Financial Management Tips for Women in Tech Part 1: Maximizing Your Earnings Potential

This article is part one of a two-part series focused on helping women in tech maximize their earnings and improve financial wellbeing.

Women are increasingly controlling a larger share of wealth in the United States. According to a recent McKinsey report, an unprecedented amount of money—roughly $30 trillion—will shift into the hands of U.S. women in the coming years.

For women in tech, this shift, coupled with above-average earnings potential, presents a tremendous opportunity—especially if financial independence is your goal. Indeed, the tech industry has one of the smallest gender pay gaps in the U.S. A new report from Payscale found that on average, women in the tech space make 90 cents for every dollar the average man makes.

As your income and net worth grow, it’s important to understand the basics of personal financial management. By making smart decisions with your money, you’ll be well positioned one day to make work optional and live life on your terms.

4 Tips to Help Women in Tech Maximize Your Earnings Potential

For women in tech, one way to maximize your earnings potential is by working hard. In other words, increase your value, and you’ll be in a better position to ask for more money. The other way is to make sure your money works hard for you.

Tip #1: Know Your Worth

If you’ve been with the same employer your entire career, you may not be aware of your current market value. And if you’re working for a startup, you may have traded a higher paycheck for a potential future payout. This is fine, so long as you’re minimizing potential opportunity costs.

Your market value is how much money you should (or could) be earning based on your experience, skills and credentials, job title, and location. Triplebyte’s Salary Tool and AngelList can be helpful online references for women in the tech industry to estimate your value. In addition, you can search H1B visa filings for salary information.

Another way to assess your worth is to gather compensation data from your colleagues. While this can be awkward, many states—including California—have laws in place that prohibit employers from punishing employees for discussing salaries in the workplace. If you’re friends with other women in tech, you may also want to broach the topic with them.

You may not be in a position to change jobs right now. However, you should always know your current worth, so you’re well prepared for future compensation negotiations.

Tip #2: Hone Your Negotiation Skills

According to researchers Linda Babcock and Lara Laschever, authors of the book Women Don’t Ask: Negotiation and the Gender Divide, women fail to maximize their earnings potential simply because they don’t ask for more money. Unfortunately, the potential downside of not negotiating your salary can be substantial.

For instance, the authors found that not negotiating a first salary can cost an individual more than $500,000 by age 60. And men are four times more likely than women to negotiate a first salary. Meanwhile, women who consistently negotiate their salary increases earn at least $1 million more during their careers than women who don’t.

These findings should make it clear how important it is not only to know your worth, but also ask for the compensation you deserve. If your negotiation skills are shaky, there are plenty of resources that can help you boost your confidence.

Tip #3: Understand Your Compensation Package

For women in tech, compensation may include a combination of base salary, bonus, company equity, and stock options. Having equity in a company—especially a startup—can potentially be very lucrative. However, there are also risks associated with equity and stock options that may keep you from maximizing your compensation.

For example, there’s no guarantee a startup’s equity will be worth anything when you cash it in. On the other hand, you may indeed earn a nice payday following an IPO or acquisition. Still, exponential equity growth—otherwise known as a “unicorn” scenario—is rare.

In addition, it’s important to remember that options alone don’t give you ownership in a company. They simply give you the right to purchase company stock. That means you must have enough cash on hand to exercise your options—and pay the associated capital gains taxes.

Meanwhile, options are only valuable if the exercise price is less than the stock’s market value. Like equity, their value to you depends on a variety of factors outside of your control.

Lastly, be aware of your vesting schedule. Vesting gives you the full right to your equity shares or to exercise your options. If you decide to leave your job before your shares or options vest, this part of your compensation package may ultimately be worthless to you.

#4: Lean into the Power of Compounding

Finally, as you accumulate wealth, make sure you’re properly invested in the market, so your assets grow over time. Unfortunately, many women lack confidence in their investing acumen. Yet recent research from Fidelity shows that more women than ever are taking a seat at the investing table. Moreover, when women invest, they tend to see better results than their male counterparts.

Investing is one of the most effective ways to maximize your earnings potential over time. Indeed, compound interest can be a powerful force in positive markets. Even at a modest rate of return, an initial investment can double over a relatively short period.

An easy way to start investing is to take advantage of your employer’s retirement plan, if available. You can also open an individual retirement account (IRA) to invest and defer the associated taxes until you need to access your funds.

Remember: You don’t have to be an investing expert to take advantage of the power of compounding. However, you may want to consider working with a financial advisor if taking a DIY approach keeps you from getting into the market.

Next: How Women in Tech Can Improve Financial Wellbeing

Maximizing your potential earnings is essential for accumulating wealth and increasing your net worth over time. But your financial wellbeing isn’t dependent on earnings alone. In Part 2 of our blog series, we’ll share our tips for how women in tech can best manage their finances to achieve financial independence.

In the meantime, SageMint Wealth has a passion for supporting, women, the LGBTQ+ community, and individuals in the technology space.  If you’d like to speak with a member of our team about developing a plan for your finances, please contact us. We’d love to hear from you.