Tom Taulli - The Personal Finance Guide for Tech Professionals: Building, Protecting, and Transferring Your Wealth

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As I write this Introduction, the stock market has suffered a major decline. True, this has come after a long bull run. But it certainly does not make investors feel any better. Bear markets are awful.

They are also a wake-up call. They highlight the importance of diversification. They also show the importance of taking a holistic approach to your personal finances. This means taking into account insurance, tax planning, and estate planning.

And this is what my book is about. Its not just about the various investments you can put your money in. The goal is to provide a comprehensive approach.

The issues for tech professionals can be particularly complex. The bear market, for example, has hit tech stocks the hardest. There are also the issues of dealing with equity compensation, like stock options. There is the risk of having too much of your wealth in shares of a few companies. When working with startups, the planning for benefits, such as for health insurance, can be challenging.

Now this is not to make you depressed! The tech world is exciting. There are many secular changes that will propel growth. But it is still important to build a good financial foundation. This will help you get through the occasional downturns.

OK then, so what about my background? Most of my career has been in the tech industry, since the early 1990s. I founded several companies and raised venture capital. Along the way, I got firsthand experience with unique personal finance issues and situations.

To better understand these, I took a tax course and then got my license as an Enrolled Agent. This is the highest designation of the IRS (Internal Revenue Service) and allows me to represent people before the agency.

In 2002, I started my own tax and financial advisory firm, called PathwayTax.com . I have helped many tech clients. A big part of this has been with tax preparation and planning. But I have also helped people resolve their tax problems, such as with back taxes and unfiled returns.

Ive also done quite a bit of writing on financial and tax matters. Ive written for publications like Forbes, Barrons, Kiplinger, Motley Fool, and BusinessWeek.

So before starting with this book, I want to provide a disclaimer. Keep in mind that I will not be providing personalized legal, accounting, or other professional services or advice. This course is meant to be educational in nature. My recommendation is for you to seek out qualified professionals when it comes to doing things like putting together a financial plan or preparing your tax returns. This will definitely be worth the money.

So why write this book? The main reason is that I have worked with many tech clients with their equity compensation. This has meant handling complex financial and tax issues. I also have clients who have come to me after they made mistakes with their tax returns and received notices from the IRS. Thus, the goal of this book is to provide the reader with a basic foundation of the essential personal finance issues and strategies for tech employees.

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How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.

Robert Allen, finance author

You can boil investments into two flavors: debt and equity. Debt is where you loan money to earn interest. Then after a period of time, you will get your initial loan amount back.

Regardless, you will own a fraction of the company and will benefit if the stock price increases or there is a dividend paid. History has shown that this is one of the best investments for building wealth.

True, these examples are simplistic. But when looking at investments, its a good idea to understand the fundamentals. There can be many extraneous details that can make it much more difficult to analyze the potential returns and risks.

In this chapter, well take a look at the two main ways to invest that is, with stocks and bonds.