What is a dollar bill worth?
Certainly, it has an assigned value: A dollar is a dollar, it’s one hundred cents. But the value you put on that dollar is very personal. How important is it to your well-being? Does it give you status? What would you spend it on? Does it motivate you? The colleague you’re sitting next to may have completely different answers to these questions.
Understanding your relationship with money—what you care about and what you don’t care about—is an essential foundation of career-building.
This is top-of-mind for me, having just listened to Tim Ferriss’s interview with Morgan Housel, author of The Psychology of Money. I highly recommend the book, and the interview is excellent, too. Housel’s premise is that we each attach different meanings to money based on personal experience—which doesn’t always make us the best stewards of our finances.
Unless you’re lucky enough to have a trust fund, your money will come from compensation for work. This compensation is useful. We need it to buy food, shelter, and the necessities of daily life. But it also provides intangibles, such as status. One could make the assumption then, that the goal is always to land the highest compensation possible. However, Housel believes this is a flawed way of thinking. Instead, we need to understand our personal money psychology to make the best financial decisions.
Here are five questions to help you clarify your own relationship with money and then align your career choices.
What are your strongest work values?
Seeking the highest possible compensation isn’t the best goal for everyone. You may prioritize other aspects of work, like mission, company culture, non-financial perks, commute time, or ability to work remotely. If so, you can target companies that may not pay market rates, such as early-stage or social impact startups.
What is your appetite for risk?
What excites you more: earning top dollar now or a jackpot in the future? Early-stage startups generally offer below-market-rate compensation but make up for this with generous stock options that may eventually pay off in a big way. If you’re not risk-averse and the prospect of eventually cashing in as an early employee at a unicorn company, this can be an exciting environment. If you are, however, sobered by the statistics on failure rates of young companies (90 percent), it may not be an environment for you.
Does cryptocurrency excite you?
Some tech companies have compensation options that intersect with crypto. This could include being paid in crypto, or, for a few companies, being paid incentives in tokens rather than stock options. Companies see this as a way to attract younger employees, the “cool factor.” But beware: crypto valuations fluctuate and if they drop, so will your compensation’s value. The number of these companies is growing but still limited, so if this is important to you, you’ll need to do some research to craft a target list.
Are you more highly motivated by a bonus or base salary?
Common advice is that a higher base salary is almost always a smarter choice than an equivalent bonus, but that may not be true for your circumstances or your personality. Certain roles, such as sales and business development, are often compensated with a bonus structure. Across-the-board bonuses are not uncommon for tech companies experiencing high growth. And some companies offer lucrative signing bonuses. How do you weigh bonuses within the complete compensation picture?
Are you willing to give stock options the attention they deserve?
I’ll go out on a limb and say most employees don’t fully understand or manage their stock options. And no wonder: There’s a lot to wrap your head around—vesting schedules, strike prices, valuations, and the tax code—all of which can be complex. If these terms make your head spin, a company heavily incentivizing with stock options may not be a good fit for you. An honest assessment of your understanding of stock options can either motivate you to learn, or motivate you to seek alternate compensation.
The ability to negotiate compensation is a critical career skill. Hone it by researching tactics, knowing market rates for your role, and working with a coach or friend to practice. A solid understanding, though, of your own relationship with money is a cornerstone to being sure you’re working at a company in line with those values.