Before making any big financial decision, always do a cost-benefit analysis. Focus on the costs more because most people are too mesmerized by the benefits. Great marketing and perennial optimism can lead to great disappointment.
In the post, The Second Biggest Financial Mistake You Can Ever Make, I made the argument to never expect your income to always go up. If you do, you run the risk of buying things you cannot comfortably afford.
The expectation of always getting paid more, despite a bear market, is odd to me. When I worked in finance, even if we performed well, we sometimes were paid down if the overall firm was doing poorly.
If you always feel entitled to more, this may be detrimental to your long-term wealth. With your back never against the wall, you won't be motivated to find new ways to make money.
Let me share a passionate disagreement from a reader who is a lawyer. No matter the economic environment, he believes employees should always get paid more. It's a great example about how two people can see capitalism differently.
I'll then explain my decision to forgo $12,500 in MBA tuition reimbursement so long ago. I'm thankful for the reader's feedback. Without it, this post would never have been written.
Believing In Always Deserving More
I’m not sure I’ve ever disagreed more with an article you’ve written than this one, in which you attack New York Times’ 1,100 unionized workers for requesting a reasonable pay raise as part of their legally protected collective bargaining rights, and seemingly encourage folks to voluntarily opt-out of contractual benefits their employers promised them.
You note that “More importantly, The New York Times stock price (NYT) is at a three-year low!” as if that has anything to do with properly paying a workforce for the labor they provide.
The NYT spent $150 million on a stock buyback on February 2, 2022 — if they had $150 million then, why do they lack funds now when it’s time to pay the employees? They’ve also paid 34 cents per share (or roughly $57 million) in dividends just this year. You’re telling me they can afford to buyback stock and pay an (increasing) dividend at a cost of over $200 million per year. But get to plead poverty when it’s time to pay the actual people doing the work?
That $200 million+ spent on stock buybacks and dividends could have given every one of the 1,100 New York Times union employees $181,818! Why not cut the one-time, completely discretionary stock buyback to $100 million, and then spend the $50 million instead on raises over the next 5 year contract ($50 million=$45,454 per unionized NYT employee).
I’ll also add your analysis ignores the fact that the NYT’s workers’ wages were NOT increasing as the NYT saw its recent highwater marks in value/subscriptions, and haven’t been increasing with the recent inflation. They aren’t asking for a real pay raise — the future pay increases would help get them to where they would have been/should have been all along if NYT paid them properly/indexed wages to inflation.
Not Asking For MBA Tuition Reimbursement Is Dumb
Then there’s your confession that “After a couple rounds of layoffs in 2004, I dared not ask for my MBA tuition reimbursement one semester. Although it was a company benefit, to ask would have put my employment in jeopardy.”
Are you kidding me? You VOLUNTARILY gave up a contractually promised benefit from your employer and thought that was smart? I mean….that’s simply crazy to me.
You weren’t working for a small mom-and-pop shop — you were working for a global investment bank! Which presumably wanted you to get that MBA because it made you more valuable to market to clients/increase the bank’s returns!
The bank promised you that benefit, they had that amount built into their budget already. And I guarantee you when layoffs came around, they’re not looking retroactively at, “Well, Sam with his MBA cost us $12k more due to tuition reimbursement than Joe without his MBA, so even though that’s a sunk cost we already incurred and won’t matter at all going forward, Sam has to go.”
You gave an investment bank license and permission to commit wage theft (or, I suppose, tuition reimbursement theft) from you.
Take your contractually guaranteed benefits. Ask for your fair wage (particularly when the employer is a publicly held company that would otherwise just spend the money on useless share buybacks). Companies should return shareholder value, but they also NEED to pay their workers fairly.
The War Between Management And Employees
I can feel the fire! The reader makes good business points. To be clear, I'm not attacking The Times employees. I'm pointing out it's dangerous to go on strike when the industry is going through layoffs.
During times of difficulty, there is greater friction between executives and employees.
Executives want their share price to go up because they work for shareholders. If the share price outperforms, executives get paid more because most of their compensation is in stock.
Employees, on the other hand, want as much compensation and benefits as possible. They may be paid partially in stock, but it is likely a minority of their overall compensation.
It's easier to argue for employees when you're not the one paying the employees. It's kind of like being pro tax hikes for the greater good, so long as you don't have to pay more taxes yourself.
Getting paid a “fair wage” is subjective. But let me shed light on the second half of the reader's comment. It's cogent for the cost-benefit analysis topic.
In a nutshell, I believe not filing for $12,500 in tuition reimbursement helped me earn at least $1 million more.
Running The Cost-Benefit Analysis On Tuition Reimbursement
In 2002, I applied to UC Berkeley's part-time MBA program because I needed a backup plan in case I was laid off. I had just joined Credit Suisse in 2001 with a pay raise and a promotion.
Previously, I was at Goldman Sachs in New York City for two years. Based on a lucky phone call, I overheard I wasn't going to be offered a third-year analyst position. So I decided to jump ship.
Within the next couple of years, 80% of my GS analyst classmates who were offered third-year analyst roles got let go. Good thing I moved.
The 2000 dotcom bomb caused a great hangover in equities. From 2000 – 2009 the S&P 500 offered negative returns. It was the lost decade for stocks. In 2003, my money shifted to real estate when I bought my first property. But that also meant mortgage debt.
As a finance employee, you are constantly aware of your lack of job security. Boom-bust cycles are more prominent in hyper-competitive industries. As a result, you try to work as hard as possible and not piss people off.
Short-Term Sacrifices For Long-Term Benefits
As someone who likes to create contingency plans, going to business school part-time was a good hedge.
Credit Suisse had a tuition reimbursement program that was offered to all frontline employees. In exchange for doing your job to 100% satisfaction and promising to work for three years after graduation, Credit Suisse would reimburse all tuition.
I didn't want to go back to school, but I feared for my future. I had already felt lucky to have escaped the firing squad by leaving New York. Besides, the requirement of working three years after graduation was music to my ears for someone who didn't have job security.
If Credit Suisse laid me off, at least I could convert to a full-time MBA student. If Credit Suisse didn't lay me off, then I could still earn my compensation and get the ~$25,000 a year in tuition paid for.
Based on my cost-benefit analysis, going to business school part-time sounded like a win-win! Then things got dicey.
Reality Is Often Different From What You Imagine
It's one thing to come up with a contingency plan if something bad happens. It's another thing to stay calm while that bad event is happening.
When I started my MBA program in 2003, Credit Suisse's stock price had fallen from a high of $51 in 2001 to $17. A year later, I was getting pressure from my manager to work harder because he was getting pressure from his bosses to boost revenue.
The fact that I was attending business school part-time was the exact opposite of what he wanted me to do. Getting my MBA part-time required 15-20 hours a week of classes and group work.
Ideally, my boss would have wanted me in the office until 9 pm every evening. If I told him I had to leave at 6 pm to do a group project, he wasn't happy. I could have lied, but I didn't have kids, a wife, or health issues to use as an excuse to quiet quit at the time.
During bad times, everybody is under more pressure. Going to business school while my company's stock was sinking put me in a bind.
The Fear Kicks In
There is a common employment belief in finance called LIFO, or Last In, First Out. In other words, if you are one of the last people to get hired, you tend to be one of the first to get fired. Since I just joined in July 2001, I felt I was most at risk of getting let go.
After submitting three semesters' worth of tuition reimbursements totaling ~$38,000 in 2003 and 2004, I felt like I had gotten away with something. During this period, my firm went through two rounds of layoffs. Yet I survived, got further educated, and had it all paid for.
Then I was hinted more layoffs were on the way. Further, never once did my manager show enthusiasm that I was getting my MBA. I had to run a new cost-benefit analysis due to a change in variables.
Deciding To Take A Pause In Asking
When it was time to file the paperwork for another semester of tuition reimbursement, I decided not to. My manager seemed extremely stressed. Giving him more paperwork to fill out that would lower the team's profit & loss seemed like a career-limiting move.
Further, it was the second half of 2004. Bonuses are always determined in the second half of the year. Unless you're great at managing up, managers seldom remember what you did in the first half of the year.
Sure, I would love to have received another $12,500. The tuition reimbursement was part of the company's benefits. But it just didn't feel right at the time. I was making enough ($150K+) where I could easily afford paying full tuition.
Again, I was fearful of getting let go. It didn't seem prudent to give my manager more ammunition for firing me. At the very least, I thought maybe my bonus would be better-than-expected.
The “Gamble” Paid Off
In the end, I survived the lost decade. Not only did I not get let go after the dotcom bubble burst, I ended up getting promoted to Vice President a year after graduating from business school.
Three years later, I got promoted again to Executive Director. The pay raises well surpassed the $12,500 I had lost.
Surviving the 2008 global financial crisis was a win. During that two-year period, there were over 10 rounds of layoffs.
Then in 2012, after 11 years of service, my manager was kind enough to lay me off with a severance package that paid for five-to-six years of normal living expenses.
So yes, I had the right to my $12,500 in tuition reimbursement. But at the time, I did a cost-benefit analysis that concluded $12,500 wasn't worth the risk of getting laid off. If I got laid off, I would lose valuable time on my journey to financial independence.
My #1 goal was survival.
Survival enabled me to accumulate a one million net worth before age 30. With this financial base, I was able to take more investment risk that paid off thanks to a bull market that lasted until 2022.
Emotional Intelligence And The Bigger Picture
If I wasn't so sensitive to situations, I might have gotten that $12,500 tuition reimbursement AND kept my job and pay. But at the time, I had to make the best decision possible with the information at hand. It's easier to point out mistakes in retrospect.
Being overly thoughtful is why I didn't start Financial Samurai until 2009. I had come up with the idea in 2006, the year I graduated from business school. At the time, I didn't feel like I had enough credibility until I had gotten my MBA and worked in finance for at least 10 years.
But then in 2009, I witnessed a 26-year-old fella with no finance background, who was also not rich, write a bestselling book on how to be rich. It was then that I realized I should be more selfish for myself.
Nobody really cares how you get to the top so long as you do. I was inspired to finally start!
Besides short-term thinking, a lack of emotional intelligence can also cost you a fortune. It'll be harder for you to create usurious $2,000 e-courses, pump and dump SPAC positions, backstab colleagues to get promoted, and misappropriate $8 billion of client funds for your hedge fund.
Who are we if we don't have lots of status, fame, and money?! Kidding.
At the same time, having high emotional intelligence can make you happier, less lonely, and more proud of your work. It feels good doing what you think is right. Hence, the choice is yours in deciding what you ultimately want.
It's OK Even If You Lose
You don't have to always optimize every single dollar. Sometimes, there's a greater benefit of peace of mind and convenience.
For example, I know private venture capital funds have steep fees compared to index funds. However, in 2022, it was nice not to have to think about any of my committed VC capital as the S&P 500 tanked. The VC funds could be tanking too, but they are 10-year commitments.
If I still got laid off after not asking for my $12,500 in tuition reimbursement, I would have sulked. Then I would have tried to get reimbursed by saying I had forgotten to submit. Surely my firm would have honored their commitment. And if not I would have let things go and found another job.
Always do a cost-benefit analysis before making any financial decision. Sit and think. Be thorough about writing out all the cons. If you do, you will become more aware and minimize regret in case you make a suboptimal choice.
The economy is very dicey at the moment. Silicon Valley Bank and Signature Bank collapsed. More people will be getting laid off as the Fed destroys the middle class.
Be careful about asking for too many work benefits now. Instead, keep your head down and try to add as much value as possible!
Reader Questions And Suggestions
What type of cost-benefit analysis do you do when making financial decisions? What are examples of some poor decisions you made in retrospect? How about some sacrifices you made that turned out well? Would you have applied for $12,500 of tuition reimbursement?
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Look, there is a reason why Sam has this website and Bari Weiss is on substack. An employer by definition is underpaying you, unless they wouldn’t make a profit. The NYT employees should be asking for a raise while starting a side business.
I think I agree with the commenter’s thinking, especially when he mentions wage theft and stock buybacks. That said, my company had layoffs last month and I’ll probably pass up the $300 reimbursement for my certification. I will take the remainder of my paternity leave before that expires, that time is much more important.
Sam great post.
In my experience any deal or transaction (of importance) both parties have to win, and give something up or lose in order to feel good about the deal.
When I am buying a building or business I try to offer a fair deal, than I will try to get more concessions in the last couple weeks of the transaction(when the other party is committed to the deal). Doesn’t always work.
Regarding employees/ employer relations in my experience employees have never had more power than now. They come to work, or they don’t. They quit quietly or they work their phone exclusively. It’s the twilight zone as an employer.
Your comments from people that disagree from your knowledgeable and reasonable conclusions are probably younger or entitled people that have never had not. They have always got what they wanted when they wanted it.
You have worked in businesses that can cut out unproductive employees. Your smart to realize that, keep your cost to your employer /ROI in the correct ratio
JJ
Sounds like a decision I would’ve made myself as well. In a similar situation, 2 years ago at the start of COVID, I welcomed my first child to my family. On paper, I was right on the cusp of qualifying for paternal paid leave (52 weeks of service to qualify, I completed 50 weeks and partway through week 51, with enough vacation time to take me across the 52 week mark).
Pre-pandemic, my managers assured me that something can be worked out be, as they value the work I’ve put in. Not to mentioned if we were to count the hours worked, all the unpaid overtime as a salary employee would put me well over the 52 week requirement anyways.
Unfortunately for me, with the onset of COVID-19 the last thing I want to do is stick my neck out and ask HR to honor an agreement outside of the written national paternal leave policy for the company. The executives and managers have plenty of their plates to deal with, managing a couple of rounds of layoffs and furloughs, so the last thing I want is to flag my own name as someone who’s looking to keep getting paid while staying at home.
Surely others may view the situation differently and take different actions. But given the same circumstances, I will no doubt let parental leave benefits go one more time for the bigger picture (both personally and for the company as well).
Strategically, since you are still employed with the firm, and we have come out of the pandemic, I would ask your managers for the parental leave now. Just explain that you sacrificed your time for the greater good, and you would like to collect. But I would ask after bonuses are paid just to be safe.
I am ALL for employees getting the pay they deserve. I believe corporations give the employees the short end of the stick because as we all know the productivity vs wage graph.
However… I can’t believe those people were saying you made a bad decision for giving up a legally binding contract! You did give up a legally binding contract but… that’s such short term thinking. Did they never see layoffs ever in their lives? They really think giving up $12.5k to make $1mil wasn’t worth it, which is interesting to me.
I’m not even going to ask my company for any promotions / raises or anything like that for the upcoming review cycle. I’m not even worried about surviving for a year, I’m worried about surviving the next two.
I am scared out of my mind for the upcoming year!
Likely just another San Francisco-based Lawyer – wouldn’t worry about it.
WOW what a burn. Your EQ is clearly sky high! I guess the facility you are in from your trip to DC on Jan 6 allows you to have periodic internet access too!
yaen….those people are in solitary confinement which means no contact with anyone.
My organization offers student loan assistance for recent graduates. In return you have to commit to staying at the job for three years. I didn’t sign up because I didn’t want to get locked in. In retrospect I should have taken the free money because I could have returned it if I changed my mind, and I wasn’t going anywhere for three years anyways.
Yes, it’s like a call option. In my case, the idea of having to work for three years after graduating was music to my ears, because I feared getting let go.
Maybe the more a firm invests in you, the more the firm wants to hold onto you.
Weird the lawyer commenter believes the company’s publicly traded stock price doesn’t matter. The share price is the ultimate indicator of the company’s worth at the time, inclusive of the increased subscription revenue.
So this is a fallacy of the commenter’s business acumen.
And I agree with you about the importance of emotional intelligence and reading the room. Different scenarios, call for different demands.
If my boss was saying layoffs were coming again, I’d take that as an HINT at least to put my head down and focus.
Sam, I’ve commented on a number of your posts in the past and cannot let this one go.
The reader post around which you wrote your post reflects many very strongly worded views and opinions about how business and world supposedly work, and about your thought processes and logical decision making capacity.
It should be proof to every one of your readers that such people exist. That is, people who sound intelligent and can compose mostly coherent thoughts in their chosen language, but who hold views that are diametrically opposite to reality, and more importantly, to the right answer!
In fact, if there is ever a more graphic example of lack of EQ and common sense than that displayed in the reader’s notes, I can’t lay my hands on it. A TOTAL MISS.
I thoroughly enjoyed your post. Your thought process is the thought process of someone that is a leader, in control of their emotions, and can communicate to others. It is the thought process of someone who can get rich, stay rich, and help others reach their potential using facts, logic and persuasion, rather than rhetoric, fear and guilt.
Keep it coming.
Thanks for your comment and encouragement.
I see where the reader is coming from. We just disagree. And hopefully the context I have provided explains my choice at the time about foregoing the tuition reimbursement.
His comment helped me go through the thought process of a choice to understand why. And I have to say, I am grateful to no longer be beholden to the fear of getting let go.
And the higher you go in an organization, the more politics are involved. And boy, do I hate politics.
I don’t like borrowing money. I cut a lot of grass and babysat a few kids in high school. Then worked in college and also signed my life away to Uncle Sam so I could get a sheepskin without borrowing.
Along the way I volunteered to be an ICBM Missile Launch Officer (one of the guys with the keys and the nuclear weapons at the start of the movie “War Games”) since, because it was unpopular duty, it came with the inducement of a free MBA from a major university, with professors coming to the base, rather than us driving 3 hours to the main campus each way. The university also maintained a full business library and computer lab on base for our use. And at the start of each semester I would just wander into the dean’s office and his secretary would issue all my books for free.
Of course, the whole point was that this wasn’t free at all. I was getting less money than the guy holding the “slow” sign at a road construction site, even while I was working 70 hour weeks (again, in charge of nuclear weapons), in addition to my going to school in my “off hours.”
I was one of the last ones to graduate from that program, too, as the cost-cutters decided it was inefficient and cancelled it. If you can get access to a truly free degree, with no downside other than less fun time and potentially less sleep, jump on it.
If you were in the navy, you could have done the job as an enlisted man.
You made the right decision at the time and don’t let that annoying reader make you think otherwise. You knew the corporate culture and tense circumstances and things worked out in your favor unlike the many others who got laid off. Sometimes things aren’t so black and white and you had the ability to see through the fog.
Criticism of what I should’ve done is just all part of the game when you share things publicly. But I do hope that when people criticize, they can also share their own stories once in a while. Two-way criticism is fun!
But I am thankful for other peoples points of view as they can shed light on Blindspot’s, and also help me think more deeply about past and future situations.
I think this explanation shows how important context is. I didn’t work in finance so I have no experience second guessing my manager’s thinking like you do. In my most recent career world, the tuition reimbursement likely would not have even been seen by my manager so it would have had zero impact on a lay-off decision. The key to your situation, I think, is as you say—you made the best decision you could think of with the information at hand at the time. No one will ever know what would have happened otherwise unless you can have an after the fact candid conversation with the people that would have made the layoff decisions, perhaps.
Before my entry into luxury executive employment, I ran my own company and provided fairly rich benefits relative to the other players in the industry. I never pried but when I discovered employees were not using the benefits available to them, I couldn’t help feeling mildly offended and confused. Like giving a gift that is clearly unappreciated.
It’s my opinion that those who subscribe to the sense of entitlement to an always-increasing-compensation don’t truly understand capitalism. It seems as though many employees of publicly held companies have lost or never had the understanding that they work for the shareholders and management’s job is navigating that mine field more than creating warm fuzzies for employees.
My observations from my experiences anyway.
Good write-up, Sam. Thanks.
Yes, context matters. If you work in a highly cutthroat industry, where it is constantly feast or famine, you have to be more careful when asking for a benefit or anything.
When your employment is At Will and when you see multiple rounds of layoffs in front of you, where your colleagues and friends are getting let it go, you become more fearful.
Please share more about the “luxury executive” life! Lots of pay and not a lot of work hopefully?
I say “luxury executive” primarily because of the rich benefits offered by this silicon valley based employer. The part of new hire orientation where they talked about the benefits brought tears to my eyes because I’d just sold my company where, along with everything else, I had to manage, administer and pay for the benefits package I offered my employees. Finally not having to do that anymore seemed like a luxury to me after ~20 years of doing it myself. A massive emotional weight lifted that I was as surprised by as relieved. Two to four weeks
of paid vacation by an employer is a much different feeling than paying yourself for taking two to four weeks off while you’re not making revenue from your own efforts.
My industry has nothing to do with the core businesses of the company I was employed by or most of the large companies that were my clients so it could be seen as riding the coattails of the software engineers, ad execs and real estate managers, et al, given my industry is sometimes (and in my opinion wrongly) viewed more as a skilled trade where folks rarely roll up to an executive level mgmt role during their tenure.
I’ve been fortunate enough in these later years to see how my career path decisions starting from late high school through the following 30 years were made correctly even if they didn’t seem like it at the time.
Much thanks to you as always for the content you make that helped me on the path.