#595 Engineers Optimize Code. They Mismanage Money | Stanley Leong, Author of Engineering Your Finances

Mehmet: [00:00:00] Hello and welcome back to a new episode, episode of the CTO Show with Mehmet today. I'm very pleased joining me from the West Coast in the us. Stanley Leong, he's a private wealth advisor and author. Um, the way, usually I like to do it, Stanley, I don't waste my guest time, you know, in fancy, lengthy intros. I keep it just to them, so.

Just tell us more about you, your background, your journey, and what you're currently up to. Before I give you the floor, just as, as the, as the audience might guess, we're gonna talk about wealth, we're gonna talk about finance, we're gonna talk about, but for technical people who are usually, and I was one of them, I wasn't aware of this.

So we're gonna discuss these topics with you today. Again, thank you again, Stanley. The floor is yours to give us your intro and then we can start the discussion from there. 

Stanley: Awesome. Thank you, Mehmet. Uh, I appreciate being here. Uh, I'm, I'm looking forward to it. Um, yeah, so I, I, uh, uh, am a former engineer, um, turned financial advisor.

I have a [00:01:00] master's degree from, uh, Cornell for electrical engineering. I designed computer chips for IBM for a couple years in the late nineties, and then, uh, moved out here to California to, uh, work fornt Technologies, uh, doing the same thing. And, uh, in 2002 I bought my first house, um, here in California, and I moved in on a Saturday, Sunday.

I was sitting in my living room, you know, patting myself on the back. Uh, so proud of myself. Had bought, having bought my first house, and then, uh, Monday went into work and got caught into my manager's office and, uh, and got laid off. And so, uh, a, a very stressful time for me financially, of course. Um, and I, I didn't know what to do, do I?

Sell the house I just bought. Um, do I, you know, cash out my 401k and pay my mortgage? Um. And I think the most frustrating thing for me was just I, I didn't have anyone to go to for help. Right? I'd asked my, my parents, they said one thing, asked my colleagues, they said another, asked my friends, they said something else.

[00:02:00] And so, um, so I was really frustrated, didn't know what to do. As I was looking for more engineering jobs at the time, I came across an ad for a job opening as a financial advisor. Had a large financial firm. And, uh, I remember thinking. Oh, that might be interesting, right? Not only would I get to learn to do, um, you know, what to do for myself, um, but then I could also help other people, uh, in similar situations with their finances.

Uh, you know, this was 2002. The, the, the tech bubble had dispersed. Lots of people were getting laid off. Lots of engineers, uh, were getting laid off at that point. Um. And with the encouragement of my girlfriend at the time, who's my wife now, um, I, I went in for an interview, uh, got somehow, got past a couple round of interviews, eventually got the job offer.

And I still remember driving home from that last, uh, from that offer thinking, you know, how hard could it be to be a financial advisor? And the, uh, the, the, the next three years of my life were, uh, the most miserable years of my life. Um, and so. Partly starting, you're starting a new business, right? [00:03:00] Starting, build up a client base.

So all the growing pains of starting a business, working 60 hour weeks, not making any money. Um, and then I think at the time the, the thing that really was, was difficult was just, uh, back then we got all of our clients through cold calling. And, um, well, I, as an engineer, I didn't even know what that was, so I didn't realize how miserable it was just to, to cold call.

And, um, so after. Uh, three years or so, it started affecting, uh, my health and even my relationship. My, my wife was giving my resume out behind my back to her engineer friends, hoping I'd go back to engineering at that point. And then, um, in 2006, I, I took the leap and, and became independent. So I became an independent franchise owner of a large.

Financial firm, which is where I'm now. And, uh, and things started getting better at that point. It started getting my feet under me, started getting more technology professionals as clients. Um, um, eventually wrote a book, um, which which is published last year, engineering Your Finances. And, uh, and, and fast forward to today, now it's wonderful.

Now I love it. Uh, I can't imagine doing anything else. It's so [00:04:00] rewarding to, I get to help people reach their financial goals in retirements. I look forward to, to going to work every day. Uh, and now I, I recently got bestselling author with Amazon and I'm a go-to advisor for tech professionals. I'm just, I feel so blessed to be where I am today.

Um, and so, you know, getting laid off was, was in hindsight one of the best things that could have happened to me. But of course, it didn't feel like it at the time. 

Mehmet: Yeah, of course. Like this is a, uh, repeating theme I would say with, you know, like, it's happened to me a couple of times before in my career.

It, it happened to a lot of, I know. Yeah. And, and you, when you look back, you start, as they say, connect the dots. Yeah. And turns out to be the best thing that happened, of course, with all the struggles that you have to survive now. It's a fantastic story, Stanley, like how, how you did this move, um, speaking about, you know, from maybe your experience, I mean your personal experience and of course now you see a lot of other people, let's focus a bit on, on the [00:05:00] techy people like the engineers, right?

Stanley: Yeah. 

Mehmet: Uh, and you know, I was telling you like even myself, you know, I didn't have this good relation with anything related, you know, to finances because. Uh, I, I'm not sure about if in the US but the part of the world where I grew up usually like, you know, like, yeah, you are the engineer. Like you are the geek.

Like you are the guy who thinks big, like you shouldn't care about all these other stuff, which is wrong. 

Stanley: Yeah. 

Mehmet: Now, what are the like wrong, um, thoughts or let's say wrong habits? Have you seen like especially techie people do when they think about their finances? 

Stanley: Yeah, yeah. There, there are actually a lot of, um, mistakes, a lot and a lot of similarities, first of all, with technology professionals in general, um, around their finances.

Uh, which also means they make a lot of similar mistakes around their finances. Um, and, uh, yeah, there are several, I'd say maybe the most common one is. [00:06:00] Um, uh, I, I find a lot of tech professionals have a lot of risk in their envi, in their investments, in their portfolios. Um, sometimes that's intentional, but, uh, oftentimes it's unintentional and they really don't realize how much risk they're taking until I, I pointed out to them.

And then they're just as surprised as, as anyone. So, uh, so I would say the, the, uh, the, the first and foremost, what I find a lot a big mistake tech professionals make is they take a lot of risk in their portfolios. Um, sometimes this is in the form of. Concentrated stock in their employer. Um. Which is maybe the most common thing I see, especially if it's someone working for a large tech firm.

Um, and then the other concentration I see a lot is just in technology, stocks in general, right? Technology is what they live and what they know. And so you generally like to buy what you're familiar with. And so you buy technology stocks, um, and then you buy a couple of them. You know, you, you, you don't wanna just have all your money in one stock, so.

Instead of buying just Nvidia, you buy Nvidia and Apple and Google, and then you think you're [00:07:00] diversified. Um, but still you're, you're, you're taking a lot of risk, even if you're. Even if you're just in tech, even if you have several different stocks, but you're just in technology, I think most people don't realize how risky and how volatile, uh, the technology sector can be.

And so that's a, that's a common, uh, and we can, we can certainly talk about solutions as well, but that, that's a common issue that I see. Um, I would say that another one that's more lec uh, related to retirement planning is in the tech field or in, in most other industries. The older you get, the more valuable you are.

Right? The wiser you are, the more experience you have. Um, in tech though, it's not quite the same. Uh, a lot of the tech firms, they actually value the younger people, right? That are just getting outta college, that are energetic and, and know all the new stuff. And, uh, as you get older, you kind of become a dinosaur in the tech world.

And so, uh, that that does change kind of the way you look at retirement and retirement planning. Um, I have a client that, for instance, a couple years ago, he was in his late fifties, um, and he got hired onto Google [00:08:00] and he used to joke that he single handedly brought the average age of the Google employee up because everyone he was working with seemed like they were in their twenties.

And so, um. So that, that we do have to kind of plan for that. Um, and you know, if you get laid off in your fifties, it becomes much harder to find a job than, than, uh, in your twenties. And, and so, uh, that's, that's another common thing that I see with tech professionals. 

Mehmet: So can we say, Stanley, that they try to optimize their, uh, is the same way we think how we can optimize a code maybe, or how we optimize a system?

Is this like part of the problem? 

Stanley: Um, I, well, I wouldn't say that's, uh, part of the problem. I think, I think the, I think the problem is more with finance. There's just so much. Um, so the, the technical part of, uh, wealth management is actually not that difficult. I tell people all the time, you know, especially my engineer clients, they're, they're really smart.

They're real technical, they're analytic. Um, and the analytic part of finance is actually not that [00:09:00] difficult. It's, uh, you don't, you don't need to. Have a PhD in math or finance to, to understand how to manage money or how to manage your personal finances. Um, the difficulty is that there's so much, it's just you have to worry about your, your, your, you know, uh, debt strategies and your investments and then insurance and in taxes and then estate planning.

And there's just so much you have to know. And so, um, I guess you could say, uh, because analytic folks, like engineers tend to. Try to want to understand how to do it themselves. Uh, it becomes overwhelming very quickly, and then they end up just procrastinating and, and not doing it or just doing little parts of it because it's just too overwhelming.

Uh, and then that's when mistakes are made. 

Mehmet: Right. Now you said you focus mainly on people who are like, let's say in their forties to sixties, right? 

Stanley: Yep. 

Mehmet: Uh, so if. Uh, and I'm focusing on the pro. Of course, we're gonna talk about the solution in a while. Sure. Uh, but you know, what I like to do is I like to [00:10:00] highlight how important this, uh, is by highlighting the problem.

Right. So, so, so we need, we need, we need to, to uncover this more and show it that it's a real pain. So, first of all, and I'm gonna try to make it in one question instead of two. Okay. So, okay. Once, once you reach the stage. So what, uh, what is the strategy should be looking like compared to when you are, like in your twenties and your thirties and when you have to diagnose, you know, like, uh, these problems, where will you see the flow?

So you talk about couple of them, but uh, do you think they are approaching this in the right way in the first place, or are they, especially now we live in an age where. You know, some people might go and ask friends. Some people might go and, uh, read some blog posts. Maybe now they're using AI for this.

Stanley: Yeah, 

Mehmet: absolutely. So, right. So, so where do you see the, the, the, the flows in, in their way, how they design their own, [00:11:00] um, financials? 

Stanley: Yeah, so yeah. Yeah. I think, um. I think having an analytic approach approach is good. Um, but yeah, I would say, uh, oftentimes when they're in their twenties and thirties, they're not even thinking about longer term type things.

They're just sort of in a, a, I would call, kind of more gambling mindset. Um, they're just trying to make as much money as they can, as fast as they can. And, uh, you know, who cares about retirement? That's, that's so far in the, in the future, uh, I'm not worried about it. And, and, um, and you're right. I think what happens is that kind of once you, you, you get to your forties and fifties now you start worrying about things like retirement in longer term.

Um, but you still kind of have this younger mindset, especially when you're an engineer. You're in this fast-paced industry or it's go, go, go. Um, and so you still kind of have this mindset of. Uh, more of a gambling type of mindset. So one of the things I do clarify, uh, try to make very clear with, uh, clients when they first become clients of mine, is there is a difference between [00:12:00] gambling and investing.

And so we clearly define the difference and then make sure, um, that they're not doing that. Um, so, but yeah, I, and I think that that might be where the aggressiveness level comes from with, with the technology professionals is just because they, they're um, they're used to go, go, go. Um, they're used to taking more risk when they're younger, and as you get older, you have to transition that.

Mindset and a lot of folks don't, um, aren't able to transition that or, or don't realize that they have to. Um, part of the reason I wrote the book, in fact just kind of bring up what you were saying is, is because just timing wise, we are in that information age. And especially the engineers, they're always looking, looking online and looking, looking at other people and trying to figure out their finances.

Um, and there, there is a lot of really good information out there. Um, and, and as just like you said, they don't, now they're asking ai, right? And, and AI sometimes gives a really good answer and around finance, but sometimes AI gives a really ridiculous answer that's that just obviously, you know, wrong from the beginning.

Um, but then it's that in between where AI gives [00:13:00] what sounds like a good answer, but how do you know if it's right or not? Right? 

Mehmet: Right. 

Stanley: And same thing with anything online that you read. There's a lot of good information, but there's also a lot of information that's, that's, uh, old or, or not good. Um, and so I, I wrote the book as a way to help.

Uh, engineers navigate that. Uh, I have a client, for instance, uh, uh, just a just recently, a year or two ago, I had recommended a relatively straightforward tax strategy. Um, their accountant actually emailed me a month later and told me that, uh, I couldn't do this and they, it was gonna cause all these problems with their taxes and so forth.

And, and they referenced an article online that kind of supported an argument. And so when I looked at the article. Um, the article was written like 2012 and, and it was correct for 2012, but a lot of tax laws have changed since then, and it's not correct for 2025 or 2026. And, um, and so if a, if an account, a CPA can get confused with their taxes, uh, because of all the information on that online, I can just imagine a normal person trying to do their retirement planning, you know, how, how [00:14:00] difficult that can be.

So I was, uh, the book I wrote was kind of a way to help help engineers, uh, kind of cut through the noise and, and get to the right answers faster. 

Mehmet: Right before I deep dive with you on, on the solutions and the book, uh, uh, one final thing regarding also the, the misconceptions, because you mentioned tech, you are in California, it's the, it's the capital of the tech.

Yep. So we see these, and by the way, it's not only in California or in the us like even in other part of the world, when you are in tech, we know like. You are paid well, like whether you are an engineer, whether you are a manager leader. So some people think, okay, you know what, like I have a very high income.

Why even should even care about like, you know, all this planning, I have financial security. How dangerous is that Stanley? 

Stanley: Yeah. Uh, very, yes. That's very dangerous. Uh, when, when, when you think about retirement? So actually one, one response I often gets with the younger folks, um, when I say, Hey, uh, what are you doing for retirement?

Um, or when I ask when they think they [00:15:00] might retire, you know, when they're younger, they say, oh, I don't think I'm ever gonna retire. Right? I love what I do. I love this engineering thing. Working at a startup, it's, it's exciting. You know, I, I'm, I'm just, I'm just gonna work until I die. Um, and so, and so that's a very common answer I get for the younger folks.

Um. And then the, and then it's the opposite. You get into your forties and fifties, like, oh, well, I wanna retire early. And so, um, yeah, I, I think, uh, uh, to, to think that you can never retire. You're never going to retire or you don't need to. Plan for it, I think is, is definitely a big mistake. You know, one way I just think of retirement, you know, if you retire in your sixties, um, you've got 30 years left in your life.

Um, it's like you're taking a 30 year vacation, you're saving money to take a 30 year vacation, right? You're, you're working for maybe 40 years to take a 30 year vacation. So, um, you do need to save no matter how much you make, uh, in order to make that happen. Um. And so, yeah, I think, uh, uh, it is very important, uh, to think of [00:16:00] planning.

Um, the other important thing about in planning and especially around investments, is the power of investing in the end is really the compounding over time. And the longer you can compound, the better. Uh, one of the things I show younger folks just to get them excited about investing is if you, if you just save, uh, I, I show 'em a spreadsheet, right?

You just save $200 a month. From ages 20 to 30 and that's it. And then you're now saving more. You have a million dollars, you know, assuming 10% growth and everything, you, you have a million dollars at around age 60. Right? And so, and, and it's because you're saved so long ago and that time and compounding gets you to a million.

Um, and so when you. Decide, uh, I don't need to save right now. I'm making lots of money. You know, and, and then, um, now you're in your forties and fifties, you don't have that time to compound anymore, and all of a sudden you have to save so much more money just to get to the same place. Um, so, uh, so the planning early is a really big help in retirement planning.

Um. Yeah. But it's difficult [00:17:00] sometimes when, when the attitude is, I don't, I don't, I don't have to worry about it 

Mehmet: right now. Let's talk about the solution, like let's talk about engineering your finances. 

Stanley: Yep. 

Mehmet: How, and feel free to, to, to, you know, give us. As much details as you want. 

Stanley: Okay. 

Mehmet: How that actually means in practice.

Like is there a certain framework people need to follow? Uh, how that starts and how it looks like in practice, Stanley? 

Stanley: Yeah. Yeah. So I can, I can start high level and then we can dig. Sure. As detailed as you like. Um, so, uh, as I mentioned it, it, it can be very overwhelming. There's so much you have to take care of with personal finance and wealth management.

Um, and so the way in the book, the way I break it up is I break it up into seven, what we call the seven key areas of financial planning. And which we can go over if you'd like, but the, the, I break it up into, in a sense, like bite size pieces, right? There's that saying, how do you eat an elephant? Uh, one bite at a time.

And so it's much easier if you can just attack one thing at a time rather than just [00:18:00] trying to take care of the, the entire thing as a whole. Um, with the caveat that each one of those parts, they tend to affect the other parts as well. So sometimes I think of it as like gears in a machine. Um, you know, one, one gear's turning affects how the other gear turns and so forth.

So they do affect each other. You have to kind of take that balance into account. But if you can attack one thing at a time, it actually, it makes it a lot easier, less, less intimidating. Um, those, those seven key areas are essentially, um. Determining your current financial position. Um, this is like looking at things like your net worth and cash flow debt levels and strategies.

Um, we always say, you know, if you wanna figure out how to get to where you want to go, the first thing you have to figure out is where you are now. And so that's, that's sort of where you are now. Um. Uh, there's investment management of course, and risk management, which we can definitely delve into. Um, the, the third one is protection planning.

So that's looking at your insurance coverages, home health insurance, auto insurance, liability insurance, and so forth. Um, the fourth one is, uh, workplace [00:19:00] benefits. Fifth one is tax, uh, tax planning. Sixth is retirement planning, and the seventh is estate planning. And so, um, so by breaking it up into those sec those, those pieces, it, it just makes it a little easier to attack.

Uh, each one. I also do recommend attacking them sort of systematically like an engineer would. Um, the way my practice is set up, for instance, for, for our clients, we have two meetings a year. The first one's in the spring, and that's specifically focused around tracking your goals and protection planning.

And then the meeting in the fall is specifically around taxes and investment strategy. And so we we're very systematic and focused every year on, um, uh, making sure we cover everything and make sure we're, we're, we're getting all the strategies, uh, incorporated. Um. So, uh, yeah, so at a high level, that's kind of how we attack it, uh, systematically.

And then, and then within each of those categories, we, we certainly have different ways of, of, uh, uh, approaching it and, and, and making sure that it's, we're doing the right things for the clients, 

Mehmet: right. I'm gonna, you know, focus on one area specifically, which [00:20:00] is the risk, right? Yeah. And the reason I want to, I want to do this for multiple reasons, of course.

As, and, and I'm an engineer by, by trade, as you say in the us. Um, so, so anything I approach, I approach using data and logic, right? Yeah. Including risk. Now, the other thing is, there's another factor, which is emotions, right? And the fear and the greed as well. We know like these to, you know, move things usually.

Stanley: Yeah. 

Mehmet: So usually how much time you need to spend Sally on, on, you know, managing. These two, I would say factors. When we talk about the risks specifically, how important is we? We, we make sure that everyone is on the same page. Let's say regarding, you know, the risk assessment and do they really understand this?

I'll tell you something because, you know, there is a group here in, um, in, in, in the UAE and people are part of it. I'm [00:21:00] part of it also as well about, you know, like, uh, I think they call it fire, like financial freedom. Yeah. 

Stanley: Financially independent. Retire early. Yep, yep. 

Mehmet: Yeah, exactly. So, and the thing that, for example, specifically now with all what's happening in Europe, politically and so on, so the first thing you see people they do when such event happen is they panic, right?

And. Well, the more wise guys, they will tell no, it's a long term investment, like better. You don't go to the screen and check it. Yeah. But as engineers, we like to look at screens. Agree. Yeah, absolutely. So, so how, how you, how you advise your clients? I would say. To, to manage, you know, this fear, greed, um, risk, you know, tell me more.

Stanley: Yeah, yeah. So, and, and it is, that's, uh, exactly right. Risk. Risk and emotions are very much, uh, tied together. Um, and yes, I spend a lot of time, actually, I would say almost most especially in the investment side, you know, all the different categories when you talk about [00:22:00] investments. Um. I'd, I'd say the majority of my time when, when we're talking about investments, it's around risk and emotion.

Um, so yeah, so a, a couple ways, uh, uh, first, first something just to point out, um, I know oftentimes when people hear that I work with technology, professional engineers, you know, they think, oh, these are very analytic people. And so emotions must not affect those people. And, and I would say, um, it's almost the opposite, um, that I, what I found is the more analytic and logical you are.

Um, the more emotional decisions you actually make. Um, if only because, you know, there, there's a saying that, uh, that you make with finance that, you know, you make emotional decisions with finance and then you later rationalize it with your logic. Um, and analytic people, engineers especially, they are so good at logic that.

They, they make emotional decisions and they can convince themselves that, that, uh, their logic is sound and, and, and, and rationalize their own emotions. Um, so I found analytic [00:23:00] people actually make the most emotional decisions of anyone. Um, and so we do spend a lot of time trying to, um. Uh, manage that. I, I even have a designation, um, A BFA designation, which is behavioral financial advisor.

Um, which there's a whole field of study, in fact on behavioral finance and why we make sometimes irrational money decisions, um, because of our emotions and, and our brain. And so, um, so that's a, that's definitely a big part of it. Um. I would say the, one of the things that I, I do with my clients is when we look at their portfolio and, and either the way they have it or the way we want to design it, um, the, one of the first things we look at is if something bad happens.

Let's say we had another 2008, you know, 2008 in the US is one of the worst recession system of depression, one of the biggest sharpest drawdowns in the market. You know, how would this portfolio have done? Right. And then let's say it was sent kind of a moderate risk, uh, level, that portfolio might have lost, uh, 20 to 30%.

The broad stock market in the US lost, you know, over 50%, um, uh, from peak to [00:24:00] TR during that time. And so I show them that, and I show them from a dollar amount, okay, you have a million dollars, uh, next year, 2008 happens to happen again. Um, that means you're losing, you know, $300,000, $400,000, or if it's, you know, $10 million, now you're losing three, $4 million.

Um. And so how do you feel about that? Right. And I just sit back and, and let them, let them stew on it. And, um, you know, if they say, oh, that, that really makes me uncomfortable, I, I would panic, I'd pull out, then, then, then that, then maybe we're taking too much risk, right? And so then, then we can have that discussion.

Um, whereas some clients will be like, uh, no problem. Lose $3 million, no big deal. In fact, I wanna invest more. Now, the stock market's cheap, right? In which case, okay, maybe you are, this is the right investment risk, risk level for you. Uh, most people don't say that. Most people are, are, are on the opposite end of it.

And, uh, and especially when you put it as a dollar amount, it becomes real to them, right? 30% loss, eh, what does that mean? But losing $3 million, well now that, that can be a big, so, so, um, so I, I make sure to go through [00:25:00] that with the clients. Um, and, and I think that's a really good exercise. The other reason why it's a really helpful exercise is later on, oh, the other thing, one of the things we learned in behavioral finance is we are actually really bad at determining how we'll act in the future.

We think that, oh yeah, no problem. Stock market drops a little bit. I'll be okay. But then when it actually happens, we act very differently than we think. We'll act. Uh, and so, so even though they say, oh yeah, 30% drop, no problem. Um, is that really the case? You know, when, when it happens, but EI think the fact that I'm going over it with them during a time that's not stressful.

Uh, when times do get stressful and they do lose 30% later on, they can at least sit back and say, oh, Stan talked about this. Okay, we're okay. Don't panic. Um, so, so I think just going over that, uh, and if you're, if you're doing it yourself, just kind of understanding. How big of a loss can your portfolio, would your portfolio take in a time like 2008 or the tech bubble?

Um, and uh, [00:26:00] put it as a dollar amount so that it becomes real to you, and then really ask yourself, is that something you're willing to ride through 

Mehmet: right now? One thing I think we didn't touch much on, everyone knows, and even if you are not in the us. Every tech company, uh, and this has became like part of how you attract talents and uh, you keep them, is to provide restricted stock options.

Like rsu. Some people, they give the stock option itself. They give you, uh, it's called like you, you can buy at a very, um, uh, like discounted price. Of course, when you join the company, you have concentrated equity as well. There are multiple ways, and all of them, some people they. Think it's part of an investment, right?

Mm-hmm. I heard a lot of people, they say, you know, like, I gotta be in this company for the coming four years. My equity will vest with time, or the company will go public if they are private company. And this is like kind of my, [00:27:00] my plan. Like, 

Stanley: yeah, 

Mehmet: let's talk about risk again here. And you know, the need, the need of diversification.

Stanley: Yeah, I think that's even a harder one emotionally when you talk about emotions again. Um, and so yeah, that is one of the issues I see. I'd mentioned, uh, you know, taking too much risk, uh, is a common issue. Uh, one of the reasons is because of that concentrated suck. Um, you know, and, and it's just like you said, it, it, it happens.

I think for the most part, people don't intend to have. Uh, take that much risk. But, you know, you start at a company either just like you said, they give you the RSUs, um, they have, they might have a stock purchase plan, like you said, if they can buy it at a discount. All these things are good, you know, so, so we do recommend doing those things.

Um. But then, you know, they're, they're working 5, 10, 15, 20 years. Um, that's, they've accumulated over time a whole bunch of shares. And on top of that, if the company has done well, gone public, whatever, now that's the, the stock price has skyrocketed and now, you know, over [00:28:00] 50% of their net worth is in. In the company stock, um, uh, you know, we, we recommend having less than 10% in any individual stock.

And actually, I say 5% is a better number. Um, so yeah, 50% of your money in one individual stock, that that's, that's a big risk. Um. And, you know, and, and people don't realize it. I, I just, I got a client last year, um, pretty high level at a, a tech firm, a large tech firm, and, and he said he had about 10, 20% of his money in, in stock and he was worried about that.

Um, and when we inventoried his assets and, and investments, it was over 50%. And he, and he was just as surprised as I was, right. So I think it sneaks up on you. You're not keeping track of it. You do some mental accounting, but that's it. And, uh, all of a sudden, you know, the majority of your net worth is concentrated in the stock.

Um, and so, yeah, it is a, it is a, an issue, um, uh, with a lot of tech professionals. Um, back to the emotional part too, it becomes very difficult to sell. Um, one you feel kind of a loyalty to the company. Um, uh, another story, I have a, a [00:29:00] client, uh, this was years ago. This was 2006 or oh seven. She, she came to me, she worked at a, a tech firm.

Um, and she wanted to re, she was in her early fifties. She wanted to retire early at 55, and so we ran her numbers and turns out she could, she was a really good saver, you know, and she had, she had a decent amount of, she, she had a couple, uh, properties as well, and ton's that the numbers work. She can retire at 55.

And so she was super happy and, and, uh, I told her. But, you know, she had the vast majority, and this was maybe 70, 80% of her network in her company stock. And I said, you know, all of our numbers here assume that you're in a diversified portfolio. Um, so we really need to sell some or most of that stock. And she said, okay, yeah, I'll, I'll, I'll, uh, yeah, I'll sell the stock.

And so, you know, six months later I meet with her. I was like, how did, how did it go? And she's like, oh, I haven't sold the stock yet. And, and, um. So I, I, I went in and I helped her sell some of it, like within her 401k. Um, but then she said, oh yeah, I'll sell the rest later. And so, and then, so same thing. Uh, we meet and she still hasn't sold.

And finally I'm like, [00:30:00] you, you know, this is a lot of risk you're taking. Um, and she admitted that, you know, she just emotionally, she felt like she had worked at the company her whole life. She, she felt loyal to the company. The company's gotten her to where she is today. And she felt like selling the stock would be like, she's being disloyal to the company.

Um, yeah. And, and I told her, you know, CEOs sell their stock all the time, right? It's not a disloyalty thing, it's, it's just a smart financial decision. But, um, but so she didn't, and then 2008 happened, stock price plummeted and it actually delayed her retirement 10 years. She wasn't able to retire until 65, um, after that.

So, uh, she's retired now and, and all is good, but you know, that, that was a painful lesson for her. Um, and so, and unfortunately that's one of several stories I can tell where people have concentrated stock. Didn't diversify, um. Part of it is the loyalty. The other emotion that comes is just, just in selling stock.

You know, when the stock has gone up, you think, oh, I can't sell it. It's on its way up, uh, it's gonna keep going, right? You always just think it's just gonna keep going up. Um, and if you sell it, uh, [00:31:00] you, you know, most places you have to pay taxes on the gains. That you made right when you sell it. And, and I don't wanna pay, it's a big tax bill, especially if this price has gone up a lot.

And so I don't wanna pay the taxes and so they don't sell it. Um, but then if the stock is down, they don't wanna sell it because then they think it'll just come back up and so I can't sell it now. And so they're emotionally again, there's just no good time to sell from an emotional standpoint. So I do spend a lot of time, um, with clients trying to figure out how to diversify that stock in a way that, um.

Uh, either we can help defer the capital gains if that's necessary. Sometimes I just tell them, Hey, just pay the capital gains that, that means you've made a lot of money. That's not necessarily a bad thing. Um, and so, uh, but yeah, but that, that is, uh, one big issue that we see. 

Mehmet: Right? One topic we didn't too much, you know, went into, we just like touch the surface and, and it's like the area where you focus more now.

Of course I gotta give myself as example only, um, I don't live in the us, but let's say, um, I came to you, Stanley, and [00:32:00] I told you, Hey, look, Stanley, I'm, I'm 46. You know, I work with one tech firm, but I'm very, very, very behind on my, uh, financials. I mean, in terms of savings, investments, uh, usually, you know, of course other than running.

The first thing you mentioned up the debt, the assets like, are there usually some kind of two to three move usually you advise them to immediately do? For, let's say for me, I came to, I said, Hey, this is how much I earn. I'm just making up numbers. Mm-hmm. Like I earn maybe, let's say $300,000 per year. I work in a, in a tech firm.

I have some stock options, but you know what? I didn't save. 

Stanley: Yeah. 

Mehmet: I'm running, you know, you know, check, check to check. 

Stanley: Yep. 

Mehmet: Uh, what I should be doing immediately. 

Stanley: Yeah. Yeah. Uh, so save, uh, first of all, but, uh, a lot of the, I, I'd say, um, a lot of tech firms, at least in the US. Uh, [00:33:00] offer, uh, some pretty good tax savings plans, um, uh, for employees, uh, especially if you're a big tech firm.

You know, apple, Google, Amazon, they, uh, they usually offer something called After Tax 401k. So it's, it's, yes. Yeah. Okay. So if you're familiar with that, so the, um, they have the regular 401k where you can put up a certain amount and either pre-tax or, or Roth. Um, and then, and then on top of that, there's this, after-tax 401k, um, a lot of clients, uh, engineering folks are not aware of that.

Um, and, and that is above and beyond your regular 401k contributions. And so, and then there's a whole strategy, um, around you, you take that and then you can convert it to Roth and, and, and, uh, it's, it's known as the mega backdoor Roth in our industry. Um. And so, and so that's a strategy that's very useful for engineers.

Um, and most big tech companies offer offer that, uh, to, to their employees. So, um, so that's a big one that's often missed that I would say certainly. And Aer especially if you're behind in savings, that that's a really good way to build up, [00:34:00] uh, savings and investments in a tax free manner. Um, in the US at least as your income is higher, if you're making 300,000, for instance, in the us you can't contribute directly into a, a Roth.

IRA position where, where the money comes out tax free. And so there's, it's a little more difficult to build up that, that sort of tax bucket. Um, but if you have that after tax 401k, it's, it's a really good, uh, place to go. So that, that might be the first, the first thing I look at to see if it's available for you, and then encourage you to try to start saving into that.

Um, you know, the four, just any, the employer savings, uh, is, is good. Not only from a tax standpoint, but just 'cause it comes out automatically, right? So you don't see it, you don't, you don't feel it, feel the pain, especially if you're used to living paycheck to paycheck. Um, you know, saving can be hard because now you have to maybe cut your lifestyle.

And, and so something like, uh, employer sponsored plan that really, really helps, um, uh, make it easier, uh, emotionally, if anything else, right? So, yeah, so I'd say saving into something like that. Uh, making sure. Um, [00:35:00] now with that, there is some strategy around that to make sure you're doing it correctly. Um, and then again, I would say likely you have lots of concentrated stock as well.

And so, um, making sure that's diversified, especially, you know, you're 46, you're, you're, you're not that far away from retirement, at least not as far away as you used to be. Um, you really need to start looking at making sure you're not taking too much risk. Um, you know, even the, the. The technology sector, for instance.

I think what most people don't realize is, um, you can still lose a lot of money even if you're in the technology sector as a whole, um, during a bad time. Uh, you know, when the tech level first, most people, uh, some people understand like the broad market, like the s and p 500, uh, lost maybe about 50%, you know, from pre trough.

Um, the tech sector lost, uh, over 70% during that time. So you're getting close to retirement. Uh, you can't, you can't stand to lose 70% at that point. If you lose 70%, then, then you're not retiring anytime soon, uh, for most people. So, so, uh, yeah. So I'd say the first things I would look [00:36:00] at, um, that, that just come to mind for me is, is looking at the concentrated stock and diversifying that somehow.

Um, and then looking at savings programs, uh, after tax 401k IRAs, um, whatever it is to, to, to start building that up. As soon as possible. And then even if it's a smaller amount, let's say, you know, rerun your analysis and because you haven't saved, you need to save, uh, several, uh, thousand, 4,000 a month. And that you just can't do that from a lifestyle standpoint.

Um, even if it's just a thousand, even if it's just 500. Even, even if it's just a little bit. Just getting that little bit in there. Um, uh, one, it starts, it helps the habit of saving, but then two, that little bit over time can still turn into a big amount. 

Mehmet: Right Now, I, I know like usually you don't focus maybe on much on these folks, but just out of curiosity Yeah.

If I'm a tech founder, right. And maybe I, I'm not saying I'm early stages, like I crossed the chasm, let's call it this way. Yeah. And. While I [00:37:00] should be focusing on, on making this priority, like it's for me and for my team, maybe we're just a small team now. Maybe we're like 10 people. And uh, yeah, we have raised.

Money and business is going good. But yeah, we are into this excitement of everything going on, and I see a lot of founders, they, they forget this. And often also like CTOs, senior engineers, like the first first people in the company when you would tell them to prioritize this. 

Stanley: Yeah. Uh, great question. And, uh, I, I do work with, with some, some founders as well.

They, they, uh, uh, when they should prioritize it is. Yesterday is as soon as possible. Um, it's, uh, the way I like to think about it is, you know, when you, when you found a company and you own a company, I mean, I own, I own my company, right? So I, I, I, I understand that. Um, uh. It's the same as owning one stock, right?

You, you own the [00:38:00] company. And so it's, it's, it's, uh, that is also concentrated risk and, and as exciting as it is and as, as, uh, optimistic as you are about the future of the company. Um, you also know anything can happen, right? Who knows? And then especially in the tech sector, anything can happen. Um, you know, I've seen companies that I've seen, uh, many founders who thought that their company was gonna be sold to, to a big firm like Google for, for $10 million and.

And at the end of the day, they ended up getting like $800,000 out of it. And, and so, right. And, and so you see, see that often and the other thing can happen as well. Um, but again, if you're, we, I always like to look at things from a risk standpoint and, um, and so. Uh, one thing I like to think of it is, okay, this is concentrated risk that you have as, as the founder of the company and you own the company.

Um, and it's also a risk you can't diversify, right? You can't, you can't just sell the stock and, uh, because it's, it's not a public stock. Um, but you should still think about having money on the side that's [00:39:00] saving for retirement, that you know, even if your company doesn't go the way you want. That you're still able to, you know, live the rest of your life and retire and, and everything like everyone else.

And so, um, and I, and so it's the same idea, uh, even as a founder of a company, you know, hopefully at some point you're making enough money that you can save and you wanna save and you wanna put aside the, just like everyone else, you wanna put aside the money that you can for, for your financial goals, helping your kids through school or, or helping, uh, you retire and so forth.

And then you think of your company as, as, um. You know, icing in a say it's, it's, it's your human capital. It's your, where your income's coming from now. And if it takes off and you get huge valuations and you end up getting a lot of money for it, then, then wonderful. Right? That's great. But if it doesn't, if you have this savings on the side in the diversified portfolio just like everyone else, then, then you're okay as well, just like everyone else.

So, um, so I, I encourage people to think of, um, their company as, um. Their, their human [00:40:00] capital, like their, the, the money they're that they're making now and allows 'em to live their lifestyle now. Um, but don't depend too much on that as your retirement, because especially in the tech field, of course, anything can happen.

Mehmet: Great advice, great advice, Stanley. Now, uh, traditional, final, final question for you where people can get in touch, where they can get the book and any final call to action you want to give us today. 

Stanley: Yeah. Yeah. So, uh, I'd say, uh, final call to action. Again, IJ just you, you brought it up first, but I think it's really important is risk.

Risk is, uh, I think for most tech professionals, risk is the thing you wanna pay attention to. Um, one of the things I like to tell. Uh, my clients is, uh, there is a very clear definition between gambling and investing. Um, and there's several ways you can define it, but the way I like to look at it and explain it is, um, when it comes to, uh, gambling, um, you are looking at the potential return of something and risk is secondary or sometimes not even considered.

Um, when you're investing. [00:41:00] Your risk is first and foremost your consideration. That's the highest priority. I always like, say as investment managers, we call ourselves investment managers. Really we're risk managers. Um, investment manager just sounds better. It sounds sexier. So we call ourselves investment manager.

We're really risk managers. And so, uh, at the end of the day, you should be, if you're investing. You should be looking at risk first, and we still wanna make as much money as we can, but within the context of that risk. And so one way you can test yourself on that is, uh, if you're looking to put money into something, um.

The gambler, the first thing they think is, oh, I wonder how much money I can make. Uh, how, how, how rich am I gonna be? What kind of car can I buy? And, and so forth. Um, a good investor, whenever they're putting money in something, the first thing they always think is, what if I'm wrong? What if this doesn't go the way that I want?

And how is that going to affect me in my situation? And if you just think of things that way, even if you don't know how to evaluate risk, but you just think of things that way. Um, you will probably be a better investor than most, most people out there. So, so, uh, that, that would be maybe my, my, my [00:42:00] tip for, for tech professionals especially around investing.

Um. To, uh, find out more or to get my book, I do have a website, engineering Your finances book.com. And so, uh, there's a free audio book, uh, version of the book on there as well. The book is on Amazon. If you want a hard copy or I'm happy to send you a free one as well. If you wanna reach out to me, my, my, or with any questions as well, uh, my email is stan at engineering your finances book.com.

And then, uh, and then we can, we can go from there. 

Mehmet: Great. I will make sure that the link and everything you mentioned is, uh, in the show notes. So if people are listening on their favorite podcasting app, they can find, uh, the links, uh, in, in the show notes. If you're watching this on YouTube, you'll find in the YouTube description.

Sally, thank you very, very much for sharing this. I think this is important. Um, I covered, but that was long time ago and I'm happy that, uh, you know, we did this again today because I think the last time we dis we discussed finances for founders and for tech [00:43:00] leaders was maybe two years ago, you know, on the podcast.

So it was a great, uh, way to refresh and have a. Engineer view, like from someone who, who, who lived in the trenches, uh, as they say. And I'm happy that, uh, you shared your thoughts. Of course, as I mentioned, people can find, you know, the book on the link that Stanley mentioned. It's in the show notes. Again, thank you very much Stanley, and this is how I add my episodes.

This is for my audience. If you just discovered us, thank you for passing by. Small favor, just share it with your friends and colleagues and subscribe to get, you know, all the new. Episodes your way, and if you are one of the people who keep coming again and again, thank you very much for ity. Thank you very much for tuning in.

Thank you for recommending the show to people in multiple countries. This is why I see from the numbers we are getting in the Apple Top 200 podcast chart. Across new countries. Some of them I've never been. Even some of them, you know, rarely we see them. So I'm happy we are reaching as much people as [00:44:00] possible.

This makes me happy. So thank you very much for the support, and as I say, always stay tuned for any episode very soon. Thank you. Bye-bye.