Tag: net worth

Be an owner – prioritize equity

Own. Don’t just earn.

Thankfully, my first job out of college was at one of the most important companies of our time – Google. It was also the first stock that I owned and I owned it because tech companies typically give all employees some stock (stock options in earlier stages and Restricted Stock Units at later stages) that vests (becomes theirs) over some period of time. Typically, you have to work at least a year at such a company for some portion of the stock to vest (typically one quarter of the initial grant because the most common vesting period is four years).

I started working at Google before it was a huge public company. Over time, as the company went public, more of my stock vested and the share price grew, the equity portion of my compensation became more meaningful. My initial cash compensation was only $35K/year, though that also grew over time but not as fast as the value of the equity.

So that first job gave me my first taste of ownership. Although I was a junior employee, I benefited from the success of the company just like the CEO, although on a much smaller scale. Of course, everything is relative and for me, it was an amazing start. The other thing Google gave me was a crash course on equity compensation and investing more generally. I had to understand how my equity worked so I learned all about it (tax implications, etc). Google also brought amazing speakers (like Jack Bogle of Vanguard) and offered personal finance classes. Since many people generated significant income from the stock, I think Google’s leadership team thought it would be appreciated if they offered some guidance about what to do with the new found cash.

Since then, I only worked in companies that give equity, except for one year and a summer in management consulting. That was a pure investment of my time into building out the consulting skill set that I thought would be helpful in my business career. It was painful to not get any equity but I am glad I had the experience.

The other two tech companies I worked at after Google either went public (now worth ~$15B) or was acquired (for ~$8B). I now work at a new early stage company that I hope to help grow to success.

It’s not just money and the feeling of ownership that drives me. I love building companies and growing myself in the process. That is also the other advantage: with experience, my equity % has been increasing (size of stake typically grows the more senior you get and the better you are at valuing the equity and negotiating it).

You don’t have to be a founder to own pieces of companies, but it really helps to own parts of companies and not just work there if you want to build wealth. I think of myself as an investor: investor of money and time. I invest my time in companies as an investment in their and my future.

What’s your Net Worth?

Net Worth is a very important personal finance term that I’ll describe below. Before I do that, I want to make one thing clear: while it’s perhaps my favorite personal finance metric, it is a dangerous phrase because some may mistake it for a person’s actual worth. Despite economists’ attempts, there is no financial way to value a person’s worth. Each one of us is so much more than the money we have in the bank. We are parents, children, spouses, brothers, sisters, friends, doctors, pilots, teachers. We are funny, smart, kind. We are so many things. We are complex.

Since this blog is about personal finance, let me share my thoughts about Net Worth anyway.

At a high level, net worth is just a number that is a sum of two things: Assets and Liabilities. Assets are those things which you own, and liabilities are those things which you owe. Assets are things like savings, brokerage, retirement, college savings accounts, as well as tangible assets like house and car. Liabilities are things like credit card debt, college loan, car loan, mortgage.

Net worth is a great measure of your overall financial health. If you have more assets than liabilities, you have positive net worth. Congratulations. If your liabilities outweigh your assets, then you have negative net worth and it’s time to address your financial health. If your assets are larger than your liabilities by $1 million, then you are a millionaire. Big congratulations!

I like tracking metrics because I am a big believer that what you measure is what you improve. I started tracking my net worth in my twenties in a spreadsheet. In my 30s, I discovered a free app called Personal Capital and have been using it pretty much daily. Once you connect all your accounts, you can see where you are today in terms of net worth – all in one place. The app also lets you track the ins and outs of your money, which I find quite helpful to see when I earn dividends across different brokerage accounts and when my purchases go through (it’s a good way to occasionally catch fraudulent credit card transactions).

I don’t think everyone needs to check their net worth daily, although transactions could be good to check frequently if you have many. I do recommend establishing the cadence that’s right for you and sticking to it. If you do well, you’ll probably increase the check-in frequency. If you start to fall behind, you’ll gravitate towards not checking. I encourage you to stay close to it in good times and bad.