Tuesday, November 13, 2018

What My Recent Raises At Work Taught Me About Financial Independence

It's been an exciting couple months. It was towards the end of August that I received a promotion at work, with a raise of just over 4% shortly thereafter. Since starting my first "real job" in July 2017, I have received 3 raises watching my pay increase from $10/hr and no benefits to a base pay rate of $12.25/hr, and with benefits included compensation around $13.00/hr (3% dollar for dollar match on retirement, free vision, free dental, and free life insurance of 2x my annual salary). With that said, I have learned two valuable lessons besides what I have learned over the past year at my job.

Lesson #1: Controlling Expenses Is Great, But Don't Forget The Other Side of The Equation

There are two levers that you can use to speed up your time to achieve financial independence, being lowering expenses, increasing income, or a combination of the two. What I've realized over the past year is that controlling expenses is absolutely pivotal to achieving financial independence at an early age or simply retiring at all. Basic math tells us that if you live at or above your means, you will never be able to retire or pursue your passions. However, just as important is the other side of the equation. Adopting the abundance mindset and recognizing that the opportunities in life are nearly limitless is conducive to the pursuit of financial independence. I'm talking about increasing your income. You can do this by starting a side hustle (large or small) depending upon your skill set and how much work you're willing to do, increasing your skills (and consequently, your value) in the workplace, or preferably both. As I alluded to, controlling your expenses is great. Adopting the scarcity mindset is something I highly recommend. Shifting to a mindset in which you see your time and resources as limited will likely better help you manage both, which will obviously be of great benefit to you. However, as great as the scarcity mindset (lowering expenses) is, you can only lower your expenses so much. The reverse is true for increasing your income. Theoretically, your income potential is limited only by how hard you're willing to work. In reality, there probably is an actual limit to your earning potential, but adopting the abundance mindset that resources (like money) are plentiful and there are numerous ways to make money will energize you to finally start that side hustle or to increase your marketable skills for the workplace, allowing you to increase your income (and capital available to save or invest). In my instance, my total compensation has increased from $10/hr gross to $13/hr gross in the past year. This is an increase in annual income of $6,240/year before factoring in taxes! Assuming that the effective tax rate of this increase in income over the past year is 20%, that would leave me with an extra $5,000 to invest. With the max contribution for an IRA for those under 50 being $5,500 as of 2018, that is the difference between almost maxing an IRA or not contributing to one at all. This is just one year of raises from work. Imagine what the next 10 or so years will likely offer as I enter my prime earning years.

Lesson #2: Never Stop Learning

In my experience, the key to getting raises (aside from having a generous employer and showing up consistently with your best effort) is to continue to hone your craft. Over the past year, I've taken on numerous tasks at work in a few facets of the business. The benefit of this is that I've actually observed how much of what transpires at work ties into each other. You don't simply get 3 raises in a short period of time without continuously learning. Your employer doesn't spend their day thinking of how they can improve your paycheck; your employer is concerned with increasing the financial performance of their business. There are numerous ways that this can be accomplished, and it's to your benefit to be proactive in seeking out ways to improve the bottom line of your employer, whether that's cutting non-essential expenses or increasing productivity resulting in added revenue. Your boss will likely take notice if you are able to measurably improve the performance of the company. They will then likely be compelled to share a small portion of those improved results with you knowing that a motivated, diligent employee such as yourself won't stay around long if you don't at least reap some of the benefits of your insight.

Takeaways:  The first point is that while adopting a scarcity mindset and controlling expenses is great, you can only cut your expenses so much. If you are serious about reaching financial independence at an early age or in a short time span, don't discount the importance of investing in increasing your human capital (improving your marketable skills). This will eventually lead to an increase in your income, which when combined with your scarcity mindset will lead to great surpluses of cash being invested, and eventually financial independence. The real universal lesson that applies not only to financial independence but to life in general is to never stop learning. If you stop learning, you will stagnate. This will also lead to stagnant wages as you won't be providing as much value to your employer or your clients as you could if you did continue to learn.

Discussion: Are there any lessons that you have learned upon reflecting on a recent raise or promotion at work? Are there any "universal" lessons that could apply to both financial independence and work/life in general?

Tuesday, November 6, 2018

October 2018 Dividend Income

As this article is about to be published, it's already early November. Basketball season is in full swing and I couldn't be more excited about Milwaukee Bucks basketball! With that said, another month has gone by, which means it's time to examine what the dividend portfolio provided for me in dividends for the month of October.

Overall, I collected $21.32 in income from the holdings in my Robinhood account and M1 Finance account. Of the $21.32 in income, $21.13 originated from 8 companies in my Robinhood account with the remaining $0.19 in dividends coming from 10 companies (as PEP and D paid dividends in September) in my M1 Finance account.


The $21.32 in dividend income that I collected in October represents a 26.7% QOQ increase from the $16.83 that I collected in July. $3.47 of the additional $4.49 in dividend income that I received originated from my first dividend from GlaxoSmithKline (GSK) since buying back in June, just days after the ex-dividend date. Furthermore, I received an additional $0.41 from PPL due to an extra share that I added shortly after the last dividend from them. A dividend increase from WP Carey (WPC) accounted for an additional $0.02 in income, while a dividend increase from Altria Group (MO) accounted for another $0.40 in additional income. The remaining $0.19 in dividends came from my M1 Finance account that I established in early September of this year.

Although the trend of the first month of the quarter being my slowest continues, my dividends have grown nearly 577% from October 2017! I'm expecting another quarter of somewhere around 25% growth in my dividend income in January 2019 as I recently initiated a position in Iron Mountain Inc (IRM) and will continue to add to it if the price stays in the low to mid $30s.


How much did you receive in October? Did you have any newcomers to your dividend payers like I did? What was your YOY dividend growth?

Tuesday, October 30, 2018

Expected Dividend Increases for November 2018

The Milwaukee Bucks remain the only unbeaten team in the NBA and another month has passed us by, which means it is time for another installment of the expected dividend increases series. Prior to delving into the dividend increases that I anticipate for the DGI portfolio for the month of November, I'll start by recapping the dividend increases from October, and their impact on my dividend income.

As expected, there were 3 raises in the month of October. However, the dividend raise from Dominion Energy (D) that I expected didn't materialize. I suspected that Dominion would continue a trend that began last year with them increasing their dividend by a small amount in October, but that raise appeared to be a one time event. Luckily, I do anticipate a high single digit dividend increase from D in January as that has been the month in which they have announced dividend increases for years now. Instead, the dividend increase came from a recent purchase as I'll detail below.

Dividend Increase #1: 

Iron Mountain (IRM) announced a dividend increase of 4% from a quarterly dividend of $0.5875 a share to $0.611 a share. Furthermore, the company also posted strong Q3 results with 12% YOY revenue growth and 9% YOY adjusted funds from operations (AFFO) growth. Unfortunately, IRM wasn't able to make any progress on the deleveraging front in paying down their debt, as they have debt that is above average when compared to their peers in the self storage and data center segments. On the plus side, they were also able to avoid issuing any new shares which would dilute their strong growth. This increase added $0.19 in annual dividend income across my 2 share position which I intend to add to over the next couple of months. Overall, I'm very pleased with my recent purchase of IRM and I'm confident that they will successfully deleverage their balance sheet, and subsequently receive a credit upgrade.

Dividend Increase #2:

Enterprise Products Partners (EPD) announced a dividend increase of 0.6% from a quarterly dividend of $0.43 a share to $0.4325 a share. This dividend increase was exactly as I expected as EPD continues to increase its dividend by a small amount every quarter. This increase added $0.09 in annual dividend income across my 9 shares.

Dividend Increase #3:

EQT Midstream Partners (EQM) announced a dividend increase of 2.3% from a quarterly dividend of $1.09 a share to $1.115 a share. This dividend increase was also as I predicted in my expected dividend increases in October post. This raise increased my annual dividend income by $0.40.

Although I'm not expecting any dividend increases across my 32 holdings in my Robinhood portfolio, I am expecting a dividend raise that others in the community are also eagerly awaiting in my recently opened M1 Finance brokerage account.

Predicted Dividend Increase #1:

Hormel Foods Corporation (HRL) is one of 50 roughly equal positions in my rather small M1 Finance portfolio. HRL is a company with a reasonable payout ratio that could likely expand a bit in the coming years as the payout ratio is a bit over 40%. With earnings expected to grow in the high single digits to low double digits over the next 5 years, I wouldn't be surprised if HRL announced at least a 9% increase in their quarterly dividend from $0.188 a share to $0.205 a share. This would increase annual dividend income by just under $0.005.


Overall, my forward annual dividend income increased by $0.68 from dividend increases alone. This doesn't even include the continued retirement contributions and occasional Robinhood portfolio purchases, which will soon manifest themselves in my monthly dividend income reports. Although I'm only expecting 1 dividend increase in November and it's not even from my Robinhood holdings, I'm expecting quite a few in the months beyond November.


What was the impact of October dividend increases on your annual dividend income going forward? Are you expecting any dividend increases in November or are you expecting a light month as I am?

Tuesday, October 23, 2018

Why Today Is The Day You Need To Pursue Your Dreams

What do you believe is the single greatest reason that most people decide to never pursue their dreams? I personally believe that failure is the single greatest fear that most people have. For whatever reason, people are embarrassed of failure. It leaves them in paralysis with fear. They defer their dreams because maybe other people don't support their dreams, and they need that support. Perhaps you have a dieting goal, a fitness goal, a goal to start a blog, or to achieve financial independence. Whatever it may be, there's no logical reason to keep deferring your dream. There will never be a better time to start pursuing your dreams than today. If you keep waiting for the "perfect time," you'll never take action. I'm going to provide you with 3 reasons to pursue your dreams, regardless of if they are FIRE related.

First Reason: Avoiding Regret

It's understandable that people are afraid of failure. It's difficult to put yourself out there, giving everything you have only to come up short. What you have to remember about failure is that it doesn't have to be the end. Failure is just the beginning. As Thomas Edison said to a reporter of his 1,000 failures to invent the light bulb, "I didn't fail 1,000 times. The light bulb was an invention with 1,000 steps." When you reframe your failure as Thomas Edison did, you continue to keep trying until you eventually find success in whatever goal it is you are pursuing. Another inspirational story is the story of Abraham Lincoln. Born into poverty, Lincoln endured a life of failure. He lost 8 elections, failed twice in business, suffered a nervous breakdown...oh yeah, and then became arguably the single greatest president in American history. The incredible thing about dreams is that you never really know what could happen until you take massive action towards fulfilling them. Imagine if Thomas Edison gave up on the light bulb. How much longer would it have taken to illuminate the world? What if Abraham Lincoln gave up before he lost 8 elections, failed twice in business, and before he suffered a nervous breakdown? Would the United States have survived the Civil War to achieve its place in history among greatest countries had it not been for Lincoln? Thankfully, we'll never know because Lincoln pushed through the adversity in his life to cement his legacy as an all time great president. It's not the failure that defines you, unless you quit. It's the success that comes despite all of your failures that defines you. The definition of a winner is a loser that never quits. Many never even knew that Lincoln failed as much as he did. We all remember him for his success.

Second Reason: You Are The Author Of Your Life

You are the director, producer, writer, and main protagonist in your life. Before you can achieve great things, you need to let this fact of life soak in. Because you are the author of your life, you must decide the life that you want to live. Do NOT let anyone else tell you how you are supposed to live your life. If you surrender your life to the whims of society, you will lead a life unfulfilled. Societal norms are not a one size fits all solution to life. Perhaps some people are apt to work at jobs they dislike for the best decades of their lives, to purchase items they don't need with money they don't have to impress people they don't even like. If you're reading this blog, I'm very willing to bet that you are not one of those people. If you want to break away from the mindset that the majority of people have, you need to develop the "minority mindset" as Jaspreet Singh puts it on his Youtube channel. If you don't want to live like the majority live, you need to stop thinking similar to how the majority thinks.

Third Reason: You Can Be An Inspiration to Others

Dreams come in many different shapes and sizes. Jason Fieber is one such person that is an inspiration to me and many others in the FIRE community. His story of going from a 27 year old below broke college dropout to financially independent at 33 is so empowering because Jason proves that just about anyone can achieve financial independence at a relatively young age with discipline and determination. There are also more well known figures that have endured quite a bit of adversity on the arduous journey to success. JK Rowling is one such figure that comes to mind. After she suffered a miscarriage in Portugal and gave birth to her daughter, Jessica, Rowling moved back to England as a divorced and destitute single parent living off welfare benefits. As we all know, JK Rowling went on to publish Harry Potter, subsequently becoming a billionaire. She is an inspiration to aspiring writers around the world. No matter the size or scope of your dreams, you can be an inspiration to others just as Jason Fieber and JK Rowling are.


If you never take action towards your dreams, you'll never really know what you could have been. The feeling of regret is not a feeling you want to experience. I'd rather fail than never try. Ultimately, you are the author of your life. Do not conform to societal norms as they are not a one size fits all approach to life. Live your life the way you design it, rather than how society thinks you should live it. Lastly, you can be an inspiration to others. Chasing your dreams takes courage. You'll probably be ridiculed along the way, but just remember that when you succeed, you will pave the way for countless others to forge their own path.


Because I've only provided 3 reasons to chase your dreams, I'm certain that I've missed several great reasons to pursue your dreams. Are you able to think of any additional compelling reasons to chase your dreams?