the other hand, there’s a residual nature to the income. If I go on vacation for a couple of weeks, I still make money from the previous articles I’ve written.

Alternative income was more passive back in 2006 before social media, podcasting, and video. Today it seems like every blogger talks of hustling (as in moving quickly, not grifting people) and “being everywhere.” I’m sticking to my dinosaur roots as the only one dumb enough to just keep writing blog posts without cool, “pinnable” images.

Alternative income is best described as income where you don’t directly trade your time for money. Some common alternative income sources include collecting rent, dividends, royalties, and blogging. It’s very subjective. Your definition of alternative income may be a little different than mine. That’s okay, many people have different definitions for “retirement”.

I believe we all get the concept. That’s the important part.

Q. How Do You Make Alternative Income?

A. Currently, it’s blogging, dog sitting, and two types of investments: rental properties and securities (stocks/bonds). I’m extremely likely to add another type of alternative income by the summer. It’s already in the works. After that I really need to get started in writing a book to increase royalties that way.

Q. How Do You Spend Your Time?

A. This is important. Someone with few dependents or responsibilities can focus their energy more on creating alternative income sources. If you have to work 2 full-time jobs just to pay rent and childcare, it is going to be difficult to create alternative income.

My first priority is to be a stay-at-home dad. My military wife works long days on top of getting an online MBA (to add to her Pharm.D.) from a prestigious school. For promotion, she’s strongly encouraged to take on a number of other committee head positions. Yes, she “brings home the bacon.”

The kids are in school/camp during the day, which gives me time to do the basic family errands (shopping, cooking, dishes, laundry, walking the dog, etc.). There’s this blog, dog sitting business, and managing the rental properties. In the middle of 2018, I took on two ongoing freelance jobs that take about 20-25 hours of week of my time. The hours are flexible and the pay is good.

It’s hard for me to put a specific label on what I am. I can’t label it myself. However, as you can see I’m not under a palm tree sipping a Mai Tai… well not always.

There’s more detail on my Now page.

Q. Can you Tell me More about Your Blogging and Dog Sitting Income

A. 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.

Dog sitting can be high in the summer as people go on vacation. Blogging can be low in the summer with internet traffic low… as people go on vacation. They end up complimenting each other quite well. It’s almost like a school teacher opening up an ice cream shop.

Q. Dog sitting income doesn’t seem like alternative income to me.

A. That’s not even a question!

It is true that both seem like trading time for money. However, this is one area where alternative income is subjective.

Sitting dogs itself isn’t a time-intensive job. While there is more overhead than you might think between booking dogs and meeting dogs for suitability, we do often have regular clients that are very easy.

The important differentiation with dog sitting is that I can “double-dip” and earn money from something else (such as blogging) at the same time. It’s very different than being an Uber driver. Double-dipping doesn’t work there as the police tend to frown on blogging and driving.

If you are interested, I wrote a very detailed article on how to make money dog sitting.

Q. Blogging doesn’t seem like alternative income to me.*

A. Again, that’s not a question.

Like dog sitting, blogging isn’t directly trading time for money either. If I write an article for the blog today, 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 13 years of blogging.

Q. What’s the background on your rental properties

A. 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 2027, we should be able to collect an estimated income of $40,000 a year (in today’s dollars, after expenses) on them.

Q. How do you calculate rental property alternative income

A. Most landlords just calculate how much money they make after their expenses. That’s the easy way.

However, most landlords choose a 30-year fixed to keep their expenses low. We wanted to pay them off quickly. Thus our mortgages are high and we don’t make money on a monthly basis.

I came up with an alternative calculation that effective gives us the percentage of the rent that is ours. That is opposed to the percentage of the rents that are the bank’s. Imagine that you and a friend bought a $200,000 property and each owned 50%. If the property brought in $1500 a month in rent after expenses, each person gets $750 a month. This is what I do.

I add up all the properties’ equity (what we own) and estimated value. (Zillow is very accurate for these condos.) I calculate the percentage of the property that we own by dividing the equity to that estimated value.

Then I calculate the rents of all the properties as if they were owned free and clear. I subtract the expenses (condo fees, maintenance, etc.). I then multiply the percentage of the property that we own by that adjusted profit number.

If you are confused this article on calculating cash flow of cash flowless real estate explains it in more detail.

Q. What about inflation of the real estate? Won’t that eat into the buying power of $40,000

A. Since rents are typically rise in line with inflation over the long term, we don’t have to adjust the numbers for the future. We’ll raise the $40,000 rents now to $80,000 at some point in the future, but it will still have roughly the same $40,000 buying power of today.

Q. How do you calculate dividend alternative income?

A. We don’t focus on putting our money in dividend stocks, but I’m going to pretend 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.

We can pretend that I moved all the money into a dividend focused portfolio. I estimate that we could easily earn 2.50% in dividends. This gives us a conservative number that we could expect to have.

However, since almost all this money is in retirements accounts, we can’t access it in a practical way without tax penalties. We’re going to ignore this for the sake of the report. In the end we need to capture around 20 years of mostly maxing out retirement contributions and compound interest.

Q. What’s “very close to passive income
A.

This is the income that is almost universally considered passive income. For us that would include just the rent payments and dividends. Maybe someday it will include royalties or book sales. I’m not counting blogging or dog sitting income in this.

* 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.

Lazy Man’s Alternative Income – March 2019

In looking at our alternative income, I break it down to 3 main sources… each with their own caveats.

1. Blogging + Dog Sitting Income

March’s dog sitting was very poor. That’s to be expected when you spend half the month in Florida. However, even when we weren’t in Florida we didn’t have a lot of requests. It almost made me feel like the business was dying and people were going with other Rover sitters. Fortunately, we’ve seen a huge pick-up in April and it’s one of our biggest months ever.

Blogging income in March was just about average. I was surprised as I didn’t get a chance to blog much with the vacation. This is where the library of nearly 2,500 old posts seems to pay off.

In February, these two categories combined for a total of $2,850.40, a little below the average of 2018. In March, it was:

Total Blogging + Dog Sitting Income: $2,148.86

For missing nearly two weeks, that’s a pretty good number. I’m not sure too many people would be excited for what amounts to a $25K income. However, when characterized as extra money earned on vacation, it’s great. Since we are more than halfway through April now, I can forecast that it could be one of the best months ever.

Here’s a historic chart with the red line being a 3-month average:

Remember that important Tweet that I mentioned in the beginning. Here’s Steven Tyler retweeted me with some encouragement on my roller coaster fears at Universal Studios.

YOU CAN DO IT!!!! ??? ?? https://t.co/XuRoRt36ld

— Steven Tyler (@IamStevenT) March 14, 2019

2. Rental Property Income

Zillow moved the value of our rental properties down a few thousand dollars. At the same time, we were able to reduce the mortgages (like every month). That has an effect almost canceling each other out.

We now have 54.71% of the equity in our properties with an estimated combined rent of $3,325. The rent number is after insurance, property taxes, and condo fees. That’s so we can estimate what we’d really be taking home after expenses.

If you multiply $3,325 by 54.71% you get $1,819 in estimated 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 26 months, we’ve seen the number grow $645/mo. That’s like giving ourselves an annual $7,740 raise until the end of time from where we were just 2+ years ago.

As the years march on, the ratio will grow to 100% of the $3,325 monthly inflation-resistant rent. That’s what gets us to that annual $40,000 income I mentioned in the FAQ.

In the previous report, the rental property income was $1,814. This number usually moves slowly and this $5 increase was the lowest in awhile. This number only changes if one of two things happen: 1) The properties go up in value. 2) We charge more for rent. Later this year, we should be able to raise the rents a bit.

Total Rental Property Income: $1,819

My wife and I had a staycation/no-kid-overnight at the historic Castle Hill hotel in Newport, RI. This was our view from the patio. The panorama image doesn’t translate well to a web page:

3. Dividend Income

March was a tremendous month for our portfolios. The stock market continued to soar from the lows in the year.

Total Dividend Income: $1,656

Last month, it was $1,567, so we gained $89 of theoretical monthly money from theoretical dividends. Amazingly, we gained exactly $89 the month before. This is an all-time new record for us. I’d like to say that we are executing amazingly, but it’s mostly the stock marketing going well. We continue to save and invest, so we’re control what we can.

It’s almost impossible to have a better birthday than I had:

It's not even 8:30 and I have already had the best birthday ever (starting early last night).

– Favorite meal at favorite restaurant
– New suit (replacing college one from 20 years ago)
– Red Sox big 9th inning rally after 1AM
– Favorite candy around a ? pic.twitter.com/bIVTXOisoI

— LazyManAndMoney (@LazyManAndMoney) March 30, 2019

Very Close to Passive Income

This is a combination of rental property income and dividend income.

The stock market goes up and down fast 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.

Having both types of income working together for us is great. The diversification gives me great confidence that we’ll be better prepared than most if there’s a market downturn in the future.

Very Close to Passive Income: $3,475

Last month it was $3,381, so it’s up $94. Last month was an all-time high, so we continue breaking records. 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 $41,697. 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 $85K/year or more.

My kids found their favorite mouse at Disney:

It took nearly 2 weeks at Disney, but I finally found what Walt meant when he said it all started with a mouse.#Epcot #worldshowcase #japan pic.twitter.com/JKcToxrecL

— LazyManAndMoney (@LazyManAndMoney) March 22, 2019

Final Alternative Income

When you add up “dogs and blogs” to the “very close to passive income” you get:

December’s Very Close to Passive Income: $5,623.86

That would be $67,486.32 a year. I’m trying to get this number over $100,000 so it’s moving in the wrong direction. However, I think we’ll be close in April.

That largely hypothetical annual income for writing on a blog, and taking care of dogs feels a little like a dream. In the long term, we can get by on much less than $67K of income. Here’s what our expenses for the next 45 years looks like.

That doesn’t include any of my wife’s bread-winning pharmacist income, her NOW VESTED military pension or any of that freelance work I’ve been doing over the last several months. It also doesn’t include how much we could get selling our kids on the black market. (Just checking if you are reading this.)

As always, I’m still hoping to write a book someday. If you know of a publisher who I could talk to contact me. I’ve got 3 or 4 very marketable ideas in the personal finance space.

We brought the kids to see The Breakers for the first time. It’s a great field trip/history lesson just a couple of miles from our home. From a personal finance perspective, it’s fascinating what moguls could buy when there was no income tax:

Net Worth Update

This isn’t very exciting as I don’t share the exact numbers of our net worth. That’s why it’s little more than a footnote here.

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..

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