[jedberg]

> Employees at this level tend to have a pretty high level of financial management services to manage scenarios like this.

I think you're seriously overestimating how sophisticated the financial management is of your typical software engineer, who could very well be spending beyond the cap with none of those things you mentioned.

In my experience, most Amazon employees just put everything on a credit card, and then they sell stock to cover the credit card payments if their salary doesn't cut it.

That's pretty much the extent of their financial planning.

[throwawaygh]

But this article isn't about a software engineer. It's about an Amazon VP, which is an executive position.

[jedberg]

That's how a lot of the executives budget too though. You'd be surprised how unsophisticated even high level software engineering VPs are when it comes to finance. Their expertise is in software, not finance.

As a case in point, we had to spend a lot of time educating people at Netflix how stock compensation worked, including a lot of VPs. They just didn't care, it was of no interest to them.

Money goes into bank, money comes out. ETrade account has a big number, yay! That was about it.

Of course some of them were much better than that, but just because they are engineering executives doesn't make them good with money.

[otterley]

How do you have so much experience with Amazon employees and their financial management behaviors? AFAIK you've never worked for the company.

[jedberg]

I have a lot of friends who do or have worked there, and we swap tax strategies. Much like me and my Netflix coworkers, they don't get a lot of help internally because most of their coworkers don't look into it.

I see from your profile that you work there. Curious if you agree with me or not.

[otterley]

I don't have enough data to say either way. My upbringing prevents me from talking about money on a personal level with friends or colleagues.

I assume my colleagues are capable of managing their finances wisely. I could be wrong.

In any event, I'm not sure a tax strategy discussion is enough to make an overarching conclusion from about someone's financial competency (or, for that matter, an entire group of people's). You can suck at tax optimization strategies without being a reckless overspender.

[jedberg]

Tax strategy usually moves into general finance since they go hand in hand. :)

We discuss salaries and total compensation too, so we are better prepared for our own negotiations.

And also, spending on the credit card and then selling stock to pay it off isn’t necessarily reckless or overspending. Imagine if it were all cash. Would you say they’re overspending because they pay out half their paycheck each month saving the other half? Given that for many amazonians their stock is more than half their compensation, selling some stock isn’t really overspending.

[otterley]

Not necessarily, but at least for me, I've never needed to spend a dime of my stock to cover my living expenses (and them some). The salary cap is more than enough to live on for most people - and I count the Bay Area, too, where I live. I personally think that if you're already at the salary cap and are selling stock to cover basic living expenses, they are probably too high, and I suspected you thought the same.

I don't intend to sell my stock except to diversify my portfolio. I intend to live long beyond retirement, and I'll need it.

[jedberg]

Let's run a quick budget for a family of two adults and two kids.

The median home in the US is 2,300 sq ft. To get that in the Bay Area in a good school district will run you about $2.3M. Assuming you put 20% down, you'll need to mortgage $1.84M. At today's rates, that's about $7,360/mo in mortgage, and about $2,100 in property tax.

So we're already at $113,520 a year just for housing.

You'll also need to pay taxes on your total comp, including the RSUs that you vest in, whether you sell them or not. Assuming you make $250K a year in total comp, and let's say you have a ton of deductions to get a crazy low tax rate, you'll still pay about 30% in taxes between Federal and State. So that's 75,000 a year.

So just in housing and income taxes, we've already spent more than the Bay Area salary cap (you've spent $188K).

And we haven't even talked about insurance, cars, food, or daycare.

I can easily see a middle class family spending more than the base salary.