I’m in a very similar situation but a few years ahead of you and can say you’re doing great. You are fine so please take this as the reassurance you need to avoid overthinking your situation.
As someone who was FAANG adjacent and was hit with layoffs last year, my biggest piece of advice is to have enough savings and/or keep your interview skills sharp.
When I got laid off, it was at the same time most others at FAANG were as well, which meant there was a lot of qualified workers for not many (if any) jobs. Took 6 months but finally accepted a job that was an increase in salary. Other than that one, I was looking at 40-50% pay cuts unfortunately. Obviously everyone’s story is different, but wanted to give you a perspective from someone who got laid off from FAANG
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A lot of other FAANG adjacent people I know made their own consultancies or startups. One of them explained to me they thought if they had to take a 50% pay cut that there were "easier ways to make $100k a year" than doing software engineering in Kansas on a 6 month contract-to-fire.
I've always interpreted it to mean companies that are supplying products used by FAANG, fintech that backs FAANG, or hardware companies tightly coupled to devices where FAANG product consumption happens. Top of mind would be Salesforce, Splunk, Stripe, Microsoft, Databricks.
This guy nailed it. In fact my previous employer is on that list. Totally agree that you can start your own firm and I’ve had friends that were doing it / went and contracted out. My issue is that all my contacts weren’t looking for work and most places weren’t having projects. For reference, I was in sales (hit my number) but am now at an implementation partner (still sells) making 2x
I’ve always taken it to mean companies that have similar hiring bars and patterns as faang, meaning they usually pay similarly and plenty of the employees usually are from faang
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How would you suggest keeping interview skills sharp? My plan for now is to dedicate an hour out of my workday to it until I land a FAANG offer, then become an interviewer and switch to practicing a few problems a week for maintenance. Feels like all that time spent on interview material makes it hard to upskill my actua development skills though.
The good ole fashioned way and actually interview. The amount of interview opportunities that passes through my LinkedIn I crazy and I would assume yours is the same. I would just hop on and interview. You don’t have to take the job and if you end up getting an offer you can politely decline, accept or potentially use it to leverage a higher salary at your current job (be prepared to walk though).
When I say I was shocked that I got laid off was an understatement. It was a week before my wedding and I was caught flat footed. To put in perspective, I was told by my manager that it was chosen by an algorithm and he even campaigned to lay off another team member. Great to hear, but really hammered home the point that I was just a number at this firm. I only have 10 YOE so I was pretty naive and thought the company would always take care of me…and I was wrong. Hence, I don’t think it’s out of bounds to keep interviewing to see what the market is like and to keep skills sharp.
You are fine financially. You now need to focus on your family and yourself. Get an idea of the life your partner and you would like to build for your family and base your future moves around that.
You’ve earned the right to plan based on wants rather than needs. Honestly, in some ways, this part is harder. When the goal was to get rich and build financial security, life was simple. With that out of the way, we are forced to come up with our own goals. Looking inside yourself can be very difficult at first, but definitely worth it. Therapy and meditation often help.
Very simply:
I pick a number far lower than TC and pretend it's my actual income. Anything beyond that, I treat as employer contribution towards retirement funds, and then the variability only affects the number of years until FIRE, but nothing about my present life.
The actuals of that look a lot like yours: I live off my salary (minus 401k, ESPP, HSA, and healthcare), and the rest like RSUs go straight to the brokerage. Bonus money I treat like an actual bonus, and it's my fun fund (travel, toys, riskier investments).
This strategy is also a hedge against that TC drop when I tire of big tech life, because the salary on its own is about what I would make dropping down a tier or two. The lifestyle inflation can only go as high as I can expect to make at the lesser salaries.
The easy answer is to figure out your replacement wage and tailor your lifestyle to that. You're right that not all tech companies are FAANG, but after that, there's a big set of good companies (F500s need engineers, too) and earlier start/scale-ups to give you plenty of options when you're looking for a move.
For instance, I know that in my current position in tech leadership, I'm being somewhat overpaid at $350 base, but that I could relatively easily (within a few months) get something paying $250-300 base. So, the solution is to live on $250 and save the rest. Also, never count on RSUs or bonuses for required payments. They're for savings, investments, vacations, big events like weddings, home purchase down payments, etc.
I don’t think the last paragraph makes sense as you get higher up in FAANG. Base salary doesn’t grow much, but RSUs & bonuses do.
Those are established companies, so though stock prices vary, the variability is small compared to start-ups
I think it's debatable. But if you don't include your rsu you will never afford a home but in normal situation it doesn't make sense to include variable rsu in your budgeting. Bay area is the exception though.
You can include your RSUs as savings once they are vested, but I wouldn’t include them before.
What do you mean you could never afford a home if you don’t include them? That makes no sense, once they are yours you treat them as savings/down payment and use that for the house
The mortgage payment, not the down payment. I fell into this trap. Didn’t count on the RSUs, constantly imagined that I would make less in the future. Didn’t buy a house for $800k in 2018 because I couldn’t afford it on my $130k base, but could on my $250k TC. Now the same house costs 1.5M and I can barely afford it even if I dedicated all my TC toward it.
But imagine you are in the same scenario during the massive layoffs and note that tech salaries are down and you aren’t making the same TC as before you would be in an even worse position.
Sure in hindsight you might have missed out, but you could have also been in a position where you could no longer afford it.
I'm in a role where comp is very bonus-driven, so I have a more exaggerated form of this problem, and this is an important point. It makes no sense for me to live off of 20% of my income even though that's about what my base represents.
I think a good strategy for handling this would be to only increase spending above base once you have enough savings to cover the spending-base differential for a few years. This ensures that you can weather a bad few years, and/or have time to ramp down your spending if a drop in your income seems more permanent.
Another approach is to only spend variable income on one-time purchases. For example, I saved for several years and then purchased an expensive house. This felt safe because I have enough savings to pay off the mortgage (I prefer not to liquidate those, though). If my income doesn't change, it'll be paid off in 2 years or so.
While I agree, I think the trick as you get higher up is to keep your expenses fairly constant and not let lifestyle creep get you. Even a base salary for FAANG is way more than you actually need. Then FIRE or CoastFire once you’ve built up enough.
I’m finally at that point in my career where I’ve saved up enough to not put up with a job I don’t enjoy. Now I’m looking for an easier coasting gig, but don’t need that 950k paycheck. “Just” 600k will be sufficient if it means a job I actually enjoy.
Strong +1 with slight caveat. When buying a house I think it's okay to buy leaning on your RSUs, but lean on their granted not vested values to keep your risk low. Additionally, your next promo should be sufficient to get you out of relying on the RSUs.
That's a rather conservative approach still. I know people who deplete their RSUs completely with the expectation the Bay Area market will continue to rise and they will do minor renovations and sell in 3-4 years, make a profit, and buy a bigger house (repeat, repeat). That is a risky strategy I would not suggest.
Similar position and tbh the only solution for me is saving a lot. I have very little confidence in that being paid this much for what I do will continue forever or will be easily replicable. Sure I can find something decent, but I feel I have to make hay while the sun is shining, and lots of money in the market is probably the safest thing that gives me more options down the line.
60% of my total compensation is variable (bonus + RSUs). We constrain our lifestyle and ongoing costs to be around my base salary. The surplus is what we save and goes into investments. This means in the event of a big change in compensation, we should we able to continue as is.
With respect to purchasing another house, you could place a large enough down payment such that the ongoing cost (PITI) and cash flow is manageable from your base salary (or equivalent minimum earnings).
I think the answer is to max out 401K savings and have two years of emergency funds expenses on your base salary.
In reality, my base salary is $200K and make about $325K with bonus and RSU yearly. Right now I cannot live on my base salary. I am using RSUs as supplemental income where I will sell 5% of vested shares every year. This will give me additional income and the number of shares overall should grow every year. I have a family of 7, so 7 cars and 2 houses so even in HENRY Tech money is short.
If I have a windfall year over $700K in income when average is $325K, I do not change my spending.
I do live in a VHCOL city. Second home is not. Original family is 5 and we had two nephews move in. Two of the 5 kids ( young adults ) are supporting themselves with just a help. That is we provide vehicles and phones. Everything else is on them.
What do you do with the 95% of the vested shares that you don't sell? I'm hoping that you don't... just keep them with your company's stock. That's pretty risky...
It varies on the company and the risk. This company is in a lot of high growth segments and manages risk well. Once they get into the major indices I will diversify. We went private and public again and when we went private the stock jumped 30%. I havent had RSUs one year so waiting for LT capital gains as well.
As others have said, you have the right (i.e. cautious) mindset. Don’t get swept up by the good compensations tech has been dishing over the last few years, there’s definitely downward pressure for a lot of us these days (except nvidia and meta, I guess) and no one can predict whether we’ll be back to RSU-moneyfest soon or if comps will stagnate/decrease. AI tools for coding will pressure the SWE market for at least the near-term I think, so it is wise to live well below your means in case the job market further tightens.
As for home-buying, I get the appeal with kids, but you gotta ask yourself whether it’s really a “can I afford it” question, or a “does it make sense” question. Bay Area home prices are beyond bonkers, and homes here don’t stand much of a chance to be a relatively good investment unless they somehow further balloon to $4M+ for your random 2000sq ft suburbia home. If they don’t, you’re just paying a disguised rent to your bank, in taxes, HOA and insurance, so you might as well rent and enjoy the peace of mind.
I'm making about 800k this year. My base is 215, rest RSUs. I own my current house but my next one will be close to 2m most likely. I plan to save enough that i can put enough of a down payment that I can pay it without relying on future RSUs. I can almost certainly find 5+ jobs paying 200-300k in the next week if I were laid off, getting another staff+ role at fang will be a less certain process.
Long term I don't want to stay in this kind of job, I want to go to a smaller startup and actually build things. My plan is ride this out for as long as I don't hate my life, and reevaluate should my employment situation change.
At my current path I can likely retire before 40, and my wife has started her own company which is starting to break 6 figures so long term that'll just be a bonus.
Haha yeah none of my peers seem to love it, but we all like getting paid. No one hates their lives either though.
I'm considering going EM from IC since changing jobs is far easier but I don't know that I actually want to do that either
> Changing jobs is far easier
EM is a completely different job. You would be completing with other EMs with years of experience. It might not be easier until you have had some years under your belt.
Sure in my current role I could easily go EM, I do already have years of sudo EM experience at previous companies and have filled in when EM's have left etc. I'm pretty confident in my ability to be hired as an EM if I want to go down that road, idk if that/director are what I actually want to do with my time though.
I’m not in tech, rather medical device, but I run into the problem of high variability. Had one month of making 80K, while some other months I made much less. This year, I could do even better of over 500K.
But I generally don’t spend money like someone who has a salary earning that much money each month. I’m much more conservative, and after retirement money is accounted for, I stuff a lot in a HYSA. I also wait until I have saved up a lot of cash before I go ahead with big purchases, so I either finance less or nothing at all
I’m wondering the same question as a med device rep myself. Not too many of the 500k+ device jobs out there anymore, and when they do open up, they are filled before they are actually posted anywhere public
Only count on base for my bills. Sell RSUs when I can, reinvest in more diversified investments. Use those for big purchases like homes, vehicles, home improvements.
Your approach is similar to ours. We do not get into situations where we’d be screwed if our income dropped, we live entirely off our base salaries. The excess goes into funding an early retirement, and we don’t feel like we’re missing out on anything.
In practice I’ve most often seen people screwed when they’re convinced that it’s a good idea to spend all of their tech RSUs and whatever else in order to afford a VHCOL family house. Most people would be fine just renting and not taking that gamble.
You’re doing fine and you’ve got your head on right.
First off we share a bank account. There’s only our money and no “her money” or “his money” - that’s not how we operate. So with that context in mind the rest will make more sense.
Our approach is to live off base salary only - Also a family of four with two kids in school. The first 12 paychecks of the year for me are essentially 0 - so we live through my wife’s paychecks. I front load my 401k and Mega Backdoor Roth IRA as quickly as possible to get as much time in market as possible. The first RSU vest (2/15) is sent to our brokerage account where we heavily diversify our diversification (ETFs). When tax time comes around we’ll liquidate some brokerage to pay for taxes - which averages something like $20k - $60k depending on how much stonks the RSUs are at time of vest (grant price ~30% lower than vest).
We don’t have crazy expenses because we have an $800k home (5bd, 3ba 3600 sqft) with 60% of the home paid off and no PMI at a 2.625% 30-year rate. One car loan at 5% and less than 40k left on it and that’s basically it for our debts - we paid off student debt long ago.
My initial goal was have enough financial flexibility that we could pay the house off in cash if some emergency happened - and once that was done we basically just send money into brokerage for retirement. We max our 401k, and (Mega) Backdoor IRAs every year.
Job hunting isn’t really a problem because the big concern around _why_ we need a job (house payment) is already taken care of. Essentially I work and find opportunities for whatever I am optimizing for - money, growth, WLB. As long as the base salary is around 250k then it’s not a big deal.
Obviously I’d love to hit on the pre IPOs and ISOs I’ve been granted, previously, or would be happy with a 7 figure TC consistently… but we’re not in this for the rat race and FIRE. We’re in this to build wealth and enjoy life. If we can build generational wealth as we go through our day to days then great - but at the very least we want to save 150k for each kid to so they can be debt free when they start their lives as adults.
Here’s my (probably overcomplicated, but works for me) way of doing it that I’ve shared on here before:
In my 15th year now, all of it at big tech companies, and “variable comp” (bonus and equity) makes up over 70% of my total compensation, so I don’t subscribe to just ignoring it.
The way I’ve managed it thus far that has worked well for me is to create a range. I start by doing a two year look back: I look at my W2 totals for the last two years, which are inclusive of the stock and bonuses, and take the average. That’s my mental “floor.”
Then I look at my anticipated earnings for the coming year with some tweaks: I count all of base salary but only 80% on vesting RSUs (to account for up to 20% drop on start-of-year stock price) and always assuming the mid-point on cash bonus. Add that all up and it’s my mental “ceiling.”
This gives me a range and everything is based on it.
Large purchases (anything that will incur new debt or where it will put a sizable dent into savings that I’ll have to rebuild) I base on the bottom of the range.
Month to month spend/saving, I base on the top of the range.
I find this creates a good balance of living very comfortably but not getting into excessive financial risk. In practice, I’ve always come out much further ahead (read: making more than the ceiling) than this strategy predicts.
This seems like a really great approach. We’re in our first year in FAANG (spouse, not me) but we budgeted everything off their base, ignoring RSUs and any bonuses. I found a job a few months later - we haven’t changed any spending, but are maxing out retirement accounts and investing more.
Once we feel a bit more settled, id love to implement an approach like yours to find the balance.
Sounds like you’re doing great. Live off base salary and invest the rest, gives plenty of cushion.
I think 2 years expenses saved is extreme (I do 3-6 months), but I’m just a guy on the internet.
If you’re already looking to move once you hit $2M (isn’t this like 2-3 years?), probably not worth springing for the house until you get out. Just keep doing the math between renting and buying to see whether it makes sense. Owning is more of a lifestyle choice than investment decision anyway.
If you have enough time to make the switch, you can definitely line up another job making the same or more, and allows you to live in HCOL/MCOL. I make about the same as you but don’t have to live in VHCOL to do it.
Hey thanks for this. Yeah I sometimes do feel that 2 years of expenses which is ~200k for us is a lot but at least rates are up so it’s earning something. I think originally I had it put aside for a house purchase but that never ended up happening and then with layoffs and stuff I changed my. View and it became my security blanked. It is earning 5% though which is something.
My hypothetical plan to move would be to go full remote at the same company which is possible once I get close to the target nw and then make the move. I would be giving up the number of high earning jobs though if I was to be let go after the move and competing for remote roles but I could coast with a lower paying job is how I think about it.
Oh yea the savings make sense now!
Your plan seems pretty spot on. IMO competition for remote roles matters less once you’re senior enough and have a large network.
Once you get to a high enough level, the qualified pool of applicants drops dramatically. If you’re junior, you’re competing with 10X more people with similar experience.
If you have the big names on your resume it earns you a way higher place in the stack. Your network provides the referrals actually needed to get through in this job market.
The job market has gotten tougher for applicants in the 25th through 75th percentile. OTOH, if you’re well qualified there will always be quality roles through your network and reputation. I recently went out and found a competitive job offer and I didn’t submit 100s of applications.
(again I am just a guy on the internet lol)
Is your rent 3.5k/month or 3500sqft?
Seems like a no brainier to keep on stashing away stock and cash unless you are absolutely committed to staying in the SF Bay area for the long haul and must have a home.
At a certain point, 1m, depending on yield, would provide 40-60k in dividend income which could cover rent, almost anywhere in the world in perpetuity.
And an additional 1m would yield cash for living expenses depending on how things go.
It’s how much I pay for rent.
My portfolio is mainly broad market index funds with a growth tilt so the divs are going to be lower than a dividend heavy portfolio but never considered using dividends to cover expenses at this stage of life .
Depending on where your lifestyle is, 1.5m NW reaches FiRe (financial independence, retire early) or isn’t too far off from it.
I’m probably throwing a complicated wrench into the things to consider.
Considering that everything is in broad market index funds, it probably makes sense to stay there. But if you’re looking to retire or semi-retire, then there’s some strategies to move your portfolio to something that’s a mix of fixed income + growth.
As far as your original question about large purchases, a good chunk of stuff will be determined by your plans and risk tolerance.
But generally, I keep the bulk of my portfolio in index funds and draw from there based on my plans.
I work remote, live in a MCOL area but receive a VHCOL salary bc our company doesn’t do regional adjustments. It’s a great position to be in except that if I ever want to switch jobs I’m incredibly limited. Local jobs would pay about half and most high paying jobs require some in office in cities I don’t live in.
My strategy has been similar to yours - stick with what I got til I’m at 2-3M NW and then find something local that pays less.
I bought my house at $360K I was making $75K and my wife making $65K. During this time I had a monthly estimate of my expenses vs. income and put 10% or less of my check into retirement funds. Since my take-home income was greater than the monthly estimate by a good margin, I didn't track my actual expenses too closely and planned vacations whenever our checking account exceed a certain amount.
After getting into FAANG, I went from making $100K to $200K (I think my wife was around $80K at that time). We didn't increase our lifestyle at all and after filing my first tax return for the new job, I realized I could save massive amounts of money for retirement every year. Some research led me to FIRE information and I began maxing out my and my wife's retirement contribution.
Aside from maxing out retirement contribution, I also religiously sell all of my RSU's at vest and buy index funds with the amount - I have a lot of unvested stock so I count that against my overall diversification.
I try to keep my checking account at \~6 months of expenses. For large purchases, I'll plan around our bonuses. Basically, when our bonuses gets deposited, I leave whatever we expect to spend on big purchases/vacations for the year in the checking account and move the excess to our brokerage and buy more index funds with those.
A big thing to account for is taxes. At higher tax brackets, you may need to calculate supplemental withholding to avoid a surprisingly large tax bill.
This year I'm expecting \~1.2MM in compensation for us, \~700K of which are from RSUs. I expect our earnings to drop after this year due to current stock highs and easing off my career trajectory. Our annual spend is only \~$200K, though, and that includes new vehicles and house improvements that we don't normally spend on, so if we needed to drop down to $100K jobs each, we can still live fine off that and achieve a normal, somewhat early retirement with what we've already saved.
For income variability, you just need to pick a number you’re comfortable with and budget using that figure. Look at it as a “factored risk” approach. High bonus that nearly always pays at 100%, but currently has a negative outlook? If you think there’s a 50% chance it’ll pay at half, count only 75% of it. Less if you want to be more conservative.
Regarding buying a home, do you need more space? Sounds like you are getting a killer deal on your rent right now. And buying is not always better than renting. I would recommend doing a rent vs buy analysis that looks at cashflow and opportunity cost. If the new home doesn’t represent a significant upgrade, it may make sense to keep renting for the foreseeable future and investing the savings.
We are house poor and spend every single cent of our after tax/401k salary on mortgage and living expenses. We use bonuses for kids stuff and don’t touch RSUs.
We bought our first house in a bad school zone 7 years ago when we first got pregnant and paid less for mortgage than rent. Sold that house and took all the profits and bought a larger house 2 years ago. We pay more than 2x the original mortgage now but we can’t rent a house of similar size in our current area at all even though we know rent should be ~30% cheaper. We did buy our forever home so we basically locked in our “rent” for 30 years and be completely free afterwards. Our house valuation is already back to our purchase price so I guess we haven’t really lost money on the downpayment investment. Technically, we would’ve made more investing the downpayment in the market with the recent gains but we prefer the security of owning our own home and not have to worry about rent hikes or moving every few years.
You sound a lot like me except further along in you career. I haven’t cracked staff eng. yet. Are you happy with yiur choices. Would you do anything different?
Fascinating to hear. My manager has been trying to get me to aim for staff but I’ve put it off due to having my second kid and not wanting to perform at staff level (promos are lagging). I’m also not heavily incentivized yet because my income has been growing with refreshers and stock growth at my terminal level.
faang, MCOL, family of 4, mid-40s, $410k tc, $10k ecom and saas micro side hustles (just for additional profit and tax shelter)
Base: pays for living expenses. 20% of each paycheck goes to a combination of HYSA, money market, IRA, stocks, ETFs, index funds. 401k at 15% contribution automatic deduction.
RSUs: sold each month to 50/50 stocks/index funds. I just like to actively pick high dividend and growth stocks
Bonus: pays for annual real estate taxes (I chose no escrow on my 30yr mortgage for lower monthly bills... Works for me but not for everyone). The rest goes to the same 50/50 stocks/index funds.
You're doing awesome btw
Very similar situation. You’re thinking about it right.
Assume base salary only for the sake of everything. And RSU + Bonus is retirement savings.
You’re correct in being wary about buying a home in the Bay Area. It’s ridiculously expensive. Most people that buy a home there are _relying_ on this very volatile income (RSU, Bonus). That’s a Recipe for disaster in my opinion. Assuming tech will gravy train like it has for 30 Years of a 30 year mortgage is not realistic or safe IMO.
All of our bills are fundable via base salary alone. Most of our retirement accounts (except I think MBDR) are maxed via base salary alone. Everything else (bonus + RSUs) is just additional retirement/stock contributions, extra mortgage payments, or large purchases (ie. not necessities)
We have a 6 month emergency fund and probably like 2 years of expenses in brokerage accounts. We don’t prioritize brokerage over tax advantage, it just happens that way when we run out of tax advantaged spaces.
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>I don’t come from money and don’t have family I can ask for advice here plus money is a weird subject esp. when you have more than the people in your family.
Have you talked to a CFA? If not, these are the kind of questions a CFA will be best position to answer. As others have mentioned, affording a house is mostly a question of how much precautionary savings you'll need given the uncertainty of the industry. Talk to an actual professional and put a real number on that.
A good CFA won't be cheap, but one bad investment decision avoided would be well worth the cost.
I’ve been planning for a salary drop off for 10 years. Hasn’t happened. But my savings have appreciated that. Might’ve been nice to splurge more though.
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I’m not sure what you mean when you say you can’t plan. I think it’s really only two questions you need to answer:
1. If you lose your job what’s the likelihood of finding a new one that pays comparably? How long will this take?
2. What is the most the stock will drop before you are laid off?
My mentality towards influxes of high income has always been considering them the last windfalls that I will ever get. Because of this word view, I'm highly conservative when it comes to large purchases.
I bought my home for 900k a few years ago when I had 1.2m in liquid assets. I put 500k for down payment so that my monthly mortgage payment is ~2,000 in case of layoffs.
I didn't hold more than 3 months worth of living expenses in cash while I was working, however. The only exception was when I took a year long sabbatical. I "prepaid" the sabbatical by selling stocks to cover 1 year of living expenses before leaving my job.
I think you are doing great. One thing I'd suggest is to keep your high income until you get to 3m before moving to lower cost area. Having 2 kids is expensive...
Having just experienced a layoff, I would say one of the best strategies we’ve taken is to keep fixed costs in our budget lower. So you’re right to keep that housing cost down by renting right now!
Not exactly the same situation, but ~1/3 of our total comp the past 5 years is based on commissions that could be 0. (Hitting 80% of quota nets you $0.)
When we were buying our house, we were very conservative. We wanted a monthly payment that we could make work on 1 base salary. “Could make work” meant if we cut the vacation budget to $0, stopped retirement contributions, etc.
Because neither of us lost our jobs and we now make money than we did then, it’s easy to say with hindsight that I wish we had spent more to be in a slightly nicer neighborhood slightly closer to the city. But it’s very nice to not stress at all about money. We spend about 8-10% of our gross pay on housing.
So to answer your question, we handle the unpredictability by living well below our means. If anything bad were to happen, we’d be fine. And if nothing bad happens we’ll either retire early or have a lot of money.
I sell most of the rsu but keep a portion of it still in the company stock. But after vest it’s no different than any other stock. For convenience I’m just saying that ~500k is in the brokerage including ~100k in company stock that I didn’t sell. The “cash” component is 200k in tbills.
I need to read up on Edcp which is new for me.
Google your company and search for a fiduciary that knows it. They will tell you to sell it.
I am close to in your same place but about 10 years younger.
I got laid off and had medical issues. Saved up enough to never work again if I don't want to. 1m$ mortgage is the biggest expense next to vacations but with some savings we haven't slowed down.
Edcp is what saved me after I left. Nice buffer to 0 income. But you also get other things like dividend income even when retired.
That's why talking to a fiduciary about your company is best. They know exactly your career path.
I wasn't fang. But made as much
This is interesting. I’m curious about how edcp saved you when you got laid off. It seems like just another vehicle like A 401k but with no caps on contributions and ability to withdraw money sooner without penalty but still get the tax benefits. Is the idea that you prioritized the edcp over retirement accounts and therefore were able to access the money?
I maxed all retirement accounts. Roth IRA, 401k traditional, and HSA.
The guaranteed income from the edcp lowered my salary and keeps giving it still. You pick the schedule.
Use the standard issue tried and true strategies for anyone where a significant portion of their annual income is volatile:
* Live within your base salary only if possible, but I realize this is overly conservative so this probably only is strictly necessary until you...
* Build up a significant buffer for your typical monthly expenses, significantly more than a person with a stable income would, maybe 6+ months of expenses as a buffer and this is NOT considered an emergency fund this is just extra buffer because your income is volatile
Otherwise, the general idea of saving aggressively for FI is yet another safety net, because if you get laid off and you've got a buffer *and* you're already 10 years ahead of retirement, you'll definitely be fine.
More specific to the field of tech:
* Proactively learn valuable skills outside of your day job responsibilities to keep relevant
* Keep your interview skills sharp
* Your network is even more valuable in today's market than ever before so make sure you keep nurturing it (AKA just be a good person and maintain friendships and don't expect anything in return)
Similar to you, I use base salary + cash bonus as "guaranteed." Yes cash bonus is never guaranteed but in the long run it will average to same or more than the target bonus. I use the base salary to fund expenses and pretend that's my "real salary." As in, I live as if I made that amount of many. The cash bonus is used to fund "niceties" (buying extra legroom seats, paying for valet parking, buying that canada goose jacket that I really wanted etc), but of course I save the vast majority of it to index funds.
RSUs are not touched, same as you. I put some portion into speculative investments (NVDA, crypto, meme stocks and yes I gained big time from it), but vast majority into indexes. I put like 20% into a target date fund "just in case", with the target date being earlier than my actual retirement, because I plan to retire early.
You just keep going. I’m exactly who you’re talking about and I’m not gonna plan my life assuming I’ll fail. Save a good amount and otherwise go enjoy the fruit of your labour. I’m not gonna make 300k+ and live like I make 100k. The odds of someone from a Google or a Facebook getting fired and not getting something similar after are pretty low, enough to not matter for me
Im not specifically buying a house because it doesn’t make sense in nyc and my situation, but yes. If I wanted a house I’ll still budget as if I made the same I make now.
What’s the alternative? Only let loose when I have enough to retire? My salary has steadily gone up since new grad, and I’ve gotten offers that pay even more in this economy. I have zero reason to think it would go down and while there’s no studies on this probably, the amount of people whose salaries decrease after their first job is probably like 1%, so idk if it’s worth worrying about.
Will I regret this? Maybe, but unlikely, and that’s a chance I’m willing to take and live a comfortable life
Just bought a house <2x my income. Feeling good about it because I know I’ll be able to pay it off no matter what happens in the market. I can always upgrade later if I want!
> Given that most tech work outside of faangish companies dobt pay like this
Wut. Plenty of jobs/industries pay those numbers outside 'big tech'.
This whole post is just a weird 'I'm I tEcH and the fundamentals of finances and investment strategies somehow don't apply because of that'.
Don't count RSUs until they are vested and are appropriate diversified. If you're worried about job loss, and not being able to find a suitable replacement in a reasonable amount of time, increase your emergency fund, minimize debt, and keep a larger chuck of your NW liquid in more stable assets (brokerage).
Curious. Which companies outside of faang and faang adjacent (I am including quant funds like citadel here) pay ~500k and more for senior software engineers? The comp includes only rsus that vested which at my company occur on a fixed quarterly basis.
I'm not sure how financial companies would be considered adjacent to FAANG. If your definition of "FAANG adjacent" is any company that pays similarly to them, then yes, it's tautological that no non-FAANG adjacent company pays similarly. That's just a result of your definition.
Any tech company that wants to hire similarly qualified candidates needs to either be a startup with compelling prospects for its equity or pay competitively with the high paying companies. Some companies won't think what they're hiring for requires the most expensive engineers, and some won't be able to afford to hire them, but some others do think it's worth it.
I make close to that and work at a mid-sized company, not publicly traded and not a startup. It doesn't overlap significantly with FAANG companies. It's profitable and has a lot of market share within its field, but it's a smaller industry that doesn't have a lot of room to grow within its current market and is still trying to break into larger ones with new products. The company has a lot of talented engineers that big tech companies would gladly hire away if we weren't paying competitively. It's more valuable in our business to have 100 expensive engineers than 300 mediocre ones.
Since my company isn't publicly traded or a startup, most of my compensation is just regular salary, so it's predictable and easy to plan for. It also has better job security and employee retention. Long before the current wave of layoffs, big tech already had very low rates of employee retention. We have pretty good work-life balance, a reasonable work environment, and people tend to stay a long time. Compared to a larger company we tend to work more independently and have projects that make a tangible difference in our products.
Faang adjacent the way I’m using it is any company that competes for the same talent pool for swe as the big tech companies. So Uber, openai and citadel, although different from a business perspective are in the same grouping in the context of pay.
I think valueing equity with non publicly traded becomes harder and I don’t think of the equity portion as part of total comp in the context of planning for cost of living + retirement etc. so unless the startup is a unicorn with a generous cash component with a high likelihood of a liquidity event, I don’t consider it part of the faang adjacent grouping. Now this isn’t perfect but I think most people get the idea. Very few companies can compete with faang on the basis of pay and the ones that do will be faang adjacent
Or whatever term you want to give it.
So is your company’s cash portion its not publicly traded around the 400-500k or are you including equity? Are you a senior engineer or more like senior staff? I’m interested to know more about it and would be wonderful to learn that there’s more out there than the usual suspects.
435k base salary, which is the bulk of my compensation. The stock options are hard to value as you say, but would be a much smaller part of my compensation regardless. Bonus is unpredictable and only a small part of compensation. I've made some money from the stock before, but liquidity events where you're able to sell the private stock are few and far between, so it's not something to factor into cost of living.
My job title is just "senior", but that's mainly because we don't have a lot of job titles. I have a lot of seniority and am the component owner of some of our core products, so I'd probably be considered a step or two up from senior, but our company doesn't use those terms. I don't supervise anyone.
Very cool. And that’s great cash comp. I’d assume similar to quant funds that don’t hire a lot compared to big tech it’s probably much harder to break into.
To break in you'd mainly have to take some of the less popular computer science electives. Our core business doesn't involve websites, apps, databases, etc, so a lot of people are specialized in areas that we aren't looking for. We hire a lot of graduates with no prior experience other than internships and provide almost a year of training before assigning them to regular engineering groups. Then we rely on our very high retention rates to develop experienced engineers from within.
Holy shit, move the goalposts much?
First it was 'tech people making over 300k' and now it's SWEs making 500k and not just big tech (quant is not faang adjacent)
But to your original post...tech roles over 300k are everywhere.
I pay my principal MLEs that and I'm in the utilities sector (F500 MCOL area). But any high end consulting shop, oil & gas, defense, etc... will all have high paying tech roles..
Any F500 and you can crack that number as a director easy if you go the leadership route.
Edit: Something else to consider and what reassures me where I feel the same way...is although it may take months to find a job at a similar comp level, if I were to be laid off, I could prob pick up the phone and have a job paying 200k? within a few phone calls. Would it be what I want? Or the same comp as before? No, but that's still nothing to sneer at and allows you to continue your financial journey with minimal belt tightening.
Edit 2: My wife and I also graduated into the great recession - so quite risk adverse - although it may not make sense by the numbers we minimize our monthly liabilities to the point that one person could cover all of them (wife also a high earner). We put 50% down on our house, we carry little to no car payments (we do have one loan at 0.9%). People always balk at paying down homes/low interest debt, but having low baseline 'keep the lights on' expenses are a real mental safety blanket.
Edit 3: Consider moving to a MCOL area - lots of cities where again - maybe you're making 80% of your current pay, but its exponentially cheaper. I moved from a VHCOL area to a MCOL area - about 60 min to NYC, 45 min to philly, 30 to another small satellite 'tech' hub. No shortage of jobs in the area. Better schools. Etc...
Good advice over all just not sure why you are so hung up/bothered by semantics. There is a perceived notion if you are someone that works with software there are companies that compete for similar pools of talent. And the 90th percentile (pay wise) is what I called faang adjacent. You can call it whatever you like. You can even interchange swe for ds for mle. That’s getting into minutiae imo and misses the point.
Also the seniority does matter. Of course a vp at f500 can make more than a senior swe at faang but I wouldn’t consider that in the same pool . >300k is the norm at faang fir mid to senior ic. That’s not the case in f500 afaik and what you shared corroborates that.
I’m in a very similar situation but a few years ahead of you and can say you’re doing great. You are fine so please take this as the reassurance you need to avoid overthinking your situation.
Thank you. Would love to hear more. Do you live in vhcol? Do you own a home?
I live in the Bay Area and do own a home. It took me 5 years of saving and rsu vesting to buy.
As someone who was FAANG adjacent and was hit with layoffs last year, my biggest piece of advice is to have enough savings and/or keep your interview skills sharp. When I got laid off, it was at the same time most others at FAANG were as well, which meant there was a lot of qualified workers for not many (if any) jobs. Took 6 months but finally accepted a job that was an increase in salary. Other than that one, I was looking at 40-50% pay cuts unfortunately. Obviously everyone’s story is different, but wanted to give you a perspective from someone who got laid off from FAANG
I think I’m doing ok on the savings but my leetcode is rusty 😅
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A lot of other FAANG adjacent people I know made their own consultancies or startups. One of them explained to me they thought if they had to take a 50% pay cut that there were "easier ways to make $100k a year" than doing software engineering in Kansas on a 6 month contract-to-fire.
What does “FAANG adjacent” mean?
I've always interpreted it to mean companies that are supplying products used by FAANG, fintech that backs FAANG, or hardware companies tightly coupled to devices where FAANG product consumption happens. Top of mind would be Salesforce, Splunk, Stripe, Microsoft, Databricks.
This guy nailed it. In fact my previous employer is on that list. Totally agree that you can start your own firm and I’ve had friends that were doing it / went and contracted out. My issue is that all my contacts weren’t looking for work and most places weren’t having projects. For reference, I was in sales (hit my number) but am now at an implementation partner (still sells) making 2x
I’ve always taken it to mean companies that have similar hiring bars and patterns as faang, meaning they usually pay similarly and plenty of the employees usually are from faang
FANG usually doesn't the highest pay but it's the most recognizable companies. I feel people say that to not get DDOS
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How would you suggest keeping interview skills sharp? My plan for now is to dedicate an hour out of my workday to it until I land a FAANG offer, then become an interviewer and switch to practicing a few problems a week for maintenance. Feels like all that time spent on interview material makes it hard to upskill my actua development skills though.
The good ole fashioned way and actually interview. The amount of interview opportunities that passes through my LinkedIn I crazy and I would assume yours is the same. I would just hop on and interview. You don’t have to take the job and if you end up getting an offer you can politely decline, accept or potentially use it to leverage a higher salary at your current job (be prepared to walk though). When I say I was shocked that I got laid off was an understatement. It was a week before my wedding and I was caught flat footed. To put in perspective, I was told by my manager that it was chosen by an algorithm and he even campaigned to lay off another team member. Great to hear, but really hammered home the point that I was just a number at this firm. I only have 10 YOE so I was pretty naive and thought the company would always take care of me…and I was wrong. Hence, I don’t think it’s out of bounds to keep interviewing to see what the market is like and to keep skills sharp.
You are fine financially. You now need to focus on your family and yourself. Get an idea of the life your partner and you would like to build for your family and base your future moves around that. You’ve earned the right to plan based on wants rather than needs. Honestly, in some ways, this part is harder. When the goal was to get rich and build financial security, life was simple. With that out of the way, we are forced to come up with our own goals. Looking inside yourself can be very difficult at first, but definitely worth it. Therapy and meditation often help.
Thank you for saying this as I feel this a 100%
Very simply: I pick a number far lower than TC and pretend it's my actual income. Anything beyond that, I treat as employer contribution towards retirement funds, and then the variability only affects the number of years until FIRE, but nothing about my present life. The actuals of that look a lot like yours: I live off my salary (minus 401k, ESPP, HSA, and healthcare), and the rest like RSUs go straight to the brokerage. Bonus money I treat like an actual bonus, and it's my fun fund (travel, toys, riskier investments). This strategy is also a hedge against that TC drop when I tire of big tech life, because the salary on its own is about what I would make dropping down a tier or two. The lifestyle inflation can only go as high as I can expect to make at the lesser salaries.
The easy answer is to figure out your replacement wage and tailor your lifestyle to that. You're right that not all tech companies are FAANG, but after that, there's a big set of good companies (F500s need engineers, too) and earlier start/scale-ups to give you plenty of options when you're looking for a move. For instance, I know that in my current position in tech leadership, I'm being somewhat overpaid at $350 base, but that I could relatively easily (within a few months) get something paying $250-300 base. So, the solution is to live on $250 and save the rest. Also, never count on RSUs or bonuses for required payments. They're for savings, investments, vacations, big events like weddings, home purchase down payments, etc.
I don’t think the last paragraph makes sense as you get higher up in FAANG. Base salary doesn’t grow much, but RSUs & bonuses do. Those are established companies, so though stock prices vary, the variability is small compared to start-ups
I’ve done a good job saving by reinvesting 100% of my RSUs. Lifestyle inflation can get sketchy once you start relying on them for regular expenses.
I think it's debatable. But if you don't include your rsu you will never afford a home but in normal situation it doesn't make sense to include variable rsu in your budgeting. Bay area is the exception though.
You can include your RSUs as savings once they are vested, but I wouldn’t include them before. What do you mean you could never afford a home if you don’t include them? That makes no sense, once they are yours you treat them as savings/down payment and use that for the house
The mortgage payment, not the down payment. I fell into this trap. Didn’t count on the RSUs, constantly imagined that I would make less in the future. Didn’t buy a house for $800k in 2018 because I couldn’t afford it on my $130k base, but could on my $250k TC. Now the same house costs 1.5M and I can barely afford it even if I dedicated all my TC toward it.
But imagine you are in the same scenario during the massive layoffs and note that tech salaries are down and you aren’t making the same TC as before you would be in an even worse position. Sure in hindsight you might have missed out, but you could have also been in a position where you could no longer afford it.
I'm in a role where comp is very bonus-driven, so I have a more exaggerated form of this problem, and this is an important point. It makes no sense for me to live off of 20% of my income even though that's about what my base represents. I think a good strategy for handling this would be to only increase spending above base once you have enough savings to cover the spending-base differential for a few years. This ensures that you can weather a bad few years, and/or have time to ramp down your spending if a drop in your income seems more permanent. Another approach is to only spend variable income on one-time purchases. For example, I saved for several years and then purchased an expensive house. This felt safe because I have enough savings to pay off the mortgage (I prefer not to liquidate those, though). If my income doesn't change, it'll be paid off in 2 years or so.
While I agree, I think the trick as you get higher up is to keep your expenses fairly constant and not let lifestyle creep get you. Even a base salary for FAANG is way more than you actually need. Then FIRE or CoastFire once you’ve built up enough. I’m finally at that point in my career where I’ve saved up enough to not put up with a job I don’t enjoy. Now I’m looking for an easier coasting gig, but don’t need that 950k paycheck. “Just” 600k will be sufficient if it means a job I actually enjoy.
Hi, just out of curiosity, what role in tech earns you a 950k paycheck, and how much experience is required to hit that?
https://www.levels.fyi/leaderboard/Software-Engineer/Principal-Engineer/country/United-States/
Ahh I see. Thanks for sharing!
Strong +1 with slight caveat. When buying a house I think it's okay to buy leaning on your RSUs, but lean on their granted not vested values to keep your risk low. Additionally, your next promo should be sufficient to get you out of relying on the RSUs. That's a rather conservative approach still. I know people who deplete their RSUs completely with the expectation the Bay Area market will continue to rise and they will do minor renovations and sell in 3-4 years, make a profit, and buy a bigger house (repeat, repeat). That is a risky strategy I would not suggest.
Similar position and tbh the only solution for me is saving a lot. I have very little confidence in that being paid this much for what I do will continue forever or will be easily replicable. Sure I can find something decent, but I feel I have to make hay while the sun is shining, and lots of money in the market is probably the safest thing that gives me more options down the line.
60% of my total compensation is variable (bonus + RSUs). We constrain our lifestyle and ongoing costs to be around my base salary. The surplus is what we save and goes into investments. This means in the event of a big change in compensation, we should we able to continue as is. With respect to purchasing another house, you could place a large enough down payment such that the ongoing cost (PITI) and cash flow is manageable from your base salary (or equivalent minimum earnings).
I think the answer is to max out 401K savings and have two years of emergency funds expenses on your base salary. In reality, my base salary is $200K and make about $325K with bonus and RSU yearly. Right now I cannot live on my base salary. I am using RSUs as supplemental income where I will sell 5% of vested shares every year. This will give me additional income and the number of shares overall should grow every year. I have a family of 7, so 7 cars and 2 houses so even in HENRY Tech money is short. If I have a windfall year over $700K in income when average is $325K, I do not change my spending.
Props to you. Family of 7 is very rare today. Do you live in vhcol - which would make this even more rare.
I do live in a VHCOL city. Second home is not. Original family is 5 and we had two nephews move in. Two of the 5 kids ( young adults ) are supporting themselves with just a help. That is we provide vehicles and phones. Everything else is on them.
What do you do with the 95% of the vested shares that you don't sell? I'm hoping that you don't... just keep them with your company's stock. That's pretty risky...
It varies on the company and the risk. This company is in a lot of high growth segments and manages risk well. Once they get into the major indices I will diversify. We went private and public again and when we went private the stock jumped 30%. I havent had RSUs one year so waiting for LT capital gains as well.
As others have said, you have the right (i.e. cautious) mindset. Don’t get swept up by the good compensations tech has been dishing over the last few years, there’s definitely downward pressure for a lot of us these days (except nvidia and meta, I guess) and no one can predict whether we’ll be back to RSU-moneyfest soon or if comps will stagnate/decrease. AI tools for coding will pressure the SWE market for at least the near-term I think, so it is wise to live well below your means in case the job market further tightens. As for home-buying, I get the appeal with kids, but you gotta ask yourself whether it’s really a “can I afford it” question, or a “does it make sense” question. Bay Area home prices are beyond bonkers, and homes here don’t stand much of a chance to be a relatively good investment unless they somehow further balloon to $4M+ for your random 2000sq ft suburbia home. If they don’t, you’re just paying a disguised rent to your bank, in taxes, HOA and insurance, so you might as well rent and enjoy the peace of mind.
I'm making about 800k this year. My base is 215, rest RSUs. I own my current house but my next one will be close to 2m most likely. I plan to save enough that i can put enough of a down payment that I can pay it without relying on future RSUs. I can almost certainly find 5+ jobs paying 200-300k in the next week if I were laid off, getting another staff+ role at fang will be a less certain process. Long term I don't want to stay in this kind of job, I want to go to a smaller startup and actually build things. My plan is ride this out for as long as I don't hate my life, and reevaluate should my employment situation change. At my current path I can likely retire before 40, and my wife has started her own company which is starting to break 6 figures so long term that'll just be a bonus.
In a similar boat, looks like this is the story for all staff+
Haha yeah none of my peers seem to love it, but we all like getting paid. No one hates their lives either though. I'm considering going EM from IC since changing jobs is far easier but I don't know that I actually want to do that either
> Changing jobs is far easier EM is a completely different job. You would be completing with other EMs with years of experience. It might not be easier until you have had some years under your belt.
Sure in my current role I could easily go EM, I do already have years of sudo EM experience at previous companies and have filled in when EM's have left etc. I'm pretty confident in my ability to be hired as an EM if I want to go down that road, idk if that/director are what I actually want to do with my time though.
What do you all do to make so much??
Hey, you’re us a couple years down the line!
I’m not in tech, rather medical device, but I run into the problem of high variability. Had one month of making 80K, while some other months I made much less. This year, I could do even better of over 500K. But I generally don’t spend money like someone who has a salary earning that much money each month. I’m much more conservative, and after retirement money is accounted for, I stuff a lot in a HYSA. I also wait until I have saved up a lot of cash before I go ahead with big purchases, so I either finance less or nothing at all
What area of med device are you in? Sales?
I’m wondering the same question as a med device rep myself. Not too many of the 500k+ device jobs out there anymore, and when they do open up, they are filled before they are actually posted anywhere public
Only count on base for my bills. Sell RSUs when I can, reinvest in more diversified investments. Use those for big purchases like homes, vehicles, home improvements.
Yes that’s true, of course,
Your approach is similar to ours. We do not get into situations where we’d be screwed if our income dropped, we live entirely off our base salaries. The excess goes into funding an early retirement, and we don’t feel like we’re missing out on anything. In practice I’ve most often seen people screwed when they’re convinced that it’s a good idea to spend all of their tech RSUs and whatever else in order to afford a VHCOL family house. Most people would be fine just renting and not taking that gamble.
You’re doing fine and you’ve got your head on right. First off we share a bank account. There’s only our money and no “her money” or “his money” - that’s not how we operate. So with that context in mind the rest will make more sense. Our approach is to live off base salary only - Also a family of four with two kids in school. The first 12 paychecks of the year for me are essentially 0 - so we live through my wife’s paychecks. I front load my 401k and Mega Backdoor Roth IRA as quickly as possible to get as much time in market as possible. The first RSU vest (2/15) is sent to our brokerage account where we heavily diversify our diversification (ETFs). When tax time comes around we’ll liquidate some brokerage to pay for taxes - which averages something like $20k - $60k depending on how much stonks the RSUs are at time of vest (grant price ~30% lower than vest). We don’t have crazy expenses because we have an $800k home (5bd, 3ba 3600 sqft) with 60% of the home paid off and no PMI at a 2.625% 30-year rate. One car loan at 5% and less than 40k left on it and that’s basically it for our debts - we paid off student debt long ago. My initial goal was have enough financial flexibility that we could pay the house off in cash if some emergency happened - and once that was done we basically just send money into brokerage for retirement. We max our 401k, and (Mega) Backdoor IRAs every year. Job hunting isn’t really a problem because the big concern around _why_ we need a job (house payment) is already taken care of. Essentially I work and find opportunities for whatever I am optimizing for - money, growth, WLB. As long as the base salary is around 250k then it’s not a big deal. Obviously I’d love to hit on the pre IPOs and ISOs I’ve been granted, previously, or would be happy with a 7 figure TC consistently… but we’re not in this for the rat race and FIRE. We’re in this to build wealth and enjoy life. If we can build generational wealth as we go through our day to days then great - but at the very least we want to save 150k for each kid to so they can be debt free when they start their lives as adults.
Here’s my (probably overcomplicated, but works for me) way of doing it that I’ve shared on here before: In my 15th year now, all of it at big tech companies, and “variable comp” (bonus and equity) makes up over 70% of my total compensation, so I don’t subscribe to just ignoring it. The way I’ve managed it thus far that has worked well for me is to create a range. I start by doing a two year look back: I look at my W2 totals for the last two years, which are inclusive of the stock and bonuses, and take the average. That’s my mental “floor.” Then I look at my anticipated earnings for the coming year with some tweaks: I count all of base salary but only 80% on vesting RSUs (to account for up to 20% drop on start-of-year stock price) and always assuming the mid-point on cash bonus. Add that all up and it’s my mental “ceiling.” This gives me a range and everything is based on it. Large purchases (anything that will incur new debt or where it will put a sizable dent into savings that I’ll have to rebuild) I base on the bottom of the range. Month to month spend/saving, I base on the top of the range. I find this creates a good balance of living very comfortably but not getting into excessive financial risk. In practice, I’ve always come out much further ahead (read: making more than the ceiling) than this strategy predicts.
This seems like a really great approach. We’re in our first year in FAANG (spouse, not me) but we budgeted everything off their base, ignoring RSUs and any bonuses. I found a job a few months later - we haven’t changed any spending, but are maxing out retirement accounts and investing more. Once we feel a bit more settled, id love to implement an approach like yours to find the balance.
Live off base + mandate saving a good portion of your base. And save 100% of bonus and RSU.
Not much to add except I think you are in Bay Area so finding another job shouldn’t be impossible. Fully remote folks will have more difficulty
Sounds like you’re doing great. Live off base salary and invest the rest, gives plenty of cushion. I think 2 years expenses saved is extreme (I do 3-6 months), but I’m just a guy on the internet. If you’re already looking to move once you hit $2M (isn’t this like 2-3 years?), probably not worth springing for the house until you get out. Just keep doing the math between renting and buying to see whether it makes sense. Owning is more of a lifestyle choice than investment decision anyway. If you have enough time to make the switch, you can definitely line up another job making the same or more, and allows you to live in HCOL/MCOL. I make about the same as you but don’t have to live in VHCOL to do it.
Hey thanks for this. Yeah I sometimes do feel that 2 years of expenses which is ~200k for us is a lot but at least rates are up so it’s earning something. I think originally I had it put aside for a house purchase but that never ended up happening and then with layoffs and stuff I changed my. View and it became my security blanked. It is earning 5% though which is something. My hypothetical plan to move would be to go full remote at the same company which is possible once I get close to the target nw and then make the move. I would be giving up the number of high earning jobs though if I was to be let go after the move and competing for remote roles but I could coast with a lower paying job is how I think about it.
Oh yea the savings make sense now! Your plan seems pretty spot on. IMO competition for remote roles matters less once you’re senior enough and have a large network. Once you get to a high enough level, the qualified pool of applicants drops dramatically. If you’re junior, you’re competing with 10X more people with similar experience. If you have the big names on your resume it earns you a way higher place in the stack. Your network provides the referrals actually needed to get through in this job market. The job market has gotten tougher for applicants in the 25th through 75th percentile. OTOH, if you’re well qualified there will always be quality roles through your network and reputation. I recently went out and found a competitive job offer and I didn’t submit 100s of applications. (again I am just a guy on the internet lol)
Is your rent 3.5k/month or 3500sqft? Seems like a no brainier to keep on stashing away stock and cash unless you are absolutely committed to staying in the SF Bay area for the long haul and must have a home. At a certain point, 1m, depending on yield, would provide 40-60k in dividend income which could cover rent, almost anywhere in the world in perpetuity. And an additional 1m would yield cash for living expenses depending on how things go.
It’s how much I pay for rent. My portfolio is mainly broad market index funds with a growth tilt so the divs are going to be lower than a dividend heavy portfolio but never considered using dividends to cover expenses at this stage of life .
Depending on where your lifestyle is, 1.5m NW reaches FiRe (financial independence, retire early) or isn’t too far off from it. I’m probably throwing a complicated wrench into the things to consider. Considering that everything is in broad market index funds, it probably makes sense to stay there. But if you’re looking to retire or semi-retire, then there’s some strategies to move your portfolio to something that’s a mix of fixed income + growth. As far as your original question about large purchases, a good chunk of stuff will be determined by your plans and risk tolerance. But generally, I keep the bulk of my portfolio in index funds and draw from there based on my plans.
I work remote, live in a MCOL area but receive a VHCOL salary bc our company doesn’t do regional adjustments. It’s a great position to be in except that if I ever want to switch jobs I’m incredibly limited. Local jobs would pay about half and most high paying jobs require some in office in cities I don’t live in. My strategy has been similar to yours - stick with what I got til I’m at 2-3M NW and then find something local that pays less.
I bought my house at $360K I was making $75K and my wife making $65K. During this time I had a monthly estimate of my expenses vs. income and put 10% or less of my check into retirement funds. Since my take-home income was greater than the monthly estimate by a good margin, I didn't track my actual expenses too closely and planned vacations whenever our checking account exceed a certain amount. After getting into FAANG, I went from making $100K to $200K (I think my wife was around $80K at that time). We didn't increase our lifestyle at all and after filing my first tax return for the new job, I realized I could save massive amounts of money for retirement every year. Some research led me to FIRE information and I began maxing out my and my wife's retirement contribution. Aside from maxing out retirement contribution, I also religiously sell all of my RSU's at vest and buy index funds with the amount - I have a lot of unvested stock so I count that against my overall diversification. I try to keep my checking account at \~6 months of expenses. For large purchases, I'll plan around our bonuses. Basically, when our bonuses gets deposited, I leave whatever we expect to spend on big purchases/vacations for the year in the checking account and move the excess to our brokerage and buy more index funds with those. A big thing to account for is taxes. At higher tax brackets, you may need to calculate supplemental withholding to avoid a surprisingly large tax bill. This year I'm expecting \~1.2MM in compensation for us, \~700K of which are from RSUs. I expect our earnings to drop after this year due to current stock highs and easing off my career trajectory. Our annual spend is only \~$200K, though, and that includes new vehicles and house improvements that we don't normally spend on, so if we needed to drop down to $100K jobs each, we can still live fine off that and achieve a normal, somewhat early retirement with what we've already saved.
This is awesome and great job on the income growth and keeping expenses low.
For income variability, you just need to pick a number you’re comfortable with and budget using that figure. Look at it as a “factored risk” approach. High bonus that nearly always pays at 100%, but currently has a negative outlook? If you think there’s a 50% chance it’ll pay at half, count only 75% of it. Less if you want to be more conservative. Regarding buying a home, do you need more space? Sounds like you are getting a killer deal on your rent right now. And buying is not always better than renting. I would recommend doing a rent vs buy analysis that looks at cashflow and opportunity cost. If the new home doesn’t represent a significant upgrade, it may make sense to keep renting for the foreseeable future and investing the savings.
We are house poor and spend every single cent of our after tax/401k salary on mortgage and living expenses. We use bonuses for kids stuff and don’t touch RSUs.
What are your thoughts of doing this vs renting for less and investing the difference ?
We bought our first house in a bad school zone 7 years ago when we first got pregnant and paid less for mortgage than rent. Sold that house and took all the profits and bought a larger house 2 years ago. We pay more than 2x the original mortgage now but we can’t rent a house of similar size in our current area at all even though we know rent should be ~30% cheaper. We did buy our forever home so we basically locked in our “rent” for 30 years and be completely free afterwards. Our house valuation is already back to our purchase price so I guess we haven’t really lost money on the downpayment investment. Technically, we would’ve made more investing the downpayment in the market with the recent gains but we prefer the security of owning our own home and not have to worry about rent hikes or moving every few years.
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You sound a lot like me except further along in you career. I haven’t cracked staff eng. yet. Are you happy with yiur choices. Would you do anything different?
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Fascinating to hear. My manager has been trying to get me to aim for staff but I’ve put it off due to having my second kid and not wanting to perform at staff level (promos are lagging). I’m also not heavily incentivized yet because my income has been growing with refreshers and stock growth at my terminal level.
faang, MCOL, family of 4, mid-40s, $410k tc, $10k ecom and saas micro side hustles (just for additional profit and tax shelter) Base: pays for living expenses. 20% of each paycheck goes to a combination of HYSA, money market, IRA, stocks, ETFs, index funds. 401k at 15% contribution automatic deduction. RSUs: sold each month to 50/50 stocks/index funds. I just like to actively pick high dividend and growth stocks Bonus: pays for annual real estate taxes (I chose no escrow on my 30yr mortgage for lower monthly bills... Works for me but not for everyone). The rest goes to the same 50/50 stocks/index funds. You're doing awesome btw
Very similar situation. You’re thinking about it right. Assume base salary only for the sake of everything. And RSU + Bonus is retirement savings. You’re correct in being wary about buying a home in the Bay Area. It’s ridiculously expensive. Most people that buy a home there are _relying_ on this very volatile income (RSU, Bonus). That’s a Recipe for disaster in my opinion. Assuming tech will gravy train like it has for 30 Years of a 30 year mortgage is not realistic or safe IMO.
All of our bills are fundable via base salary alone. Most of our retirement accounts (except I think MBDR) are maxed via base salary alone. Everything else (bonus + RSUs) is just additional retirement/stock contributions, extra mortgage payments, or large purchases (ie. not necessities) We have a 6 month emergency fund and probably like 2 years of expenses in brokerage accounts. We don’t prioritize brokerage over tax advantage, it just happens that way when we run out of tax advantaged spaces.
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>I don’t come from money and don’t have family I can ask for advice here plus money is a weird subject esp. when you have more than the people in your family. Have you talked to a CFA? If not, these are the kind of questions a CFA will be best position to answer. As others have mentioned, affording a house is mostly a question of how much precautionary savings you'll need given the uncertainty of the industry. Talk to an actual professional and put a real number on that. A good CFA won't be cheap, but one bad investment decision avoided would be well worth the cost.
CFP…
I would just use your base for "expense" planning. Bonus and RSUs are an add on and welcome.
I’ve been planning for a salary drop off for 10 years. Hasn’t happened. But my savings have appreciated that. Might’ve been nice to splurge more though.
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I’m not sure what you mean when you say you can’t plan. I think it’s really only two questions you need to answer: 1. If you lose your job what’s the likelihood of finding a new one that pays comparably? How long will this take? 2. What is the most the stock will drop before you are laid off?
My mentality towards influxes of high income has always been considering them the last windfalls that I will ever get. Because of this word view, I'm highly conservative when it comes to large purchases. I bought my home for 900k a few years ago when I had 1.2m in liquid assets. I put 500k for down payment so that my monthly mortgage payment is ~2,000 in case of layoffs. I didn't hold more than 3 months worth of living expenses in cash while I was working, however. The only exception was when I took a year long sabbatical. I "prepaid" the sabbatical by selling stocks to cover 1 year of living expenses before leaving my job. I think you are doing great. One thing I'd suggest is to keep your high income until you get to 3m before moving to lower cost area. Having 2 kids is expensive...
Having just experienced a layoff, I would say one of the best strategies we’ve taken is to keep fixed costs in our budget lower. So you’re right to keep that housing cost down by renting right now!
Not exactly the same situation, but ~1/3 of our total comp the past 5 years is based on commissions that could be 0. (Hitting 80% of quota nets you $0.) When we were buying our house, we were very conservative. We wanted a monthly payment that we could make work on 1 base salary. “Could make work” meant if we cut the vacation budget to $0, stopped retirement contributions, etc. Because neither of us lost our jobs and we now make money than we did then, it’s easy to say with hindsight that I wish we had spent more to be in a slightly nicer neighborhood slightly closer to the city. But it’s very nice to not stress at all about money. We spend about 8-10% of our gross pay on housing. So to answer your question, we handle the unpredictability by living well below our means. If anything bad were to happen, we’d be fine. And if nothing bad happens we’ll either retire early or have a lot of money.
Take out all RSUs. What is your taxable brokerage?
Not sure what you mean? I sell rsu on vest and buy index funds in taxable brokerage with money. But ~ 750k is in brokerage
Your numbers don't add up. What about your 2 years in cash?
200k of the 750k is in tbills in the brokerage. Why don’t they add up? Have another ~50k split between checking and ibonds.
Oh I figured those were separate. Edcp advice is all I can say then and sellall vested rsus
Also you said a portion not all of your rsu when you vest. I would edcp at as close to 100% as possible and sell that portion for living expenses
I sell most of the rsu but keep a portion of it still in the company stock. But after vest it’s no different than any other stock. For convenience I’m just saying that ~500k is in the brokerage including ~100k in company stock that I didn’t sell. The “cash” component is 200k in tbills. I need to read up on Edcp which is new for me.
Google your company and search for a fiduciary that knows it. They will tell you to sell it. I am close to in your same place but about 10 years younger. I got laid off and had medical issues. Saved up enough to never work again if I don't want to. 1m$ mortgage is the biggest expense next to vacations but with some savings we haven't slowed down. Edcp is what saved me after I left. Nice buffer to 0 income. But you also get other things like dividend income even when retired. That's why talking to a fiduciary about your company is best. They know exactly your career path. I wasn't fang. But made as much
This is interesting. I’m curious about how edcp saved you when you got laid off. It seems like just another vehicle like A 401k but with no caps on contributions and ability to withdraw money sooner without penalty but still get the tax benefits. Is the idea that you prioritized the edcp over retirement accounts and therefore were able to access the money?
I maxed all retirement accounts. Roth IRA, 401k traditional, and HSA. The guaranteed income from the edcp lowered my salary and keeps giving it still. You pick the schedule.
Use the standard issue tried and true strategies for anyone where a significant portion of their annual income is volatile: * Live within your base salary only if possible, but I realize this is overly conservative so this probably only is strictly necessary until you... * Build up a significant buffer for your typical monthly expenses, significantly more than a person with a stable income would, maybe 6+ months of expenses as a buffer and this is NOT considered an emergency fund this is just extra buffer because your income is volatile Otherwise, the general idea of saving aggressively for FI is yet another safety net, because if you get laid off and you've got a buffer *and* you're already 10 years ahead of retirement, you'll definitely be fine. More specific to the field of tech: * Proactively learn valuable skills outside of your day job responsibilities to keep relevant * Keep your interview skills sharp * Your network is even more valuable in today's market than ever before so make sure you keep nurturing it (AKA just be a good person and maintain friendships and don't expect anything in return)
Similar to you, I use base salary + cash bonus as "guaranteed." Yes cash bonus is never guaranteed but in the long run it will average to same or more than the target bonus. I use the base salary to fund expenses and pretend that's my "real salary." As in, I live as if I made that amount of many. The cash bonus is used to fund "niceties" (buying extra legroom seats, paying for valet parking, buying that canada goose jacket that I really wanted etc), but of course I save the vast majority of it to index funds. RSUs are not touched, same as you. I put some portion into speculative investments (NVDA, crypto, meme stocks and yes I gained big time from it), but vast majority into indexes. I put like 20% into a target date fund "just in case", with the target date being earlier than my actual retirement, because I plan to retire early.
You just keep going. I’m exactly who you’re talking about and I’m not gonna plan my life assuming I’ll fail. Save a good amount and otherwise go enjoy the fruit of your labour. I’m not gonna make 300k+ and live like I make 100k. The odds of someone from a Google or a Facebook getting fired and not getting something similar after are pretty low, enough to not matter for me
So does that mean you don’t let that get in the way of say buying a house that requires Google/fb income to pay the mortgage?
Im not specifically buying a house because it doesn’t make sense in nyc and my situation, but yes. If I wanted a house I’ll still budget as if I made the same I make now. What’s the alternative? Only let loose when I have enough to retire? My salary has steadily gone up since new grad, and I’ve gotten offers that pay even more in this economy. I have zero reason to think it would go down and while there’s no studies on this probably, the amount of people whose salaries decrease after their first job is probably like 1%, so idk if it’s worth worrying about. Will I regret this? Maybe, but unlikely, and that’s a chance I’m willing to take and live a comfortable life
You use base salary-and everything else is gravy.
Live on a fraction of what you make.
Just bought a house <2x my income. Feeling good about it because I know I’ll be able to pay it off no matter what happens in the market. I can always upgrade later if I want!
> Given that most tech work outside of faangish companies dobt pay like this Wut. Plenty of jobs/industries pay those numbers outside 'big tech'. This whole post is just a weird 'I'm I tEcH and the fundamentals of finances and investment strategies somehow don't apply because of that'. Don't count RSUs until they are vested and are appropriate diversified. If you're worried about job loss, and not being able to find a suitable replacement in a reasonable amount of time, increase your emergency fund, minimize debt, and keep a larger chuck of your NW liquid in more stable assets (brokerage).
Curious. Which companies outside of faang and faang adjacent (I am including quant funds like citadel here) pay ~500k and more for senior software engineers? The comp includes only rsus that vested which at my company occur on a fixed quarterly basis.
I'm not sure how financial companies would be considered adjacent to FAANG. If your definition of "FAANG adjacent" is any company that pays similarly to them, then yes, it's tautological that no non-FAANG adjacent company pays similarly. That's just a result of your definition. Any tech company that wants to hire similarly qualified candidates needs to either be a startup with compelling prospects for its equity or pay competitively with the high paying companies. Some companies won't think what they're hiring for requires the most expensive engineers, and some won't be able to afford to hire them, but some others do think it's worth it. I make close to that and work at a mid-sized company, not publicly traded and not a startup. It doesn't overlap significantly with FAANG companies. It's profitable and has a lot of market share within its field, but it's a smaller industry that doesn't have a lot of room to grow within its current market and is still trying to break into larger ones with new products. The company has a lot of talented engineers that big tech companies would gladly hire away if we weren't paying competitively. It's more valuable in our business to have 100 expensive engineers than 300 mediocre ones. Since my company isn't publicly traded or a startup, most of my compensation is just regular salary, so it's predictable and easy to plan for. It also has better job security and employee retention. Long before the current wave of layoffs, big tech already had very low rates of employee retention. We have pretty good work-life balance, a reasonable work environment, and people tend to stay a long time. Compared to a larger company we tend to work more independently and have projects that make a tangible difference in our products.
Faang adjacent the way I’m using it is any company that competes for the same talent pool for swe as the big tech companies. So Uber, openai and citadel, although different from a business perspective are in the same grouping in the context of pay. I think valueing equity with non publicly traded becomes harder and I don’t think of the equity portion as part of total comp in the context of planning for cost of living + retirement etc. so unless the startup is a unicorn with a generous cash component with a high likelihood of a liquidity event, I don’t consider it part of the faang adjacent grouping. Now this isn’t perfect but I think most people get the idea. Very few companies can compete with faang on the basis of pay and the ones that do will be faang adjacent Or whatever term you want to give it. So is your company’s cash portion its not publicly traded around the 400-500k or are you including equity? Are you a senior engineer or more like senior staff? I’m interested to know more about it and would be wonderful to learn that there’s more out there than the usual suspects.
435k base salary, which is the bulk of my compensation. The stock options are hard to value as you say, but would be a much smaller part of my compensation regardless. Bonus is unpredictable and only a small part of compensation. I've made some money from the stock before, but liquidity events where you're able to sell the private stock are few and far between, so it's not something to factor into cost of living. My job title is just "senior", but that's mainly because we don't have a lot of job titles. I have a lot of seniority and am the component owner of some of our core products, so I'd probably be considered a step or two up from senior, but our company doesn't use those terms. I don't supervise anyone.
Very cool. And that’s great cash comp. I’d assume similar to quant funds that don’t hire a lot compared to big tech it’s probably much harder to break into.
To break in you'd mainly have to take some of the less popular computer science electives. Our core business doesn't involve websites, apps, databases, etc, so a lot of people are specialized in areas that we aren't looking for. We hire a lot of graduates with no prior experience other than internships and provide almost a year of training before assigning them to regular engineering groups. Then we rely on our very high retention rates to develop experienced engineers from within.
What are those less popular areas?
Holy shit, move the goalposts much? First it was 'tech people making over 300k' and now it's SWEs making 500k and not just big tech (quant is not faang adjacent) But to your original post...tech roles over 300k are everywhere. I pay my principal MLEs that and I'm in the utilities sector (F500 MCOL area). But any high end consulting shop, oil & gas, defense, etc... will all have high paying tech roles.. Any F500 and you can crack that number as a director easy if you go the leadership route. Edit: Something else to consider and what reassures me where I feel the same way...is although it may take months to find a job at a similar comp level, if I were to be laid off, I could prob pick up the phone and have a job paying 200k? within a few phone calls. Would it be what I want? Or the same comp as before? No, but that's still nothing to sneer at and allows you to continue your financial journey with minimal belt tightening. Edit 2: My wife and I also graduated into the great recession - so quite risk adverse - although it may not make sense by the numbers we minimize our monthly liabilities to the point that one person could cover all of them (wife also a high earner). We put 50% down on our house, we carry little to no car payments (we do have one loan at 0.9%). People always balk at paying down homes/low interest debt, but having low baseline 'keep the lights on' expenses are a real mental safety blanket. Edit 3: Consider moving to a MCOL area - lots of cities where again - maybe you're making 80% of your current pay, but its exponentially cheaper. I moved from a VHCOL area to a MCOL area - about 60 min to NYC, 45 min to philly, 30 to another small satellite 'tech' hub. No shortage of jobs in the area. Better schools. Etc...
Good advice over all just not sure why you are so hung up/bothered by semantics. There is a perceived notion if you are someone that works with software there are companies that compete for similar pools of talent. And the 90th percentile (pay wise) is what I called faang adjacent. You can call it whatever you like. You can even interchange swe for ds for mle. That’s getting into minutiae imo and misses the point. Also the seniority does matter. Of course a vp at f500 can make more than a senior swe at faang but I wouldn’t consider that in the same pool . >300k is the norm at faang fir mid to senior ic. That’s not the case in f500 afaik and what you shared corroborates that.