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The financial mistakes behind why a startup laid off 400 employees overnight (teampay.co)
112 points by smalter 4 months ago | hide | past | web | favorite | 118 comments



These mistakes and the ending advice are pretty distracting tangents to a fundamental flaw: The business model can't afford employee overhead at even poverty salary levels. Everything else is just noise.

The best take away is yet another damning piece of evidence against the "gig" economy.


To me this article indirectly implied that everything would've been okay if only the workers shouldered the risks of this business.


The problem isn’t the “gig” economy. Having flexible part time work hours can work for some people if they want some extra money and they aren’t the primary bread winner.

Also $12-$14 hour is a livable wage in rural America, for full time hours, if you didn’t have to worry about health care.

The biggest issue with the gig economy is our insane health insurance system where the only way you can get affordable insurance is through your job.

But expecting college students to work for that amount is crazy.


"...if you didn’t have to worry about health care" Also known as That Thing Everyone Will Need To Worry About Eventually.


>That Thing Everyone Will Need To Worry About Eventually

(in USA #1)

I never have, and do not ever expect to have to, worry about it, because Euro


Everyone will have to worry about healthcare eventually, even Europeans. You might not have to pay for it, but that's different from being able to ignore it.

Also, if a scenario is about a U.S. company, and pay in USD, talking about America seems reasonable.


It works out okay if you’re married and one spouse has insurance.


Health Care isn't really affordable through your job. The company is paying a large amount for it, rather than paying you that money in salary.

But you can make decent money in rural America, if you have a family, and still qualify for subsidies through the aca.


>The biggest issue with the gig economy is our insane health insurance system where the only way you can get affordable insurance is through your job.

Are there good books/papers that have good research on this?


The difference between contract work and being an employee is that you have to pay “self employment tax” - the half of Medicare that your employee pays (2.8%) and social security (6.2%).

The usual difference between part time and full time employment is subsidized health insurance, paid time off, and sometimes a 401K employment match.

At least with the ACA, everyone can get insurance, whether everyone can afford insurance is a different issue.

For people like IT workers in the right market, whether to go contract vs. full time is just a numbers question - can you make enough to compensate for having to pay self employment taxes, health insurance, and unpaid time off.

For people on the other end of the spectrum - those who are getting paid much less and have to pay thier health insurance - it sucks.

The people hit hardest are for some reason some of the same ones who support candidates who want to get rid of the ACA.


The employer and employee each pay 1.45% into Medicare (and OASDI 6.2%) at these salaries.


Self Employment taxes is one reason I never considered doing side work. Taxes would total almost 50- (Federal 28%, state 6%, SSA 12.4%, Medicare 2.8%).

Now, between the tax cut that makes our marginal tax rate 24%, and that my primary job puts me over the social security maximum, my total taxes would be 32.8%. But I still have a magic number that no one has been willing to reach to make side work worth it for me.


The nice thing about side work is you can write tons of stuff off as “business expenses.” Your actual taxes are a lot less than you think because of all these write offs.


Worst of all, they required college degrees and offered employees $11-$12 per hour?


Exactly. I could push a broom at Home Depot for that much.


You'd need to be in a large city for Home Depot to pay that, and even then in places like Austin and especially Boise, many people make less than that per hour. $10 an hour after a bachelors degree isn't uncommon in economically depressed parts of the US.


I drove by a Home Depot near Utica, NY advertising $15/hr a few months ago.

Utica isn’t exactly a big city or prosperous place.


No you don't. I'm from a small town in Ohio and my first job was at Home Depot for $12 an hour 6 years ago.


Minimum wage is around $12 here in MA, if I recall correctly. There’s been talk of increasing it to $15.


It just became $11 in 2017 and that's only for non-service workers. Tipped workers still only make $3.75 and STILL have to pay taxes as if they were fully compensated. Tipping needs to go.


I have literally worked putting paper into boxes for $13/hour. Granted that was decent money, but it definitely made me a lot more loyal and willing to look the other way when the company needed a favor.


> The business model can't afford employee overhead at even poverty salary levels.

And on 1099 too. You've managed to play so much financial hop scotch that you've gotten out of paying FICA taxes and labor premiums, and you still can't sustain your business?

Just wow.


Did you read the article? A big part of their financial problems was that the virtual assistants were full employees, not 1099/contractors.


Yeah it's all "omg full time employees" than you read $15 an hour ... oh yeah that's not that much of a cost there.

I don't care how many bad charts they put up, their employee costs were pretty low either way I think. They just couldn't float the boat through a storm fundamentally.


And why full time? Why not part time? Were they paying out benefits?


That wouldn't be "poverty" in the rural South and Midwest, but one does wonder how much recruiting Zirtual would have done in those regions...


$11-12/hr is poverty everywhere in the US.


$12/hr is about $24k/yr, which appears to be double the poverty level for one person: https://aspe.hhs.gov/poverty-guidelines

Not saying $24k is a lot of money, just pointing out how low the poverty line actually is in government regulations.


I don’t think you realize how cheap most of the US is. If you get 40 hours a week, that’s $2,100 per month. You can rent a 2BR in Des Moines for $700 per month; split that with a roommate and your rent is $350. That probably leaves about $1,300-1,400 which is totally doable for a single person. (I spent less than that after rent while I was in law school, and I went out all the time, etc.)


At some point an adult doesn't want a roommate.


Usually the adult exchanges a roommate for a spouse, who also works to help pay the rent.


> Usually the adult exchanges a roommate for a spouse, who also works to help pay the rent.

and then, a child comes along.


And you can have a kid in a 2BR and its not “poverty.”


Is that how it usually works? That's not what my wife says... oh.


When I got my first job after I got my CS degree in 2007, my rent was under $400 without a roommate and my base pay was about $18/hr. I thought that was pretty good, because it was a real hourly rate, with a significant bonus for overtime.


Well at some point an adult has to stop making entry level wages at a startup as well.


Then you need to go to the ER and suddenly you owe $25,000. Oops.


Austin may be skewing your perspective due to the recent run up in rent, I know more than one person who lives on $11/hr. Most don't live on the coasts or in a major city though! Housing is really cheap in some parts of the US, though it isn't a great life to earn that little after getting a college degree.


Uggh, these kinds of stories send me into a rage. Here’s someone who evidently knew little about technology, Silicon Valley, or running a business, and yet, she had access to incubators, co-founders, and business-starting capital that many of us (who are actually competent) only dream of. So jealous! More evidence that life is not fair and it’s all about connections and schmoozing.


>> that life is not fair

Yes, this shouldn't be a surprise.

>> it’s all about connections

Getting anything done requires the help of others. That's how society works. The best way to get what you want is to help others get what they want. Focus on the people and you will be 100x better equipped to deal with anything than any amount of technical or operational knowledge.


> Focus on the people and you will be 100x better equipped to deal with anything than any amount of technical or operational knowledge.

this is only true if what you're doing isn't innovation, but just making business.


What is "innovation"? You need people to get things done even if you're doing research on new tech, unless you're Tony Stark inventing fusion reactors in a cave.


And that forgets that Tony Stark came from a wealthy family and inherited his wealth and made most of his money off of taxpayers through defense contractors. We only like him because he finally started to do something other than starlets or for himself.


Just proving that whoever is the best bullshit artist can raise money. Look at theranos and 99% of "blockchain" vc funded startups.


Are we somehow surprised that investing, an inherently human and social endeavour, is dominated by people who are good social operators?


It is not surprise being expressed here, but disappointment.


We are social animals, as much as you can be technically competent it's incredibly difficult to build whole products and companies just based on that. Connections are another resource for a company to thrive, contact with the right people at the right time is considered luck but you can work to increase those chances.

It's not fair if your worldview is limited to a deep technical one but that's not how the world works, we need other people to support, help and guide us. We are closer to a hivemind in that aspect as we build on our collective knowledge.


Yeah i'm a bit lost on that. They didn't hire a CFO.... where where folks funding this? They should have been telling them "Uh naw, CFO important, get one!"


> More evidence that life is not fair and it’s all about connections and schmoozing.

What evidence would you be looking for to sustain that conclusion and never bring it up again?


...discovered that Keating’s payroll projections assumed two pay periods a month for a total of 24 pay periods a year. In reality, since Zirtual was on a two-week pay cycle, the company had 26 pay periods a year.

ZOMG. Who is this "Ryan Keating", a high school intern?


For whatever reason, instead of counting the extra pay periods in the specific months he raised the per-pay-period cost to compensate. An odd way to do it, but there we are.

There's also a "his side of the story": http://fortune.com/2015/08/13/zirtuals-outsourced-cfo-gives-...


He's very polite, and really that is admirable after getting thrown under this particular bus, but nothing he said here or there really explains why he would have done this. The CEO needed projections she could use without deep analysis on her part. Instead he gave her some riddles in spreadsheet form. There are probably some SV CEOs who enjoy that sort of thing...


What’s a riddle about that? You would calculate a monthly budget and 10 months out of the year your salary budget would be higher based on 2 pay periods a year and 2 months it would be lower. Most other expenses besides salary would be monthly. You would accrue a monthly liability for salaries even though you wouldn’t pay them out evenly. On the months with 3 pay periods, you would deduct from your “salary account”.

I’m probably using the words wrong, but I would understand the concept from two courses of accounting I took over 20 years ago. What business does anyone have being a CEO that doesn’t understand simple accounting?


That seems like a sort of shorthand to simplify long-term thinking, for a firm that has a long term. This firm lasted four more months. This CEO needed to understand how much her workforce compensation decisions would cost. The straightforward way to communicate that would have been to indicate what would be paid on each particular payday. This was... something else.

There were probably a number of other problems here. The CEO should have known of this particular problem, even without help from the interim CFO. Still, in this area he didn't really help as much as he could have.


The most basic part of a CFO's job would be to make sure the CEO understands that which he apparently did not do.


I think a CEO should understand basic accounting. It’s part of Sarbanes Oxley that that senior executives take individual responsibility for the accuracy and completeness of corporate financial reports. If the company ever did go public, she would be responsible for making sure reports are accurate.

For instance, as a private citizen, I would be responsible for making sure I pay the appropriate amount of taxes even if I had an accountant if I was a self employed consultant. If I get audited, my neck is on the line.

Ignorance is the reason that most professional football players go broke shortly after they retire and they depend on “professionals”.


Yes. But shame on her for trusting the CFO firm they paid for this information? The whole point of hiring a CFO or paying a contractor to do it is so that you don't have to do everything yourself as the CEO. It would be unreasonable to expect every CEO to know the financial details down to a difference in 2 pay periods a year.

But that brings us to the real issue, which is that they were obviously operating way too tight if a difference of 2 pay periods a year was enough to bankrupt them.


Unreasonable? Most of the company's expenses are employees, and a lot of this stuff is common sense. It's hardly advanced math.

No way were they bankrupted just because of 2 pay periods. There is more to the story.


Yeah this is exactly the same methodology I used when calculating my expenses. Three columns: cost, number of periods, averaged cost per month (as my mortgage payments would be monthly).

You might need access to the spreadsheet to see where the calculations came from but it's only high school maths.


I am surprised that (if) he is allowed to disclose this type of detail about a client to the press...


Hardly a justification though. "Yes, I provided projections for only 24 out of 26 pay periods, but each of them had some buffer so you should have been good."


I read that as each pay period being scaled by 26/24, which means the yearly total cost is the same, but the monthly/weekly cashflow is going to be off every now and then.


"Scaling" might have made sense if the average payroll were fairly constant. However, we're talking about a startup that could only adjust to demand by hiring and firing. If they served twice as many customers, they would have to hire twice as many ZAs. Thus the payroll would vary wildly from one pay cycle to the next, leave alone one month to the next. There is no purpose relevant to this firm's situation that could have been served by this particular simplification.

A startup with these particular hiring needs might have been better served to chop the year into 26 periods than to bother thinking about months... a part-time CFO is unlikely to suggest that.


That's how I read it too, which while a bit obtuse, I can see being useful if all you are looking for is some big number that helps you with _yearly_ cost projections (but does nothing for you if your costs increase _right this minute_).


No it makes sense to smooth the numbers so your monthly costs are not wildly skewed by whether there are two or three pay periods in that particular month. Other costs will be monthly.


Except that your expenses ARE wildly skewed by a 50% increase in labor some months.

Maybe smooth is fine for modeling, but when making decisions of when to spend or not spend, you need to know when you will have money. It could be that delaying the transition to full-time by 1-2 months would have made it all work


What was wild to me was watching the founder being interviewed, getting praise for a potential billion dollar valuation then going out of business the next week.

https://thisweekinstartups.com/maren-kate-donovan-zirtual/


LOL I couldn’t make it past a minute without throwing up. So much gushing and hero worship, especially considering what we now know. Shades of Theranos there.


"...the next Unicorn..."

LOL


  Donovan “dug into the numbers herself” and discovered that Keating’s payroll projections assumed two pay
 periods a month for a total of 24 pay periods a year. In reality, since Zirtual was on a two-week pay cycle, the company had 26 pay periods a year.
Umm, that's pretty dang fundamental. How the heck do the people keeping the books not know the payroll schedule !?!


This, plus Keating's Fortune rebuttal, is fascinating stuff. Fundamentally, she was the CEO so the buck stops with her; if the company folds because she didn't understand the financials or the practical operations of the business, then the blame is on her. But, you also have to wonder why Keating didn't offer any guidance about the iceberg at which she was steering the ship.

It almost sounds like he wrote up some kind of simplified model, not something meant as an actual operating document. She wanted to convert people to employee status and took the doc as justification, rather than understanding the actual data presented. Keating was not employed as CFO or similar role, so apparently decided he was under no real obligation to provide further guidance.

I think what's most interesting about this is that I recall doing case studies on basics like this 20 years ago as an undergrad; because it's just that basic. One is left wondering if there's a deeper story that would make these seemingly obvious mistakes (IE: there is no way they could afford to make those people employees) less obvious. Or, was it just hubris that they could keep growing the business / an investor would come along and rescue them.


I imagine that convincing a CEO of important details of finance when she won't even hire someone as a CFO goes about as well as convincing the CEO of important details of technology when they don't think it's worth hiring a CTO.


Perhaps I'm misunderstanding, but isn't the outsourced CFO company's entire business model based on providing services to CEOs who "won't even hire a CFO"? If so, it would be extremely odd for them to scoff about how it's hard to explain finance stuff to their core target customers.


I don't know if you ever worked in large companies that outsource critical pieces of their company to contractors. I have routinely seen contracting companies who were ostensibly there to provide service X, but in practice they were there to make the management think that they were making all the right choices


So many of these postmortems end in "we should have hired an expert". I don't really understand what drives people to not hire experts.


Experts are expensive. And there's hubris or what I jokingly like to call the maxim of management myopia: "Anything I don't understand must be easy."


> And there's hubris or what I jokingly like to call the maxim of management myopia: "Anything I don't understand must be easy."

So much this.

I know of a case where a company hired a junior java dev for a desktop project and after his second week on the job the manager posted a ticket instructing the newbie to implement a component to receive a video stream from a drone, stitch the video stream into a 3D model, and render the 3D model in real time. "How many days do you need to finish this?"


This is a manager who doesn't understand what they are asking or the complexity involved. I suppose the appropriate response should be that time to completion depends on the accuracy needed of the final 3D model as it's going to take a few months minimum to learn entirely different skill sets, oh and you'll need to include the hardware and compute costs for the storage and rendering time. Also you'll need either a sim card or a physical base station for the drone with an internet link. I..uh...may like trying to solve problems.


"If you think experts are expensive, you should see how much amateurs cost!" or something to that effect.


This needs a t-shirt


* Money.

* Not knowing the difference between ignorance and knowledge.

Most probably both at the same time.


>Not knowing the difference between ignorance and knowledge.

Like the Dunning-Kruger Effect?

https://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect


Hindsight is 20/20 though, people may not realize that the people handling important things aren’t actual experts until the bottom falls out of whatever function the purported expert was managing.

In such a position I would slightly prefer to say “I should have hired an expert” and not “I was not keen enough to know that the person I hired was not actually an expert”


It's a matter of timing. You don't hire a CFO on day 1 b/c you don't need one. On day 2 you start to balance the needs vs the expense. Sometimes you take a risk (intentional or not) a delay a little more than you should. Especially when you need experts in 2 areas and can only afford 1.

Sometimes, we misjudge that risk or get unlucky.


I think your statement is rhetorical, but it is obviously the compensation that experts require along with short term thinking.


You don't know what you don't know


That phrase might just be a fancier version of "We wish we'd known then what we know now."


They didn't need an "expert", just someone who can do basic grade school arithmetic.


You can’t quit paying an employee if you lose the client he’s working for; you have to keep on paying his wages and other expenses even when you no longer have revenues coming in to balance it.

This isn't quite true if said employee is not salaried. You can still have an hourly employee and then cut their hours if there is no work for them. Employees may not like it, but businesses do this all the time. There are some minimum hours according to each states wage laws, however.


I worked for a startup that hit hard times, as a salaried employee. They cut us all to 1/2 paychecks for months, then down to 1/4 paychecks. So it’s definitely possible. Probably nobody ended up below minimum wage so legal too? Some people left and others accepted IOUs.


Why would you continue working there for 1/2 cut pay?


The founders were genuinely good people and I was young enough to risk that we’d be made whole. Also the dot com bubble was just recently obliterated so I was lucky to have any job at all.


the minimum for a salary is currently $913/wk (~$47k/yr).. otherwise they have to pay for overtime.

From 2004-2016 it was only $455/wk though (~$23k/yr).


The minimum depends on the justifying job function (exemption is based on past and job function), and states like California often have much higher minimums than the federal minimum.


Seems like valid issues noted in the article they point out but they really didn't say why revenues declined so much... sure they made choices that made that harder to deal with but the cause of "that" (the revenue decline) isn't really addressed.


As the article points out, the company's turnover rate surged and the quality of employees went down.

What the article does not address seems to be the changes to the incentive structure after the transition. Which I believe contribute to the failure to an extent.


Yeah the article seems to reference what might have been a bigger issue... but rather just blames making people full time and some other dork ups.

I think this was a larger systematic thing.


Thought of the day: in the same way that Uber succeeds by exploiting the depreciation of its "driver-partners" cars, Zirtual failed because people value a larger paycheck but no benefits over a pay package with benefits but a smaller cash component, even when the package costs the company more to provide and (at least on paper) has more value.


> Zirtual failed because people value a larger paycheck but no benefits over a pay package with benefits but a smaller cash component, even when the package costs the company more to provide and (at least on paper) has more value.

One thing that's not mentioned about the gig economy is that contractors on 1099 don't have taxes withheld from their paychecks, so they get the temporary impression that they're getting paid more than their actual post tax amount. They're usually in for an unpleasant surprise when taxes are due.


Cash definitely matters more up to a certain point, since you can't replace essential needs (rent, food) with benefits. Plus at the rate they were paying (~$11/hr) employees would have likely been eligible for various federal and state programs anyways.


>people value a larger paycheck but no benefits over a pay package with benefits but a smaller cash component

How did you arrive at this conclusion?


The increased churn that Zirtual faced after moving to employees, keeping total cost around the same and making up for it the difference by reducing pay.


That doesn't really answer my question. What shows that these employees preferred $15 over $12 with presumably employer subsidized health care (they wouldn't have it on contract, I assure you), 401k, and other standard benefits?


The thing that "showed" that they valued the wages more was the fact that they quit over it, and that it was more difficult to hire people.

That's literally what the article says. That people started quiting because of it.


You can't then make the assumption that they prefer a higher wage over benefits. You can merely take away that they started quitting over having _their wages cut_.


No, the article says they had great difficulty hiring new people at the lower wage (plus benefits), which they did not at the higher wage (without benefits).


Just read the article (and the Fortune article which it links to). It will save all of us a lot of time.


A lot of startups don’t have 401K matching.


Mods: Can you please update the title? It should be "The 3 Mistakes That Crushed Zirtual Overnight"


If the original title begins with a number or number + gratuitous adjective, we'd appreciate it if you'd crop it. E.g. translate "10 Ways To Do X" to "How To Do X," and "14 Amazing Ys" to "Ys." Exception: when the number is meaningful, e.g. "The 5 Platonic Solids."


The edited title is arguably more clickbaity in that it replaces the actual company name with “this startup”. I also think the exception applies here because the number is more meaningful, not just an “X things that Y” list.


I strongly second editing at least the "this startup" part; it's plain clickbait.


If they didn’t have work for all the employees for all the hours, couldn’t they have reduced the employee count? And only bring full time contractors that had full cycles in the past? And work with a mix of full timers and contractors to take care of variable load?

It seems like the actual reason they had to go down was because they didn’t have enough customers as opposed to the 20% extra employee costs. Plus every where in the industry the hourly rate of contractors is higher than the the employees because of the benefits. Was the CEO a high schooler?


Good question. Maybe they buried their heads in the sand until they went broke and had to fire everyone. Rather than make a tough decision earlier.

Another theory if they cut staff they'd have to cut clients and therefore revenue would take a hit which would be bad for their image raising most more money. Might as well go "all in" hope to raise some more. If you go bust start another startup.


This whole story doesn’t hold water. It sounds much more like what happens when you have pushed your funding round right to the limit and then suddenly it evaporates.


> You can’t quit paying an employee if you lose the client he’s working for

Yeah you can. It's called firing them under right-to-work.


> It's called firing them under right-to-work.

You probably mean "at-will employment." "Right to work" is related to union membership.

Each of these concepts is applicable in some U.S. states.


I read this and then the comments. A fundamental take away of many is that switching from contractors to employees was wrong. I think it was right, but the way they did it was wrong. They could have done the shift slower, planned better, and not have had as many problems.

The gig economy done right is a great idea. Right being fair to both the contractor and the employer. Problem is, I almost never see it done right. Instead, I see gig economy workers being taken advantage of left and right.

Let's take the middle of the pay, $13 per hour. For comparison, median pay for plumbers in 2017 was $20.17 per hour[1]. Figure 2080 paid hours in a year for a contractor for our purposes (that's no vacation). That's $27,040 per year gross. Now let's adjust that to reality (i.e., net spendable income). For ease, I'll round to the nearest whole dollar.

First, taxes. $27,040 puts the person squarely in the 12% federal income tax bracket. Remember we are assuming fresh out of college, not married. Social security self-employment tax was 12.4% is 2017. Medicare self-employment tax was 2.9% in 2017. Let's assume they live in a state that levies income tax (excludes WA, NV, WY, SD, TX, AK, FL), but they live in PA, one of the lowest tax rates at 3.07% in 2018. Let's also assume no deductions for ease (unrealistic, but I am not a tax accountant). So that's a total tax levy of 12%+12.4%+2.9%+3.07%=30.37%, bringing us down to $18,828.

Second, healthcare. You can't say that this is for people with insured spouses, so healthcare is hand-waived. Instead, healthcare.gov defines affordable health care at 9.56% of salary. Typically an employer pays two-thirds the cost of the health care plan, so let's say 28.68% and round up to 30% because insurance companies charge more for individuals (could easily be more than ~2% extra, but lets go with that). That's 30% of the initial gross, not our after taxes figure, so a cost of $8112, bringing us down to $10,715. That's $206 a week, or $893 a month, to cover rent, food, transportation, internet costs (digital remote worker), and clothing.

To put that into perspective, it's $1425 below the 2018 Federal Poverty Level for an individual: $12,140. Some agencies compare the FPL to before taxes, some after taxes, but it's still almost $1500 below the FPL.

Another thing is that gig economy workers are often asked to shoulder costs that would have been the responsibility of an employer, forcing some gig workers to work crazy hours or in crazy conditions[2]. In Zirtual's case, gig workers could have been paying for their computers, internet, and any software when they were contractors.

When you are a contractor you need to be making 160% of what you would if you were an employee, to cover insurance, increased taxes, and expenditures that now come out of your pocket. You also shouldn't be charging at a dollar rate, as it's an accounting nightmare and lends itself to some clients (or gig economy startups) nickel & diming you or micromanaging your time.

Instead, charge a flat weekly fee based on assuming each week you'll work 36 hours on client work, 10+ hours on business marketing and administration, and that you'll take a two week vacation. So let's say as a fresh college grad I want to make the equivalent of if I was an employee making $45k per year. That means I need to gross $72k. Dividing that by 2000 hours to allow for two weeks vacation, I need to make $36 per hour. Remember that you have to assume you are only going to get 36 billed hours, so multiply that by 40/36, which handily works out to $40 per hour (I swear I did not plan that). Now multiply that by 40 to get a rate of $1600 per week. That's not contributing anything to your retirement or emergency fund (yes, you should start right out of college - I didn't and regret it mightily). Especially if you are a contractor, you must have a enough in an emergency fund to last you 2 months without pay. So add %10 to your emergency fund, taking it to a weekly charged rate of $1760, until your emergency fund is 2 months. Put any windfalls (tax refunds, gift checks, etc.) into that emergency fund until it is up to two months of pay, and hopefully it will be there by the end of a year. Two years is more realistic.

If you are a more experienced contractor, things get wonky at the $128k level, because social security not longer applies and retirement stuff is different. If you are a contractor on the side (make sure your employer's IPR agreement allows this, or get a explicit written statement allowing it), you can probably charge 120-140% of what you want to make from your contracting work.

Make sure your employer's work comes first though, or you will find yourself out of a job. That also assumes you work for 'Big Corp', not a startup at the ground floor. If you work for a startup and you have non-trivial equity, you are working for yourself and should be pouring everything into the startup.

The cost of living comfortably relative to the average income in the U.S. seems to me to be higher now than it's ever been in my lifetime (50 years). One estimate in 2012 says it took $150k to live comfortably in the U.S. then, and it seems to have gotten worse since[3].

I am not an accountant, a lawyer, a doctor, and you should not construe any of the above as legal, accounting, or medical advice.

[1] https://www.payscale.com/research/US/Job=Plumber/Hourly_Rate

[2] https://philadelphiapartisan.com/2018/05/17/the-perilous-gig...

[3] https://www.businessinsider.com/the-basic-annual-income-ever...




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