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Hi! I'm Mike and this is my wife, Jen!  Since we began this site, we've learned to live more frugally, completely eliminate our debts, create new income, radically increase our net worth, and live altogether better lives!  Sign up below for instant access to our members-only toolbox, including our exclusive guide:  15 Steps to Fix Your Broken Finances and Live a Better Life!

Monday
Jul212014

Notes From This Month

July has been even crazier than usual.  A few notes:

1) My grandmother passed away and Jen and I were able to travel to her funeral to say goodbye.  The degree of financial security that we've scratched together allowed us to do this without stressing about money, even with the costs associated with last-minute travel.  To me, this is a great example of what money allows you to do-- it isn't an end in and of itself, but a means to allowing you to attend to those things in life that you need to without worrying.

2) One of our cats also died. He was 15 years old and had been with Jen and me since near the beginning of our marriage.  Losing a pet is difficult, particularly for kids.  In our case, I think it also reminded Jen and me of our own mortality and how quickly time passes.  

3) These two events have reminded us to waste less time with things that don't matter and we've adjusted portions of our lifestyle to reflect this reminder.  We spent some time discussing our marriage, parenting, goals and ambitions, and our current lifestyle to find places where we can improve.

4) Finishing up a dissertation is much harder than beginning one.  This process has taught me a ton about myself, my abilities, and my interests-- these are priceless lessons!

5) The best and happiest times are almost always the cheapest:  spending time with friends and family, watching your kids do something great, harvesting the vegetables that you planted months ago (oh, and tasting the difference!  We planted a ton of different types of lettuce and the bag lettuce at the store is cardboard in comparison!), and so on.  

6) Hard exercise hurts.  In my case, this isn't just muscles, but things like knees, hips, and feet.  Pushing through makes them hurt less, plus you feel like you're shaking your fist at the gods!  

7) One half cup of plain oatmeal, some blueberries, and a boiled egg will fuel you just fine until lunch, even with lots of exercise.

July has made me a kinder and wiser person, but I also feel like I've undergone some sort of paradigm shift where, for the first time, I'm absolutely willing to tell people to pound sand, when it is appropriate.  

Maybe I'll get another post in this month.  If not, I'll see you at the end of the month for our monthly report!  

Tuesday
Jul012014

The LTNE Report -- June 2014 (New Format!)

June is in the books and those of you who stuck around through our "slow period" of posting might have noted that we got quite a few posts up this month!  Even with everything going on, I'm going to try like hell to get a post up weekly.  

I'll be fiddling with these monthly reports for some time going forward as I arrive at what I want to communicate, so expect some ongoing changes.  

First off, I'm going to change the way that I report passive income.  When I used to report passive income, I'd follow a format something like:  Passive Income = (Internet Income (Affiliate + Cost-Per-Click + Advertising) + P2P Interest Income + Cash Rewards Income) - (Internet Expenses (Web Hosting, aWeber Cost, etc.).  From this point forward, I'm including our rental property in these calculations, despite the fact that what we charge from rent is less than what we pay for its mortgage and HOA fees each month (particularly after refinancing from a 30-year fixed rate to a 15-year fixed rate loan).  

Though the old way really focused in on the passive income that most people are interested in (i.e., making money online), it is an incomplete picture for our own personal finances and what we advocate for here on LTNE, which is multiple streams of passive income, so I'm making this change.  We will eventually pay off that mortgage and keeping this home as a rental will turn into bona fide (mostly) passive income, so I want that included in our reporting.

Plus, it allows me to set another short-term goal, which is to achieve a net zero passive income.  Since we lose money on our rental, I want to make up that difference with our other passive income streams, so I'm setting out to do that from here on out.

This also deemphasizes online income, because I just haven't been working too hard with this lately (note the dearth of affiliate links in almost all of my recent posts).  I'm going to continue to include some affiliate links when they are merited (like I have in this post!), but I want the freedom to write without having to worry about them too much.  All of that said, there remains an Amazon search box on the right side of this site that I appreciate you using if you are going to shop there anyway!  When I hit important thresholds for online-derived income, I'll parse it out more fully with separate posts. 

So, on to our Net Passive Income for this month, which includes all of our P2P interest income, online income, cash rewards income, and income from our rental property, minus hosting and other online service costs, mortgage costs, and HOA fees:

Next change:  as I pointed out in this post, I'm done using the Zestimate from Zillow for our rental home's value, as it is clearly (and profoundly) wrong and it has been screwing up our net worth calculations for far too long.  For reasons that I spelled out in the Zestimate post, I've established a $245,000 value for our rental home and I'll update this on occasion.  

I've normalized our net worth calculations using this new data and it finally shows what we've been doing all along, which is investing a ton of money that is showing up in our increased net worth.  We've increased our savings rate to over 50 percent and it is paying off.

In case you didn't check it out, I wrote a bit about earnings, savings, and time horizons here.

So, as far as net worth is concerned, we've now met our 2014 goal much earlier than I had originally forecasted, once we made the adjustment to the value of our rental home.  Woot!  Once our net worth exceeds the figures for an "above average" net worth of a mid-40's couple that Sam over at Financial Samurai wrote about here, I will likely no longer publish net worth figures.  Until that point, consider our net worth charts an example of going from a negative net worth to a positive one using our very basic principles of earning, saving, and investing.  (I'm interested in your thoughts on this, either in the comments or sent as a note.  My dad, for instance, doesn't understand showing personal "money stuff" on the Internet, but many have told me that they love the transparency, and others have advocated for something like "stealth wealth," but I'd love to hear your thoughts.).  

One note on net worth for our military readers (and others who will draw a pension):  I'm not including the present value of my forthcoming military pension in our net worth calculations, but I am including it in our own transition / first retirement financial planning.  For this internal planning, I'm using a formula from Doug Nordman's excellent post here.  

Anyhow, here's the new, normalized net worth chart that shows our progress:

I will continue as well to show how our P2P investing with Prosper and Lending Club is going.  As you can see, both are doing well, but Prosper is doing REALLY well.  I will try to get to the bottom of this if it is possible-- I might have just been really lucky with Prosper-- but something appears to be going on to account for the fact that Prosper is doing so much better for us than Lending Club.

One important point from P2P investing is that an approximately $20,000 investment is yielding about $300 in passive income each month.  I'm drawing down the principal now for our transition, but as I look to a period after that, I can definitely imagine sinking a sizeable amount of money into P2P investing and then using the monthly interest as a robust passive income stream (noting that there are tax implications with these-- as income gleaned is treated as regular old income, and is taxed the same way).  

Here's the latest comparison chart between Prosper and Lending Club (don't forget:  signing up using any of these links kicks a small amount of money to our site, costs you nothing more, and rewards our writing on the topic!).

I'll highlight other things in these reports as needed, especially when they illustrate something (for instance, our traffic numbers haven't recovered yet from Squarespace's (the service we use to create and host LTNE) algorithm change, despite picking up the pace of writing-- once they do, I'll point that out).

The #1 thing that you can do to help out LTNE is to link to it in your own blogs, like us on Facebook, Tweet about us, etc.  Check out what we've written for the last two years and, when you find a useful or interesting post, tell people about it!  In fact, feel free to click one of the social media icons below this post!  Thanks!

That's it for this month!  I hope this stuff is helpful to you, either as helping to cobble together your own plan, or as inspiration for turning things around, or both.  Enjoy your July!