Money doesn’t feel very special most of the time because we work hard for our money. When we get our paycheck or the proceeds from a successful investment, of course we deserve the money. It’s when we win the lottery or find a dollar on the street when we start experiencing that giddy feeling money sometimes brings.
I got a nice surprise in the mail from my old employer the other week. It’s shocking to think it’s been over three years since I last worked a stable job. The mail simply notified me that another tranche of employer stock was going to hit my brokerage account. Sweet! I haven’t thought about receiving deferred compensation in a while now given I’ve been so busy writing, consulting, finding new tenants, and managing my never ending bathroom construction.
Finance industry bonuses are generally broken out into cash, stock, and private investments, depending on your seniority. The more senior you are, the less cash you get. I was a Director (one up from VP) at my old shop, so my bonus was heavily weighted towards deferred compensation that was spread over three to seven years! That’s how firms make it expensive for employees to ever leave.
If you quit your job, you will lose your deferred compensation in finance much like how you’d lose your remaining unvested stock grants if you work at a startup. But if you have a dialogue with your manager, you just might be able to keep what’s yours.
Remember, everything is negotiable. The sooner you realize this, the more wealth you’ll be able to create!
DEFERRED COMPENSATION 3 YEARS LATER
Here are a couple screenshots of my brokerage account where I received the proceeds and then transferred $11,381.75 into my checking account. The gross amount of stock proceeds was over $20,000, but thanks to our benevolent government, they decided to leave me with a little over half.
$11,381 is not a ton of money, but it sure feels like I just found 113, crisp one hundred dollar bills stuffed in a fat envelope on the street! Every time deferred compensation hits my brokerage or checking account, it feels like Christmas.
An easy trick to make a smaller amount of money seem more significant is by going through a list of what such money can buy.
What could one buy with $11,000?
* A soul-searching three week business trip for two to Asia.
* A 256 gig version of the 13″ MacBook Pro for $1,650, a new Macbook for $1,400, a $700 version Apple Watch, and a iPhone 6+ for $700 with $5,500 left over.
* 10,000 Mcdonald’s cheeseburgers and $20 for the doctor’s co-pay when you go for heartburn treatment.
* 55 pairs of the iciest retro Air Jordans, Bo Jacksons, and Andre Agassi shoes.
* A 72″ by 42″ jacuzzi tub for $5,000 and 10 rubber duckies with $5,800 to spare.
* A 70″ Sony 4K Ultra TV for $4,500 plus an incredible McIntosh 6:1 surround sound system for $6,500.
* A Hermes 50cm Bleu Indigo Veau Sikkim leather palladium plated Kelly Relax Bag for $11,000.
* Two tickets to the finals of the French Open, US Open, Australian Open, and Wimbledon.
* Four lower level tickets to every single Golden State Warriors playoff game, even the finals.
* Help slay the final $21,000 in mortgage owed on my first rental property.
* 2,000 square feet of refinished floors with meticulous sanding and staining with $4,000 left.
* A new 1,600 square foot roof for $6,200 with $4,800 to spare.
* A new paint job on a 2,000 square foot house for $7,000 with $4,000 to spare.
* One year’s worth of private grade school tuition.
* A 2010 Honda Civic, Toyota Corolla, Honda Fit.
* A 2015 Yamaha R6 racing bike or a 1200 cc 2015 Harley Davidson Sportster.
* A doubling up of my Financial Samurai portfolio, which is so far outperforming the S&P 500 thanks to winning positions in Netflix, Honda Motor, Fiat Chrysler, Hawaiian Holdings, and KB Home.
* Sponsor two poor children via Childrens.org for 16 years each so that they survive and grow up to be amazing people!
* Invest in real estate crowdfunding across the country to diversify my real estate holdings. Fundrise is the best platform that is free to sign up and explore.
DEFERRED COMP ISN’T OVER YET
Despite receiving this tranche of equity proceeds three years later, I’m still waiting for my deferred cash proceeds to directly hit my checking account, and the remaining portion of a private investment vehicle that has a seven year vesting schedule calculated from 2009. These amounts are substantially more than this most recent $11,381 net stock sale.
A baby panda dies every time someone quits their job, instead of negotiating a severance. You might fail at negotiating a severance, but at least you will never have any regrets knowing that you tried. If you were really planning on quitting anyway, you’ve got nothing to lose!
Taking on a new job in a new industry often requires a pay cut. Trying to do something entrepreneurial will probably crush your soul for the first couple of years. Negotiating a severance to do something new is the responsible thing. It’s similar to maxing out your 401k every month or reading the prescription label before taking any medication.
Why wouldn’t you want a financial buffer to fulfill your dreams? Are you too afraid to ask?
Recommendation For Leaving A Job
If you want to leave a job you no longer enjoy, I negotiating a severance instead of quitting. If you negotiate a severance like I did back in 2012, you not only get a severance check, but potentially subsidized healthcare, deferred compensation, and worker training. Since you got laid off, you’re also eligible for up to 27 weeks of unemployment benefits. Having a financial runway is huge during your transition period.
Conversely, if you quit your job you get nothing. Check out, How To Engineer Your Layoff: Make A Small Fortune By Saying Goodbye, on how to negotiate a severance. I first published the book in 2012 and have since expanded it to 180 pages from 100 pages in the 3rd edition thanks to tremendous reader feedback and successful case studies.
Start your own business: Take matters into your own hand and start your own business online! It used to cost a fortune and a lot of employees to start your business. Now you can start it for next to nothing with Bluehost. Brand yourself online, connect with like-minded people, find new consulting gigs, and potentially make a good amount of income online one day by selling your product or recommending other great products.
Not a day goes by where I’m not thankful for starting Financial Samurai in 2009. I have maximum freedom now thanks to working on my side-hustle while working for 2.5 years. You never know where your journey will take you!
Updated for 2020 and beyond.