IT Workers, What Do You Make? July 18, 2006
Are you in IT? How much do you get paid? This is the question, someone asked on The Joel on Software Group. The thread got Digged as well. It’s an interesting peek into IT salaries. People have submitted their anonymous salaries (some post fake salaries), and in general, people who have been in the industry for approximately 10 years can make $100,000 per year.
base salaries for Sr Developers in NYC range from 90k - 120 k. In the financial industry, you’re looking at a 20% bonus at least.
What I found amazing was the difference in pay among those who worked for a big company, and those who did their own thing.
There’s a range of job descriptions, from a software architect at Google to developers in India:
Experience: 4 years
Education: BS Computer Engineering
Certifications: No
Company: Google
Title: Software Architect
Location: MountainView, CA
SALARY: $165,000 + 20K Stock option @ $85.00 [That’s $1.7mil!]Experience: 6 & 1/2 years
Education: some college
Certifications: none
Company: Large well known public company
Title: Team Lead
Location: Bangalore, India
SALARY: $17,000 a year
The danger of posting all these is that this is not a scientific poll, it is probably not very accurate, and entry level staff feel like they are not getting paid enough. There’s more to a job than salary. Living expenses in your area, benefits, flexibility, and education have to be accounted for. Are you surprised by IT pay?
Want More Income? Work For the Dept of Homeland Security Then Do This… June 18, 2006
Forget about doubling your income; That’s nothing compared to making 6 times your current income or gaining 47,000% on an investment. After I wrote about how my former bosses doubled their income, I saw this article in the NY Times this morning about how former Department of Homeland Security officials are finding that moving from public office to the private sector pays much better. It sounds like all of these federal workers not only doubled their income but made 6 times or more and purchased stock options for $25,000 that are valued at millions of dollars.
At least 90 officials at the Department of Homeland Security or the White House Office of Homeland Security — including the department’s former secretary, Tom Ridge; the former deputy secretary, Adm. James M. Loy; and the former under secretary, Asa Hutchinson — are executives, consultants or lobbyists for companies that collectively do billions of dollars’ worth of domestic security business.
More than two-thirds of the department’s most senior executives in its first years have moved through the revolving door. That pattern raises questions for some former officials.
As I mentioned in my previous post about doing contract work on the side, as long as these officials aren’t breaking any laws or violating any national security policies, I think everyone has a right to make a living. But the article goes on to mention that many of these government officials are avoiding certain federal laws via loopholes. “Federal law prohibits senior executive branch officials from lobbying former government colleagues or subordinates for at least a year after leaving public service. But by exploiting loopholes in the law — including one provision drawn up by department executives to facilitate their entry into the business world — it is often easy for former officials to do just that.”
“In their new roles, former department officials often command salaries that dwarf their government paychecks. Carol A. DiBattiste, who made $155,000 in 2004 as deputy administrator at the Transportation Security Administration, earned more than $934,000 last year from ChoicePoint, a Homeland Security Department contractor she joined in April 2005, the same month she left the agency.” It’s hard not to switch from a government salary of $155,000 as compared to $934,000, but if I were working there, having the impact of protecting the country is an intangible benefit and would make it harder to leave the post. If anyone can get me a job in the Department of Homeland Security I’d be happy to offer my technology expertise anytime!
Source:
Former Antiterror Officials Find Industry Pays Better,
By ERIC LIPTON, NY Times
Published: June 18, 2006
Three of My Past Bosses have Doubled Their Income By Doing This June 16, 2006
This may not be for everyone, but if you work in an industry where you become a subject matter expert at something, you can double your income by consulting for other companies. I work in technology for a specific industry, so over time you pick up specialties and knowledge where other companies may benefit from your experience.
Three of my past bosses have consulted for other businesses. They didn’t tell me, but I found out from others and they worked on other contracts on their spare time. Be sure there’s no breaching of contracts or disclosure of confidential company information. I’m all for side consulting jobs if you can get them so long as it doesn’t affect your full-time job. My guess is that they doubled their income by working on the side for about 12 hours a week. Let’s assume that they made $100,000 per year in their day job ($8333 per month). I heard that they worked on the side for big corporations for $175/hour (yes, this is management consulting billed hours. Must be nice.) If they worked on average 12 hours a week, that’s $2100/week (or $8400/month), more than double their full time day job. Nice change if you can get it.
But this doesn’t only apply to high paying corporate jobs. I just happen to speak with three people this week who got extra income on the side:
- Cable guy who does home network cabling on the side charges $300 per visit (outside of his day job).
- My super does handyman work outside of his normal hours, building shelves, light carpentry, and odd jobs.
- A programmer friend who works on side contract jobs.
Some consulting and side jobs can turn into bigger opportunities later on. In the cases of my former bosses, their side careers did better than the current job and decided to go on their own. Do you have a side job?
Debt to Income Ratio - My Example June 8, 2006
Because of our recent move, I haven’t been able to post as much in the past few weeks. But I finanlly had some time to look at my housing costs and provide you a real world example of my debt to income ratio.
You know that debt to income ratio is a comparison of gross income to housing and non-housing expenses. According to the FHA, the monthly mortgage payment should be no more than 29% of monthly gross income (before taxes) and the mortgage payment combined with non-housing debts should not exceed 41% of income. (aka “29/41 qualifying ratio”)
Calculating the Debt to Income Ratio
To calculate your debt to income ratio first calculate your income before taxes. Next calculate your fixed debt payments like credit cards, auto loans, and school loans. Don’t include living expenses such as grocery, utility bills, or phone bills.
Example:
Gross monthly household income: $5,000
Fixed monthly expenses: $1,200
Debt-to-income ratio calculation:
$1,200 / $5,000 = 24.0%
Generally a ratio of 36% is considered high and creditors prefer people with lower ratios somewhere around 20%.
Here’s my ratio:
Old: 15%
New: 30%
We doubled our ratio, but because we no longer have any other debt, this ratio used to be approximately 25%. We felt that because of our age and financial ability, we made the move. At 30%, it’s on the higher end of the ratio, but our financial advisor thinks it’s ok. We don’t have any car payments, no gas to purchase, no school loans. Also, in NYC, it’s tough not to own property and be in the lower end of the debt to income ratio. For older people, it’s important to lower their debt to income ratio so that they can live a debt free life in their old age. Younger couples tend to have a higher ratio and probably should decrease this by 1% each year (more on this for a future post).
Info: Tax Bracket and Marginal Tax Rate May 11, 2006
I’ve mentioned before that in some cases the added tax you pay when your income goes up isn’t the same as your tax bracket. Some don’t realize that your tax bracket is the rate you pay on the “last dollar” you earn. As a percentage of your income, your tax rate is generally less than that.
For example, suppose your taxable income (after deductions and exemptions) was exactly $100,000 in 2005 and your status was Married filing separately; then your tax would be calculated like this:
| ( | $ 7,300 - | 0 ) | x .10 : | $ 730 |
| ( | 29,700 - | 7,300 ) | x .15 : | 3,360 |
| ( | 59,975 - | 29,700 ) | x .25 : | 7,568.75 |
| ( | 91,400 - | 59,975 ) | x .28 : | 8,799 |
| ( | 100,000 - | 91,400 ) | x .33 : | 2,838 |
| Total: | $ 23,295.75 | |||
This puts you in the 33% tax bracket; but as a percentage of your income, your tax is about 23.3%.
Yesterday’s announcement on the tax cuts in the US extends to 2010 the 15% tax rate on most dividends and capital gains, which benefits the wealthier tax payers, who would otherwise pay the 35%, which is the tax bracket for married earners of over $168,275 or single earner making over $336,550.
Related:
Common Tax Bracket Mistakes
Would You Take GM’s Buyout Package? March 29, 2006
Last week, more than 120,000 hourly workers for General Motors and auto supplier Delphi were offered buyouts of up to $140,000. It’s tough to see such a large company having to cut so many workers.
If you took that offer, you’d have to give up retirement and health benefits. Given the choice, would you take a large payment and no benefits, or a smaller payment and continued health care coverage? $140,000 is no small sum, but it’s not an amount you can live off of, unless you are close to retirement. If you face such a choice, don’t underestimate the value of benefits because those costs will only go up over time. Consider tax implications too. If your buyout is considered severance pay, as opposed to a lump-sum pension payment, it will be taxed as ordinary income. That could push you into the next tax bracket, and the employer must withhold more tax, thus making the payout smaller than the stated number.
If you’re young, you have time on your side. If you’re able to put all the $140,000 in an interest bearing account such as ING Direct for 5 years with an interest rate of 4% compounded monthly, you’d end up with $170,939.52. That’s $6000 per year of income if you were able to get another job that pays for your living expenses. The problem with many of the GM workers is that getting another job is probably not that easy, since the US auto industry is not exactly booming. At my age (30s), I’d take it since I wouldn’t know if GM would cut me later without the buyout package.
So, would you take the buyout?
Average American Family Income Declines February 23, 2006
According to an AP story, the average income of American families, after adjusting for inflation, declined by 2.3 percent in 2004 compared to 2001.
The Federal Reserve reported Thursday that the drop in inflation-adjusted incomes left the average family income at $70,700 in 2004. The median, or point where half the families earned more and half less, did rise slightly in 2004 after adjusting for inflation to $43,200, up 1.6 percent from the 2001 level.
The median, or midpoint for net worth rose by 1.5 percent to $93,100 from 2001 to 2004. That growth was far below the 10.3 percent gain in median net worth from 1998 to 2001, a period when the stock market reached record highs before starting to decline in early 2000.
After technology stocks crashed in 2000 and in 2001, the 9/11 incident in NYC, it makes sense that the average income of American families declined. Although the economy in America is reported to be strong now, companies are cautious about their spending. As for net worth, I’m not sure if that includes the values of their homes or stock, but if so, a net worth increase of just 1.5% from 2001 to 2004 is pretty small. (The negative savings rate as reported earlier doesn’t include the value of the home or stock portfolio). With the inflation rate at around 2%, decline in family income, and net worth, it’s obvious we have to take steps to create a better spending plan and save for our future. The USA can’t count on our home equity as a source of money too long!
Source:
By MARTIN CRUTSINGER, AP Economics Writer
Winning the $365 million lottery…yes will get you to the top income tax bracket BUT… February 20, 2006
…but will is solve your problems?
Someone in Nebraska just won a record winning $365 million Powerball, but until the winner has sought legal counsel or financial counsel, we won’t know who won.
My friend has a good philosophy about buying Lotto tickets. He only buys when the jackpot exceeds, say, $200 million. Not buying a ticket gives you 0% chance of winning, but buying one ticket gives you an infinite increase in winning a lotto jackpot, so $1 is worth that chance.
The ticket holder has the option of taking the money in one lump sum or installments over 30 years. The cash option is $177.3 million, or $124.1 million after taxes. On the installment plan, the first payment would be $6,507,986 after taxes. As I posted in my “Tax Around the World” series on Canada, lottery winnings aren’t taxed, so they would’ve won the full $365 million, but $124.1 million after taxes in the US isn’t too shabby.
I rarely buy lottery tickets, but my wife bought $5 worth. Needless to say, we did not win, but had we won, my wife told me that she will give half to charity, some to our parents, but wouldn’t give cash to any of our siblings. She said that by giving my sisters cash, they would always expect more, and it wouldn’t be good for their relationship with us and with material things. She would pay for their education, or their kids education, but it would do a dis-service to them by making money the focus of our relationship with them. My initial reaction was that this is pretty harsh, but the more I thought about it, the more I agree. The richest people in the world like Bill Gates and Warren Buffett don’t believe in passing down too much money to their kids because they want their kids to be self sufficient and work for money. I respect that. Better to have their money spent on universities or research on a cure for diseases than a bunch of Paris Hiltons in the world. The self made wealthy people are entitled to use their money for social causes and not pass on everything to their kids.