Life in the tech world can be exhilarating and challenging in equal measure. High salaries and dynamic work environment brings its own unique financial concerns
I work with families that are in tech and they struggle with figuring out how to maximize finances while working their tail off making a ton of money for the companies they work for. Here is a look at 5 financial issues families in tech face along with some practical solutions.
Job Security:
The tech industry is notorious for its volatility, with frequent layoffs and sudden company closures. This can make job security a major concern.
Solution:
- Continuous Learning: Keep your skills current by participating in online courses, workshops and certifications.
- Networking: Build a strong professional network. Connect with colleagues, attend industry conferences, engage in entrepreneurism.
- Adequate access to money: Not just an emergency fund. Many people define emergency fund as 3 months of expenses. I encourage my clients to have access to 12 months of income. This doesn't mean it has to sit in cash. Maybe 3-6 months in cash, some in short term CD's and some in brokerage account. This gives a ton of flexibility not only for short term, but could allow for more aggressiveness in other accounts since you have plenty of cash to weather a storm!
Cost of Living:
Tech hubs like Silicon Valley and Seattle come with a high cost of living. Housing, childcare and daily expenses can stretch the family financially.
Solution:
- Have a spending plan: What do you and you and your family truly value? Does your spending match that? I know it's very cliche. Seriously though, have you ever tried to do the exercise? I found $1k/month in my own spending plan because I didn't realize how much dining out I did!
- Rent vs buy: Have you analyzed the true cost of home ownership? When you account for property taxes, HOA fees, and upkeep, it's a lot higher than you think. So really look at the true cost of each and decide on what's the most important for you and your family.
Retirement Savings:
The more money you make the easier it is to spend without consideration. Think about it. When you were making $50k per year, you had to budget! when you make $300k+ per year, budgeting is no longer a thing. If I asked you how much money you spend per month, could you answer it anywhere near correctly?
Solution:
- Regular contributions: Your retirement contributions come directly out of your paycheck. Harder to spend money that never enters your world.
- Diversify Investments and Taxation: Balance your risk and optimiaze returns with diversifying your investments. Don't forget about looking into whether you should be doing Roth or Traditional. Having tax diversification allows for flexibility with your taxes later in life.
Student Loan Debt:
Many tech professionals carry significant student loan debt either for themselves, or for their kids.
Solution:
- Refinance: Consider refinancing your student loans. This could be through a traditional refinance or even taking out home equity to payoff. It's always about cash flow. If you could lower your payments and save the extra money, what could that do for you?
- Have a plan: Do you have a true financial plan that you are following that shows you when your loans are paid off and what you could look like financially? I have found that when my clients know that information, it relieves stress and brings confidence.
Healthcare Costs:
Despite great health benefits, overall healthcare costs can be a concern, especially with families with chronic health issues.
Solution:
- Maximize Benefits: Utilizing the health benefits and wellness programs offered such as HSA's, FSA's and choosing the right medical plan is essential.
- Work with someone you trust: Having someone that understands your financial goals, what you look like and your employer benefits can be a huge value add. They can help you navigate all these questions and show you how to maximize benefits in ways you may not know existed.
Final Thoughts:
You are working your tail off and wondering how you can become wealthy enough so that you can stop working. Finding the time to do so is difficult. Like most things in life, being proactive, staying informed and having someone you trust that you can bounce ideas off of really takes your finances to the next level. If any questions came out of this blog, message me at qfpteam@quantifiedwa.com.
Material discussed is meant for general informational purposes only and is not to be construed as a recommendation or advice. Please note that individual situations can vary therefore, the information should be relied upon only when coordinated with individual professional advice.