Many of you readers know of my real life full-time occupation. Although I don't identify myself by my job, I do have to fund my Freedom Fund somehow - and right now the best way I know how is to engage in a 50+ hour workweek where I work my butt off as a service advisor at a luxury car dealership. As such, my income is completely hinged on my ability to handle as many customers as possible and do so in a manner that befits their status in society while also maximizing the dollar amount per transaction. I process what are called "repair orders", a term for the job(s) vehicles are in the shop for. Whether it be routine maintenance (most of my workload) or repairs I operate as a liaison between clients (owners) and technicians (mechanics) so that vehicles are maintained or repaired properly and within a specified and agreed-to time frame and estimate.
I've been doing incredibly well in this role for the last seven or so years. I've largely increased my income on a regular basis and I've tried to maintain a reputation of being client friendly and mindful. I never attempt to sell anything a vehicle doesn't really need and I try to put customer service ahead of the bottom line at all times. And this credo has served me well thus far. Hence the increase in income and relative longevity in the industry - one notorious for turnover.
But not all is rainbows and unicorns on the horizon. As I stated above, the work is hard and the hours are long. I'm not pursuing financial independence and early retirement for nothing. And as much as people like to visit the dentist, equally so people enjoy visiting a repair shop very little. I'm a source for capital loss as luxury cars can be expensive to maintain. Furthermore, people don't want to be without their cars. Although I got by for over two years without a car in a small city not known for public transportation, I'm a bit of an anomaly. But the horizon is darkened for reasons beyond the usual.
A new guy starts this coming Monday.
Que the dum-dum-dum on the synthesizer (or other dark, shadowy music).
What does this mean? Well, my pay is 100% commission-based. That means I receive no salary for the time I spend at work. Whatever labor and parts are sold on my repair orders fully determines my income. And as I mentioned before, the more customers I handle the more repair orders I write and thus the more money I can potentially make. Right now there is a team of two in my department - me and one other service advisor. But now there is a third.
The new guy.
I like the new guy. He's actually moving over from another department within the dealership, so I already know him. But liking him does not allow me to ignore the fact that my income is going to be dramatically reduced throughout 2014. It's nothing personal, I'm just stating facts. Our department is growing due to the strong sales of the brand we work within. And due to this growth management has determined that another body is needed to process the rising number of customers coming through our doors. Fair enough. But this growth has not translated into a big increase in my personal income, as my 2013 work income was mostly the same as what I earned in 2012. And now it looks like I'm likely going to see a reduction of at least 20% throughout 2014 compared to what I earned in 2013.
And this leads me to the point of this article.
You cannot predict what is going to happen at your job. You could get fired for seemingly no reason. You could find yourself in the unfortunate path of a mass downsizing. Your income could be cut. Your company could decide to move (as mine recently has), or decide to move you. You have little control over these changes. I'm of the opinion that job equity is not the same as it once was. Gone are the days you work for one company for 40 years, get your gold watch and pension just before sailing into the sunset. Now are the days when you need to look out for yourself, contribute to your own retirement aggressively and constantly have one eye over your shoulder. I'm not complaining, but it is what it is. And one needs to roll with the punches. And my way of rolling and adapting is by maximizing my income potential unrelated to my full-time job - specifically passive income. And even more specifically, dividend income.
I've often referred to my dividends as an extra worker, a second job or multiple paychecks. There's a reason this concept exists in my head. It's because I think of my investments as a hedge against income or job loss. Every single company I invest in sends me a portion of the profits they are able to generate in the form of dividends on a regular basis. I receive hundreds of dollars per month that I don't have to go out and work for. And I've been building this money tree for years now. Well, it turns out this hedge was necessary all along as I now face a fairly substantial pay cut.
And, thanks to you readers, my dividends aren't the only source of income outside of my regular job. This blog now also produces a strong income. Although it's certainly not passive, it also acts as a hedge against loss of job security and/or income. I anticipate seeing at least a $10k pay cut due to the addition in our department, and the combined sources of dividends and blog income will make up for much, if not all, of it. However, I'm not aiming to break even. I'm aiming for financial independence by 40 years old and as such I need constant growth in all financial aspects of my life. However, while I deal with the shock of significant income loss I can at least be comforted by the fact that my hard work over the last few years has allowed that shock to be softened.
The great thing is that while you can't predict what's going to happen at your job and you could likely be fired at any time (unless you have a contract of some sort), dividends are much more predicable and friendly. You can't be fired as a shareholder. Dividend raises are typically clockwork in their nature, and often much more lucrative than a raise you might see at your day job. And although dividend cuts happen from time to time, it's fairly easy to diversify your dividend income sources enough to where you won't see a 20% pay cut like I just did. Invest fairly evenly between, say, 40 companies and even if two companies cut their dividend in the same year (not often if you're investing in high quality companies known for dividend growth) you'll see a 5% reduction in your passive income. And this is only if you didn't have even an inkling that a cut was coming and you held on to an investment through a cut. But don't forget you have 38 other dividend machines churning out more cash for you. If the other 38 companies raise their dividend just 5% you'd be made whole.
So while I'll likely have less capital with which to fund my portfolio over the coming year(s), my motivation is as high as ever to take more control over my income. It didn't take a big cut in pay to wake me up and inspire me to pursue passive income generation; I've been at this for years. However, it does put a little more pep in my step and a little more fire in my belly to continue investing in high quality companies that pay rising dividends so that I don't have to worry about my ability to receive a certain income or pay my bills. Working my butt off for 50+ hours per week for years on end only to see a highly likely cut in my commission checks and then seeing the payouts in the companies I'm invested in rise relentlessly year after year no matter how crappy of a shareholder I am in real life allows for an interesting contrast and really opens ones eyes: being a shareholder is much more rewarding with much less work required. Which is just another great reason to pursue passive income!
How about you? Seen a pay cut lately? Were you more motivated to take control of your income?
Thanks for reading.
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