Most executives are paid like this:
This creates complexity because most end up at a large monthly deficit even though you have a large yearly surplus.
If you’re an executive, you need to carefully plan around this
Here’s exactly how to do that:
One of the most common financial challenges I see with executives isn’t about how much you earn, it’s how you earn it.
You have a salary, but in many cases, it’s not the primary driver of your total compensation.
Stock grants, performance bonuses, RSUs, and deferred comp often make up the bulk of an executive’s income.
These come in big chunks—quarterly, annually, or even less frequently.
Meanwhile, monthly expenses (mortgage, school tuition, living costs, etc.) still exist
The result?
A mismatch between lifestyle and liquidity.
Many executives find themselves in a monthly cash flow deficit, even though they’re in the top 1% of earners.
Here’s how to fix it.
You can’t solve what you don’t see.
Many executives don’t have a clear handle on monthly inflows and outflows. Good financial planning always starts with understanding what you spend monthly and yearly then comparing that to what you earn.
Even though your income is lumpy and hard to predict, you need a baseline. Start by:
Only from here, can you start to plan.
Let’s say you take home $10,000 a month, but your expenses are $25,000.
You now know that you are at a:
This means you need to carve out funds for this.
Now that you know your deficit, you need to plan for it.
Let’s say your bonus and all your RSUs vest in Q1 - you will need to set aside funds from the whole year for the time of year.
This means using your RSUs and bonus to supplement the shortfall. You would need to carve out $180,000 to be used throughout the year. This could mean putting it in a HYSA then automating $15,000 a month back to yourself.
Find a strategy that works for you.
If you have quarterly RSUs or bonuses, then you can do this same thing, but quarterly and carve out $45,000 for the next quarters shortfall.
This is so important, way too many do not do this then leverage debt or get behind on quarterly taxes.
Most executives paid this way end up underwithholding on their bonuses and RSUs.
This means that you need to pay quarterly tax payments to hit safe harbor (90% of current year liability or 110% of prior year liability).
You need to plan for this when you have liquidity so you can make these payments and avoid penalties. I’ve seen way too many executives throwing away $5,000-$15,000 in underpayment penalties.
Once you know your yearly surplus and goals, you can now plan with your surplus.
And you need to plan with it when the liquidity is there.
This means:
Time this planning for when you get bonuses or can sell RSUs.
One common objective you will hear from executives is that they cannot sell their company stock when it vests due to blackout periods. However, you can setup a 10b51 plan to automatically sell, even in blackout periods.
It is basically an agreement to sell in advance so you are not doing it with insider information.
If you know you are going to sell $50,000 a quarter, you can set this up to ensure this happens so you can plan for the next quarter.
Not enough people are using 10b51 plans today, they just assume they cannot sell and then you have to wait till the next open period, which means you could risk a lot of price movements in the stock.
A lot of executives are scared to sell their equity comp. They feel like they need it so they can have exposure to the stock going up. Most believe in their company and want to take part in the growth.
Here’s the thing: all your future RSUs already granted to you, have that price appreciation built in. If the stock goes up, you will get to benefit from that as is.
Don’t be afraid to sell the stock to fund your life or to diversify and invest elsewhere.
You don’t want to become too concentrated.
Financial Advisor