Welcome to episode 226 of the Nerd Journey Podcast [@NerdJourney]! We’re John White (@vJourneyman) and Nick Korte (@NetworkNerd_) – two technology professionals with backgrounds in IT Operations and Sales Engineering on a mission to help others accelerate career progression and increase job satisfaction by bringing listeners the advice we wish we’d been given earlier in our careers. In today’s episode we share part 3 of an interview with John Nicholson with a focus on ways to negotiate offers, some food for thought on different company benefits, levels of risk as it relates to startups, and numerous tips on personal finance.
Original Recording Date: 02-02-2023
John Nicholson is a Staff Technical Marketing Architect at VMware and co-host of the Virtually Speaking Podcast. If you missed the first parts of our discussion with John, check out Episode 224 and Episode 225.
Topics – Negotiating Offers, The Purple Squirrel and more Company Benefits, Personal Finance
3:00 – Negotiating Offers
- When negotiating an offer and health insurance for example is more expensive than your current company, can you ask for the company to pay more for your insurance instead of offering more salary pay? In other words, does it come from a different bucket on the back end?
- John N feels like health insurance options have to be pretty flat across the board (i.e. standardized for everyone).
- 401K matches have to be flat as well. The company / companies will get into trouble if only the executives or "highly compensated individuals" are using the full match.
- Additionally, the IRS has strict rules on fringe benefits.
- John’s blog post even talks about hotels. What kind of hotels would the company put you up in if you need to travel? Is it Motel 6 only, or would a nicer Marriott be ok?
- Consider any and all differences when you’re in the negotiation phase, and come into it by stating you’re taking the position of really wanting things to work out. Is the percentage of variable compensation negotiable (i.e. bonus or commission)?
- If not, is there room in there to raise the base salary? You may or may not be coming in at the top of a salary band (which could be good or bad).
- John N mentions raises are generally distributed heavier for people at the bottom of a pay band and lighter for those at the top.
- If you’re at the top of the salary band and cannot adjust bonus / commission percentages advantageously, ask about the RSU bucket and if it can be increased (i.e. you want to enjoy the risk with the company).
- John N has seen some startups allow designing your own compensation package to a certain extent. John provides the example of a married couple he knows in the San Francisco Bay area with one spouse seeking to always work for a well-known established company (being able to live within their means off the base salary) and the other spouse working at different startups structuring the base salary is low and the number of stock options is high (i.e. once the startup hits a successful exit the person can retire). This is a strategy.
- Each person has a different risk tolerance level. Some take risks that seem crazy. John N tells us startup founders may turn down an offer to buy the company because they have had success in the past and are "swinging from the fences."
- When working for a startup, your risk tolerance and your founder’s risk tolerance could be completely different. In the case where founders are trying to gain all they can from the startup, it can potentially end in tears for all parties. Listen to John N’s illustration.
- There’s also something called secondary offerings. John N encourages us to go look at Crunchbase. In this situation the company executives might instead of taking an exit of the startup and putting money back in the company sell their shares for personal gain (i.e. lowering their ownership stake and making sure they have a way to retire but not doing it for the benefit of the company.
- Nick mentioned wellness benefits that we might need to take into consideration when working for our current / future employer.
- John N mentions a 2-day intensive speaker training in which he participated. They would record each person as they delivered some kind of presentation, and John says it was surprising how much this experience improved everyone’s speaking abilities.
- Spending a chunk of money on 5 members of a team for a 2-day training to make them better is not something companies casually do. This is why John encourages us to ask about training.
- It’s possible people may not want to make more money by making a move. They may just want to not work on Fridays, for example, or work from home all the time. Others may want to go to the office because working from home isn’t an option or something they want to get away from, for example.
- Working from home sounds great until you realize you have to provide an office space for yourself and place to work (including furniture, etc.) that is not necessarily funded by the company. John White tells us this may require raising your standard of living to get a bigger house or apartment for a dedicated room.
- John N shares an illustration about the difference in cost of an extra bedroom in Houston, TX (around $40,000 extra on your mortgage) and one in Palo Alto, California (around $2,000 extra per month in mortgage / rent).
- Maye you enjoy working remotely and are willing to go live somewhere cheaper. Some companies have an offset for this and may or may not be transparent about it.
- John N feels the more senior someone is the more they will push back on what they get paid regardless of where they live. Junior candidates may not be able to push as hard and may see the company pushing back.
11:13 – The Purple Squirrel and more Company Benefits
- John N tells us a purple squirrel is a term recruiters use to describe an impossible list of skills needed to fill a specific role. In other words, someone is looking for something that doesn’t exist (which can happen a lot with internal IT). Realistically a company might need to change what they are looking for or split it between multiple roles. Listen to John N’s illustration.
- John N isn’t sure why HR and recruiters refer to folks as purple squirrels but says HR folks have some of the best stories. John N would encourage us to ask HR personnel who don’t work for our company some fun questions about interesting situations.
- This gets back to the suggestion of always having questions to ask people. If John N is in a cab in a foreign country or meets somoene who works a 24-hour job, he will ask about the weirdest things those people have ever seen. You can learn all kinds of things by doing this.
- "If they have listed a bunch of random stuff and you’re the one guy who has it, stare down the recruiter and be like, ‘I am the purple squirrel, and you’re not going to find anyone else. Show me the money!’" – John Nicholson
- John N tells us to be likable, lively, and fun. But also think about randomly switching to being completely serious about execution.
- John N says some companies will let you do a mega back door Roth or other longer term tax avoidance tactics.
- The more senior you are and the more research you do, think about what the company does at anniversaries. VMware, for example, will 100% match charitable donations to non-profits in the US up to a certain amount per year. Many companies like to do non-profit matching since they can write off the match for tax purposes.
- Look for benefits like companies contributing some annual amount a Health Saving Account (or HSA) for employees.
- If you have a Health Savings Account John N recommends investing it and not letting it sit in cash.
- There are some interesting ways to put in money tax free, let it grow tax free by investing it, and in some cases, remove it tax free.
14:55 – Personal Finance
There are a number of hyper-optimizations you can do with these benefits, which are things you’re not going to do when fresh out of school.
As you become more senior there is a lot you can do to help work backward toward leaving the industry on your own terms, for example. John N says we should try to set a target date for retirement, a date you would like to work past but one at which you could retire if you wanted.
- "I don’t want to be that guy who is burned out, making half what he used to, is having to work, and angry. I’ve met that guy. I don’t want to be that guy." – John Nicholson
John White says when it comes to personal finance it is wise to get yourself healthy in that area before uncertainties come your way.
John N says the lower you are paid the easier it is to find a job. He once did a stint as a bartender / bar / manager / waiter and mentions it was pretty easy to find a new job quickly.
- As you gain experience and begin to target more senior roles, the funnel is smaller. It’s important to understand this.
- Some say for every $10,000 you make over $80,000 add another week to expected time to find a new job (which may not be true in the tech industry).
- John N gives the example of a sales engineer being able to land something else fairly quickly even if they did not like it.
- John White’s story of getting laid off and needing to find a new job is something to reference. Check out Episode 220 for the first of a 4-part series showcasing that story.
- If you are a niche specialist and have some unique skill that not many might be looking for, you may decide you need some reserves ready for this.
The advice of many people is to keep a 6-month or more emergency fund for tough times. The longer you work, the more you should have in reserve.
- Should you leave all reserve that sitting in cash? You might if you’re a bundle of nerves or extremely worried about it, but there are alternatives.
- If you keep $100K in cash only, you are potentially burning 8-9% per year because of inflation (so $9K annually).
- If you want some kind of yield over time for the money, maybe you look at TreasuryDirect and look at i-series bonds. You can buy $10,000 per year per social security number in your house, and if inflation goes up, the value goes up. John N is laddering by buying $10K per year in these so he can shift his emergency fund to i-series bonds (which will auto-adjust to inflation).
- This type of bond can be cashed in after 1 year of being purchased but not before. If you sell before the end of 5 years, some of the interest earned gets taken away (the previous 90 days). But if you lose your job, that’s fine because you would need the money.
- Perhaps you keep some reserves in cash and some in i-series bonds.
- Maybe you decide to keep your reserves in blue chip stocks since these do not shift up and down as much as others. The largest bad stock event with these kinds of stocks are generally no more than 20%. So if you wanted to have $100K in reserves you could invest $120K and still have your target even if the market is down.
- Perhaps you take a blended approach and have some cash, some i-series bonds, some treasuries, and some blue chip stock you can sell if needed.
- Should you leave all reserve that sitting in cash? You might if you’re a bundle of nerves or extremely worried about it, but there are alternatives.
We also need to find tools to look at where our money is going.
- There are a number of products out there. John N likes to do a 1-month review of the top expenses on credit cards and categorize them. He uses Personal Capital (which seems to have moved to Empower). Many people use tools like Mint or YNAB which are spending management tools and can really help if you need to get on a budget. The tool John N mentioned is more of a finance tool.
- It can be very helpful to sit down with other family members monthly to go through spending.
- John N looks at top spends and likes to look at it from a cash flow basis (cash going out, cash going in, and where he and his family are). Some people do envelopes and specialized savings accounts.
- Be sure to factor in extra overheads of yearly expenses like property taxes and ensure you are saving enough monthly to account for it.
- John N likes the aggregation of all financial assets. It helps to see everything in one place across your brokerage, retirement accounts, etc.
- Be sure to roll over any 401(K) funds and do not leave with the old company (roll into existing 401(K) or some kind of Roth IRA).
- If all this sounds painful, go hire a financial advisor who will take 1% of your assets per year to manage it. John N likes to read the Wall Street Journal and is kind of a finance nerd (likes to do it himself).
- Also look into r/personalfinance on Reddit – there is a good wiki there.
- Many people have too much cash on hand and do not invest enough.
If you’re saving up for college, you could look at a 529 plan and work backward from what projected tuition will be.
- If you have extra money in their your kids could roll it over into a Roth IRA as part of the SECURE Act.
- John N tells us not to copy him and that he does not use 529s. He’s heavily investing in Roth 401(K) using he mega backdoor conversion plan as well as Roth IRA. Roth accounts seasoned for 5 years will allow you to withdraw the contributions and then spend on anything (since it was post-tax anyway) but cannot withdraw the gains.
- Crazy rich people might start looking at family limited partnerships for example to hide money in assets. If colleges know you have a ton of money they expect you to pay more.
If you’re severely in debt, consider the Dave Ramsey Debt Snowball approach.
- You might need to go with envelopes for budgeting.
- Nick says The Automatic Millionaire is good too.
- John N says he likes Dave Ramsey for people who have a spending problem but isn’t a fan of Ramsey’s investment and finance advice.
- Many of the investments we have discussed are going to be much more fun to do once you’re no longer in debt or broke (which John N experienced in his 20s).
People often look to others as examples. Many will say they have done a specific thing and encourage others to follow the same path.
- "The road behind you is always changing. The specifics of your situation is always different….How we got to here, that path or the most efficient path to it is probably not what we did." – John Nicholson, on following the same path as others.
- Personal finance is deeply personal and deeply specific, and there are easy mode solutions like…
- Max out your 401(K) match, put at least 10% in, and use a target date fund
- John N wants us to know he’s qualifying why he does what he does and is not going to sit and tell everyone to do exactly what he does / did.
- Part of the podcast thesis is to help people get ahead faster than we did, and there is no one path.
- Some book recommendations and other resources if you want to gain knowledge
- A Random Walk Down Wall Street by Burton G. Malkiel will teach you why you’re likely not going to beat the market guessing stocks
- Freakonomics – it makes statistics fun
- Against the Gods by Peter L. Bernstein – if you want to get into risk and assessment of it / why humanity is poor at it
- If you like podcasts, check out Planet Money
- Reading these books and reading the Wall Street Journal for a couple of years could provide a fantastic background which may be comparable to someone who went to school for business administration.
Mentioned in the outro
- Don’t forget to do your homework in advance on pay bands using online tools like levels.fyi, in conversations with the recruiter, in reading job descriptions, etc.
- At small enough startups maybe it makes sense to ask the founders what their exit strategy is and how much risk they are accepting (if they are willing to share) or at least get their perspective. You could also try to get perspective from the people interviewing you on the exit strategy.
- We would want to ask this of people in a respectful way. It cannot be the most important topic of conversation or your only question, but it’s part of your total compensation.
- Benefits like insurance can be wildly different from company to company. Understand what your healthcare costs would be when evaluating an offer.
- Retirement benefits are also important to understand as there could be huge advantages to one company over another (matching employee retirement benefits like 401K and the mega back door IRA options).
- Needing to add an extra room because you’re working from home (and the cost of doing it) is not something Nick had considered before this interview.
- Check out other episodes in which we discussed personal finance:
- Episode 57 – Preparing for Unexpected Opportunities Part 5 – Personal Finance
- Bonus 07 – Influence of Family on Career and Career on Family
- Episode 169 – A Thoughtful Personal Sabbatical with Mike Wood (2/2)
- Episode 218 – Explaining Hard Concepts in Simple Terms with Jason Langer (1/2)
- Episode 189 – Capture the Intangibles with Joe Houghes (3/3)
Contact us if you need help on the journey, and be sure to check out the Nerd Journey Podcast Knowledge Graph.
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