My dear loyal readers,
I sincerely value your readership and appreciate your patience over the last few weeks in sticking with my blog updates. I am hoping that I have not lost you. Life has been crazy busy over the last several weeks. As I stated in my previous post, I am going through an fairly significant change in my professional life which has been consuming a lot of my free time. I would finally like to talk about this in this post.
Before getting started, I wanted to take you back to the topic of “Savings Rate” which I have also talked about previously on this blog.
A simple equation to look at your savings is as follows:
Savings = Income Generated – Expenses
Our objective is to improve the savings rate to the best extent possible, because higher the savings, the more capital we have to invest into our own future. For dividend growth investing to work as a strategy, it is important to ensure that we are investing as much capital as we possibly can atleast during the accumulation phase of our investing journey.
None of this should be overly controversial as the subject of improving the savings rate is pretty critical to the success of ANY investing strategy, let alone dividend growth investing.
The part of the equation that does not get as much attention as it should is the “Increasing Income” part. Since we are so hyper-focused on the “reducing expenses” part of the equation, we generally ignore the aspect of getting better at our day jobs and “coast” through it. Some of this is due to the relative comfort of our job, we understand it pretty well, why push ourselves in the quest for something better? Is it really worth it?
In my case, I saw a couple of interesting dynamics that prompted me to seriously ponder over this question. The rising inflation was one of these factors. At the time of writing this, we are seeing record-high levels of inflation and it is unclear how long this situation will last. The other dynamic was a question about my employer’s profitability in the years to come. As an investor, I am now used to reading through financial statements and questioning aspects of the businesses that I am invested in. I used some of these learnings to study the financial statements of my own employer. The exercise revealed some interesting insights. I was able to make reasonable approximations about the company’s long-term profitability and make reasonable guesses about how long it would take me to reach my financial goals if I would stick with this employer. It also dawned on me that while things are great with my employer at present, there is only so much I could do to boost my pay beyond a certain level. Ultimately, this exercise prompted me to start considering other options.
Interviewing in my area of expertise (i.e. tech sector) is incredibly hard and requires months of arduous preparation. This is because the interview process itself is fundamentally broken thanks to the FAANG (Facebook/Meta, Apple, Amazon, Netflix, Google) style of companies. These companies have tailored the software engineering interviews to include questions surrounding topics that an engineer would have typically studied back in graduate school. These questions, while academically interesting, have arguably little practical relevance. Unfortunately, the rest of the tech industry has been so enamored by these FAANG companies that they have replicated the interview process as well. It can be mind-numbingly stupid at times, but there is nothing much anybody can do about this.
Anyhow, the mere thought of preparing for interviews can be demotivating by itself. In my case though, I had to look past this and focus on my larger goals. So I prepared….juggling my responsibilities between a full-time job, my family responsibilities and using every little free time available to prepare.
After interviewing with several potential employers, I landed up with offers from a handful of them. Apart from evaluating the offers themselves, I studied each employer’s history by looking through their annual SEC filings, reading up about the management itself and factoring those into my decision making. This is something that I never did previously in my career. I would mostly look at the role itself, look at the offer in isolation, rely on the recent media news about the company and just take a blind leap of faith about the health of the company. My education as investor has forced me to research these other aspects of a potential future employer and use that to make a decision.
In the end, I am happy that I went through this process. Change is incredibly hard to accept especially as one progresses through life. But sometimes it is important to take a step back, analyze and make a difficult decision. At this point, I have no idea if my decision is right or not. But the decision is based on a logical premise, and that is all that is in my control.