This is the third in a four-part series about your paycheck – what the various deductions mean and why you need to pay attention to them so you can effectively manage your cash flow to support the lifestyle you desire.
In my last couple of blogs, I’ve talked about basic deductions and deductions related to stock options. Now let’s flip that around and talk about what you have left after those deductions, and whether you are using that to your best advantage.
Ask yourself, are you using your whole paycheck?
That doesn’t mean are you SPENDING your whole paycheck. It means, are you leveraging your paycheck in a way that supports your lifestyle and gives you peace of mind while still enabling you to grow wealth.
I have found with some clients that they have a hard time getting past a pattern of self-denial or spend-guilt even as their income goes up or their bonuses increase. They feel strapped and stressed for no good reason!
Time for a different approach.
Here’s an example.
A couple came to see me a few months ago. The husband worked in high-tech making about $216,000 a year plus various stock options, mostly RSUs. Like many couples in the Bay Area, his wife also worked and they both had long commutes to their jobs. They had three children, two in daycare and one in private school, which cost them about $14,000 annually, plus they had their mortgage expense. They wanted to cut back her hours and make some upgrades to their home, but they were feeling strapped just managing their existing expenses.
We analyzed his paycheck and found that in addition to his $216,000 base, he was also getting quarterly RSUs valued at $40,000. In looking at their annual income and expenses, I found it hard to believe that they were feeling strapped. They had a good income and were not extravagant.
I probed a little deeper and learned that his reason for taking this job had been the attraction of the additional income from the RSUs. But they were in a pattern of living on his previous base income and felt they needed to continue to do that. Instead of using the cash from the RSUs so they didn’t feel as strapped, they just let them sit there.
Here’s the lesson.
Depending on your combination of stock options, RSUs are the most important to cash out and use, as they have already been taxed. Take advantage of that money to do the things you want to do, to upgrade your house, pay for school, diversify your investments. Let that money work for you and give you peace mind.
If you have been saving your RSUs, let us take a look at them to determine which ones you should cash out. We’ll put a plan together so you can do the things you want to do now, plus continue to save for your future!