TE&MN #33: How to Save Smart: The Proven Plan for Tech Employees with Equity Comp

The Simple 3-Step Savings Plan for Tech Employees Working for Equity Comp

Here is the truth: Saving money is the first step to investing. 

If you don’t have any money to invest, you don’t have the fuel to move towards financial freedom. 

How can tech employees save effectively while managing the demands of the job and complex finances?

Many find it hard to save working in tech, even with high incomes and even higher expenses.

Luckily, saving money can be straightforward. Use this dead-simple framework for maximizing savings and building wealth.

Here is a framework that helped me save money and build my Evergreen Portfolio, which I will teach you in 3 steps. 

The Struggle to Save is Real

Most people fail or struggle to save because they:

• Let lifestyle creep eat into savings

• Focus on acquiring liabilities over assets

• Have a poor relationship with money

I know that saving can be complicated because life comes at us fast.

Life changes can come at us quickly, putting new demands on the expense line. 

• Building and Growing a Family 

• Buying a Primary Residence 

• Aging Parents with Failing Health and Finances 

• Medical Issues

With these many challenges, your process must be simple and easy to manage.  

The Simple Savings Plan Framework in 3 Steps

 This framework breaks down how to manage your separate income streams as different funding sources. As a tech employee, these 3 steps will help you to maximize savings and fuel your investment portfolio.

The foundation is to map an income stream to set expenses and limit your spending on those expenses to the income.

• Salary  ->  Living Expenses 

• Bonus ->  Large Purchases & Lifestyle Expenses 

• Equity -> Investments 

Here are the 3 steps: 

 1. Fit Living Operating Expenses to Salary

Create a budget to adjust your lifestyle to fit within your salary. This can be challenging, but it is the cornerstone of locking down your lifestyle. 

• Housing Expense: Limit it to a reasonable portion of your salary. In a high-cost-of-living area, this can be challenging, but lock this down.  

• Living Expenses: Track and control monthly expenses.

• Child Expenses: Plan for education and childcare within your means. 

To simplify this, my wife and I put all our salary income into a single checking account. We use this to run our family and map it to our budget.   

We treat our salary income as fixed and don’t access additional dollars.  This helped us stay disciplined and avoid overspending.

 2. Bonus is Used  for Larger Purchases and Trips

Allocate bonuses towards one-time, larger purchases instead of regular expenses. We want to have fun and enjoy our money; bonuses are allocated for that.   

Bonuses are incentive compensation, so for us, they align with putting in that extra effort to get additional annual rewards. The better our results, the more “fun tickets” we have to play with.  

Here, we leverage tactics like travel hacking to extend our dollars and get more yearly trips. 

In a few weeks, I will have a podcast episode with Julian Fung, in which I discuss my travel hacking journey that led us to Spain this Summer

3. Save All Equity to Invest

Equity compensation is our fuel for financial independence. It should be saved and invested to build wealth. We use it to buy assets that will grow or produce income, and that is it. 

These dollars were put into a different bank, not just a different account. We did not want to make accessing these dollars easy. 

Every share of equity I received was kept separate and funded our “multi-generational business” of a diversified portfolio. 

The portfolio is responsible for creating a steady income stream to fund our expenses. If we don’t need it, we keep reinvesting to compound our returns.

This simple framework will help you save more annually, allowing you to build a robust investment portfolio that grows over time.

TLDR:

• Fit your lifestyle into your salary to avoid overspending.

• Use bonuses for larger, one-time purchases.

• Save and invest all equity to diversify and grow your wealth.

Following this simple savings plan can fuel your evergreen portfolio and secure your financial future.

Start today and take control of your finances.

I will soon launch a new product that teaches you how to build and grow a multi-generational portfolio.

If you are interested in learning more, reply “portfolio,” and I will tell you all about it!

Tech Equity and Money Talk is a weekly podcast showing how to work for tech equity as a wealth-building strategy and meet your financial goals.

062🎙️ Mobile Home Park Investments with Christopher Nelson

Continuing the series on alternative investments, this week, I present the mobile home park asset class.

While this asset class may get a bad name in the media, it is a great investment that can also provide real affordable housing.

Check out the episode where I break down the fundamentals of mobile home park investing.

The Tech IPO market in 2024 shows signs of recovery after a challenging period, with increased activity and investor appetite for new listings.

After a challenging 2023, the IPO market is gaining momentum in 2024, with the first quarter showing significant improvement compared to the same period last year.

Global IPO volumes and proceeds have increased, driven by stabilizing interest rates and rallying stock markets.

Investor sentiment has notably improved, particularly for tech companies, as the market has become more comfortable with growth valuations again.

Successful debuts of companies like Reddit and Astera Labs have further bolstered confidence in the tech IPO landscape.

This renewed optimism has led to predictions of increased IPO activity, with Morgan Stanley anticipating 10 to 15 more tech companies going public before the end of 2024.

Here are some companies that could still IPO in 2024:

Stripe: A leading digital payments company, and its IPO is highly anticipated due to its significant valuation and market presence. This could be the year!

Databricks: Known for its data analytics and AI solutions, Databricks is another major tech company expected to go public this year.

Plaid: Known for its financial data aggregation services, it is preparing for an IPO and has recently bolstered its executive team. This is a tell when key executive team members are hired with IPO experience.

Stay apprised of the market and look for equity that will be liquid and grow.

Link to Article

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Disclaimer: This newsletter is for informational purposes only and does not constitute financial or career advice. Always consult with qualified professionals before making any decisions based on the information provided.