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Comment by WestCoastJustin | Hacker News Reader

Why is compensation #1 though? There is a threshold where you have enough money and it's easier to work with people you know and like. So, what do they need that extra money for? As I mentioned elsewhere housing is currently the #1 issues I see here in Canada that people are focused on. If you are a front line person, making $15 at a restaurant, plus renting where housing costs $1m+, you are probably looking for options (vs someone who owns a house and is making $150/hour as a dev).

This is a leading question to expand on why compensation matters. Personally, I fall into the group where I could probably make more but really like my group. So, there is risk with leaving (bad boss, toxic culture, too much work, etc) vs making more.

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Do you know anyone where that threshold has been reached? Anyone with a family? Given the way inflation is going, I know maybe one person, and they're single with their mortgage paid off.

I recently just left my job for another because of inflation, if the price of things go up so should my salary. The value of my work did not get cheaper!

Not tying my job to expensive urban markets would help!

But I'm hesitant to describe my salary needs in terms of my household costs. I want to get paid by the value I bring first and foremost. And, similarly, what the market clearing rate for an engineer with my capabilities is. Not "market rate" unless I'm truly a median engineer, especially since companies tend to be underinformed about market rates.

If you're invested in a diversified portfolio then inflation shouldn't really make a big difference. So I think this is really some variation of FIRE 4% ... If you can live off 4% of your savings per year then the rest of it is just do you want to work more so you can buy more stuff ;)

I'm sort of in the same position as the parent. I've crossed the threshold, a little more money or a little less money makes no difference to me. I don't buy stuff I don't need. The amount of money that'll completely change my life is like x10 so likely won't happen (so moving from the "have enough" to the "mildly rich" category) and really I'm not sure that would mean anything to me anyways...

I want work that I can enjoy, with good people, that challenges me, and pretty much all the pay in the world won't make me go work for some sucky place (ofcourse everyone has their price, but my price would be higher than what they'd be willing to pay).

Personally, I’m still building for retirement. I have way more than enough to live every month, but way less than I’ll need to retire and be able to spend my early retirement (healthiest remaining) years traveling and still be confident that my spouse (with longevity in her family) will be well taken care of financially if she lives as long as the rest of her family tends to.

Retirement savings (and to a lesser extent because the numbers are way smaller, college savings) drive the need to accumulate 25x your annual expenses.

Yes. Even if I had my every theoretical need and want covered by my salary, it still makes sense to go for more, because it just goes right into savings and reduces my retirement age by X.

I have a sign "The Goal is to not have to work" right above my monitor in my home office. Every career/learning/spending/saving decision I make is in furtherance of this goal.

The threshold where you have enough has been driven up by crazy rents and house prices. Personally, I want my house paid off before I'm 40, so I shoot for maximum earnings and remote work that lets me live in a cheaper place. That ratio makes my ambition very attainable.

Related is the sustainability of work: I don't want to need high earnings past 40. I want to retire into a second career I'll find more fulfilling but which might pay dramatically less. Higher pay now is the only way I can achieve this.

not a bad idea!

Why would you pay off your house when you can keep the cash in an investment account making > 5% APR vs. the house loan which presumably is in the low 3s.

House prices are increasing by >5% a year in a lot of the world.

This doesn't change the equation.

Go buy a house that will increase by >5%/year, but then don't pay it off any sooner than you have to.

Make the minimum payments, and invest in something that will return a stable 5%+ with your remaining income.

Just because the house itself increases in value, doesn't mean you should pay down the ~3% interest rate loan any faster than you have to.

And really, once you've built enough via this strategy, you should either invest in a more expensive house or buy a house to rent afterward.

This is all the consequence of inflation and easy money/loans, but the smart money move is to never pay off low interest rate loans. This is particularly true when inflation (acknowledged anyway) is 6%.

Using the 6% number, you're actually gaining (on average) 3% on a 3% loan just by using the cash.

I'm not sure exactly how it affects the calculations, but if the house is paid off, you can use the money that would have gone towards mortgage payments towards investments though. So instead of $1000/mo towards mortgage and $1000/mo towards investments, you could do $2000/mo towards investments. It's probably a smaller total return than your method, but it's way less leveraged.

Do the exercise on a spreadsheet. One row per year to make things simple.

Make 3 columns, "mortgage paid," "investment", "no-mortgage". Pretend the house is $100k. With the mortgage you get to keep that money and invest it, so first row in "investment:" should be $100k. Put $0 in the "no-mortgage" column, put $-421 * 12 in the "mortgage paid" column. I got that number from a mortgage calculator, assuming $100k loan and 3% interest over 30 years.

Then in row 2, "mortgage paid" cell should be previous cell - $421 * 12. You will keep paying this for 30 years.

"investment cell" should be previous cell * 1.05. We assume the investment return is 5% over long term.

The no-mortgage column stays 0. You spent the $100k to pay for the house, so it's gone right off the bat.

Repeat this for 30 rows (years). Then at the end look at the difference between investment vs. mortgage paid columns.

And then get back to me and tell me if you still think that is a "smaller total return" :-)

It’s always better to lever up if returns are greater than interest or inflation is higher than interest. And residential mortgages are the cheapest source of leverage available.

Cheapest and most easily attainable.

Canadian home prices have risen 70% or by $300,000 since 2015. There was almost a 30% jump just last year.

Source: https://www.straight.com/news/canadian-home-prices-have-rise...

What investment can reliably get > 5% APR with low risk?

Over the timespan comparable to a mortgage? Broad-based equity funds.

The worst ever 20-year return for S&P 500 was +6.4% per year for the 240 month period ending in May 1979.

https://www.thebalance.com/rolling-index-returns-4061795

*assuming conditions over the next 150 years mirror those during the sudden rise of a single global superpower with control over the world's reserve currency and a continent full of unexploited natural resources at its disposal

For that contingency, you are going to want to be forming lots of political allies with lots of guns.

I paid mine off years ago. I got the same thing then. "Name me one investment I can put this 100k into that will pay 1500 a month". That is closer to 15% per year...

Your actual return is only the interest portion of the payment, so that's an odd way to calculate it

I get what you are saying. It is fair. But my goal was to have no 'payment'. So it would need to generate enough to cover the whole thing. It was like getting a 1500 per month raise.

Not exactly what you're looking for, but in the US I series bonds are currently paying >7%. The biggest downside is you have to hold them for a year. The other issue is you're limited to buying $10k in a calendar year.

Currently paying. It is a variable interest rate, and it would behoove you to assume that if a treasury is paying 7%, then real inflation is much more. Hence the SP500 returning 30%.

Sure, but if you're looking for the lowest risk thing that's paying at least CPI inflation. A lot better than cash under the mattress (or a savings account for that matter...)

>keep the cash in an investment account making > 5% APR vs. the house loan which presumably is in the low 3s.

One is guaranteed, one is not. Markets are volatile. I lived through 2001 and 2008 as a working stiff, that shit can drop on a dime.

Right now, I have no debts. House and vehicle are paid off and I have an "oh shit" account that's pretty good. I can sit here as a hermit for at least a year or two, three if I really hunkered down and pinched pennies. It's a good feeling; one less thing to worry about.

Now if I put all that money into the market and shit hit the fan, not only would I not be willing to sell stocks due to their price plummeting, I would still have a mortgage and car payment. I'd be in this situation for 6 months to a year. Not a great situation.

Ensure your freedom / ability to live first, then invest heavily, IMO.

This is something you can hedge against, which is known as a sequence risk [0]. There are investment vehicles with built in volatility buffers designed to avoid this https://paradigmlife.net/blog/episode/the-volatility-buffer-....

That 3 years of cash on hand would be better off in some kind of investment and if you're worried, supported by a volatility buffer.

[0] https://www.investopedia.com/terms/s/sequence-risk.asp

This illustrates why rich people are rich, and have an easier time getting richer. Even if they don't have time or aptitude to learn about this kind of thing, they have family or paid professionals to guide them.

>> Why would you pay off your house when you can keep the cash in an investment...

I asked someone that in my mid 20's. He said "It's nice knowing I can support my family working at McDonalds if I have to." That stuck with me. Something fundamental changes in your life when you become debt-free.

> Something fundamental changes in your life when you become debt-free.

This to me is the only legitimate criticism, and it really boils down to risk-reward.

If you're holding cash for say a backup fund, great! That's good security and everyone should aspire to that. But also acknowledge that with 6% inflation, you're actually losing 6% on that backup fund.

Inflation is insipid. You _must_ take risk with your funds just to not lose the value of it.

> Inflation is insipid. You _must_ take risk with your funds just to not lose the value of it.

This certainly seems to be the case, but it's fustrating. I can think of no fundamental reason why it should be so. Other than speculators and govt policies backfiring to destroy the safety of alternative places to keep your money besides cash.

Couldn't agree more!

Then add to that the fact that you're taxed on `gains` for investment.

So buy an ounce of gold. 1 year later sell it for 6% more than you paid. Cool, beat inflation right?

Well, no because now you pay capital gains on something that isn't really worth more than when you bought it.

Inflation _is_ a tax...

> govt policies backfiring

Yeah sure, they're `backfiring`...

I was being a little generous, yes. I wonder if that's what is triggering people.

The stated goal of govt seems to be low (but positive) levels of inflation and high growth. The current situation with high inflation and low interest rates makes even tax-free govt bonds undesirable. And they will need to raise rates. So I'd say policies are backfiring, yes.

Yeah, I don't get the downvotes. It's worse that they won't reply why either. At least converse when you are in disagreement.

> The stated goal of govt seems to be low (but positive) levels of inflation and high growth.

Yes, and I disagree with that position too, but people are taught Keynesian economics, so even beginning to unfurl that mess is asking for a downvote storm.

The same people that will argue inflation is beneficial for growth tend to believe they are also open minded, free thinking, and well `educated`. It makes for a difficult argument often resulting in a lot of pointing to `authorities` on the matter.

There's nothing nefarious about it. The government doesn't want people hoarding cash, because it means the money isn't supporting the economy.

Not to mention the dramatic effects of deflation on growth.

I think it's weird that people expect to just be able to just watch a pile of cash and have it maintain value indefinitely (or even grow in value). Every other resource you could trade for that money would decay over time.

The buying power of your cash is surely decaying over time.

Yes, as would anything else. That's the point.

Well, real estate, gold, and bitcoin don't.

govt bonds aren't generally expected to decay over time either. But I suppose they are these days.

Ah. No that's not what I meant. Option #1 is risk the money. Option #2 is sit on cash. You forgot about option #3: invest it somewhere that is both not risky and safe from inflation. Institutional investors have hedging strategies that achieve this. For us little people, there used to be crappy govt bonds that would safely give you the inflation rate more or less. Now they give you negative returns while inflation climbs. And of course the traditional hedges like real estate and precious metals are sky-high and dominated by speculators.

You must take risks with everything. Owning a house, paid off or not, is risky in a multitude of ways.

At least monetary wealth can be diversely invested; so you have some control over it. Most of the risks that come from owning a house are completely out of your hands.

> Something fundamental changes in your life when you become debt-free.

Being able to pay off a debt at anytime is equally freeing, for me at least. Paying off a loan with an interest rate significantly below inflation is not a great use of money[1] (and an opportunity loss). Putting that lumpsum into bonds (any bond with interest higher than the loan) is better, or even investing in stocks with a stop-loss. If I lose my job and have to flip burgers, that's when I'll pay off the loan and get a little extra from the investment/bond, thanks to the power of compounding interest.

1. Its the equivalent of someone offering you a 6- or 7-figure loan payable in 20/30 years at 2-3% when inflation is 6%, and you decline.

The opportunity loss is what I don't get. Without the debt you can take on new debt that could be say a rental property or business loan.

How is a bunch of money tied up in debt, and an equal amount invested to hedge that not a huge opportunity sink?

It's hard to argue in the abstract without figures and expected returns. If paying off the debt opens the door higher returns, then I'm all for it. All things being equal, I'll keep $250k cash with a $250k mortgage at 2.7% today, as opposed to a paid-off house and a $250k hole in my account.

There is no loss of opportunity. You can borrow against invested money at very low interest rates, lower than mortgage interest rates, and people often do. In today's crazy real estate market, when people make "all cash offers" that is often just cash borrowed against securities. It is some of the cheapest debt that exists.

>> Being able to pay off a debt at anytime is equally freeing,

Let me remind you that in 2008 things were so screwed up, some lenders lost track of who owed what. Having a hard copy document that shows a debt was close out is not the same as having assets that could pay off the loan. Keep in mind too that it was also not a good time to trade investments for cash.

There are risks in every approach. I can't imagine taking out a loan on a property today and investing the money thinking it will beat the interest payments over the next couple years. At other times, it's less risky but the rates will probably also be higher at those times.

Yeah, but if the market crashes while you’re still overpaying your mortgage, now you’re out of a job AND potential savings that you can’t get back. With even inflation outpacing mortgage rates now, I’m not certain in what situation—even from a risk perspective—it makes more sense to pay down a mortgage more quickly than necessary. (With current rates at ~3%. Obviously in the late 80s it made sense to pay the house off as quickly as possible.)

I keep looking over the historical graph for broad indexes and I don't really see any window longer then 2-3 years where 3% would come out better. You just need a buffer to withstand those downturns.

VTSAX is a very popular broad-market index fund. Its price was overall flat from October 2007 to sometime in January 2013 - over 5 years - while returning dividends of around 1.5%. 3% beats that pretty handily.

That doesn't mean literally paying off the low interest loan though.

You can save up so that you have enough money invested to cover all the remaining loan payments and consider that having paid off the house. But don't send the money to the mortgage company, invest it into something stable that pays more than the mortgage interest and you're better off.

(Not historically always possible, but with today's interest rates pretty easy.)

Risk.

I'm just old enough to remember what the financial crisis did to people's pensions. I'm happier to take risks with the rest of my money if my home isn't exposed to them.

During a crash I'd expect to lose on both earnings and investments. Losing my home as well would suck.

I don't trust banks, the market and the governments manipulating them.

You never know when they're going to pull the rug from the infinite growth market. Maybe Crypto will do that? Maybe a few more years of lockdown? Who knows?

I agree that it's an unlikely scenario, but I'd rather be poorer and own my house than be dependant on a bank - even if that means compromising on its size or location.

Where are you getting 5% interest? Best I can find in the UK is about 2% on low balances.

> So, what do they need that extra money for?

FIRE. Money buys a lot beyond your monthly food and rent.

> I fall into the group where I could probably make more

If you don't know for sure it's also hard to judge if you're making the right decision. I also wouldn't risk a nice and stable situation for a +5%, but recent threads on HN have been mentioning way higher bumps lately, hence compensation #1 (again on HN, SV-centered etc.).

> there is risk with leaving (bad boss, toxic culture, too much work, etc)

The chance goes both ways though, there's also a chance you might end up at a better place on top of a better compensation. If you're risk-averse that might not be for you, but there's probably a compensation bump at which it makes sense even if you're risk-averse.

I'm single, in my late 20s, and live alone in a big city.

When $PREV_EMPLOYER closed the office in early 2020 and everyone shifted to remote work, I learned how much I depended on coworkers for daily social interaction. My friends live far away, so the last two years has been extremely isolating and lonely.

That lack of socialization meant work rapidly deteriorated into "just a paycheck" territory, and once that happens, there's no going back.

The format of the poll biases the results. You can select multiple options, and compensation might be the one that most people have in common -- but not necessarily the reason why people are leaving.

In other words, I think the results can only show motivating factors, but can't satisfy it as a sufficient condition for departure.

+1 anecdotally I think it is often a combination of factors. And once you start looking/ exploring and realize you can get a comp adjustment, then that becomes an easily quantified motivator to pull the trigger.

> Why is compensation #1 though?

> There is a threshold where you have enough money.

You've answered your own question.

Who is making 150/hour and owns a house as a dev in Canada ? Nobody that works for Canadian companies that’s for sure

Yes, if you live in Canada and work remotely for a US company.

In that case, you've likely already optimized for compensation, so it makes sense that it would be less of a factor in your next move.

US companies pay 2-3x as much at the top end (if you relocate, probably less for remote). With that kind of gap it's pretty hard for pay not to be a major factor.

What percentage of developers in Canada do you believe are making >= 150$/hour? People generally aren't that forthcoming with salaries but I'm not sure if I know anyone making >= 200k/year CAD. Am I in a bubble and should go job hunting?

Those jobs are out there. Depends on what area you're in and your level. Total comp.

Total comp it’s not that out it sight, $120k per year plus bonus plus pension can hit $200k at the right government outfit but $120k per year is $60 hr not $150

150/h is around 320k a year no? 200k a year is doable, even for Canadian companies

I thought Canadian houses were purely to be investment vehicles for foreign speculators. Canadians actually live in homes they own?

Older ones I guess. According to Stats Canada over 6/10 families own their home.

No, plenty of Canadian speculators as well.

I work as a dev in Canada, for a Canadian company, and I own a house here.

I'm not making $150 an hour though.

I also don't live in Toronto, Vancouver, or Victoria.

I own my house in Canada (Vancouver area). I owned my house in Canada 20 years ago. Some of the younger people on my team can buy into this market because they've had the luck of working for a company that grew a lot and joining at the right time. Otherwise it's pretty tough. I got where I am over my very long career.

They want that extra compensation for whatever they want it for. That's the thing about being paid a fungible - it puts the freedom to decide what to do with it where it belongs.

A publicly traded company I left some years ago had dozens of different little "things" they offered instead of better salary and/or better hours for the salary paid. They're now worth a tenth of what they were when I departed.

You answer your question in your post:

> $150/hour as a dev

That's about $25k/mo gross. Minus ~50% for taxes and vacation (hourly pay means you buy your vacation). So call it $13k net.

> housing costs $1m+

If you live in a top 10 major metro in the US, this is your city. So call housing ~$4k if you have a family. Now you're at $9k. Buy health insurance for $1500, tally at $7500. Did you mean to save 15% of your gross income, as is the guidance? Minus another $3,750. Tally at $3,750. You haven't bought food or paid for transportation, vacations, clothing, etc. yet. You're not an intense saver, so you need to be confident you can earn at this level for decades to come. You probably are in the process of eating the inflation of '21 & '22 as your contract is not going to re-price automatically, so your earning power is being eroded.

This is why people are pushing to earn more. If you are fortunate enough to have a spouse who is also a high earner, great.

Where I live a single family home starts at 1.3 million and townhouses are 1.2 CAD, in a town of 20,000 45 minutes from a major city.

$150 an hour is a charge out rate for a professional engineer not in programming or IT, and trades are closer to $100. $150/hr on salary you probably are in business consulting with a phd and charge out at $400/hr.

$9k usd/mo after paying taxes and for housing is not something that’s readily available here, I don’t think even in IT.

Do you like rock climbing too? Heh

Not yet… but mountain biking

I was being generous to the poster, but also I was assuming hourly was not salary but rather a contract/freelance rate.

Even people earning top 3% of salaries find houses to be expensive and most people will get indebted to buy a house. This is normality nowadays.

Money will always be a concern for the majority.

That said, I agree that once you've bought a house, you can cover your expenses and holidays, who cares about making more money. It's just not a very common position.

> Why is compensation #1 though?

If you view this multi-answer poll from the opposite perspective, the question is, when would someone leave for a lower compensation job? I suspect that would be an extremely low number. Higher on HN because of the demographic, but still low.

Most people are not making 400k as a dev. People are leaving due to compensation because it is a strong market for seekers right now, and all things equal it is not rational to leave 20k+ a year on the table if you have even partially complete information(which a lot of people do nowadays).

Might be worth saying "it is not rational to leave a 15% pay increase on the table" than 20k. At 200k / year, I would absolutely ignore a 20k pay increase if company culture sucked.

Inflation went up 7% in 2021. Inflation in popular urban markets was worse. Market rate for good engineers probably went up more than that.

Even a 10% pay raise was meh with that in mind.

How many engineering companies are prepared to give 15-20% pay raises to keep up with these kinds of conditions? How many are handing out 7% adjustments proudly?

With "compensation" winning maybe it's relevant to think about the effects of runaway inflation. Currently getting up to ~10% (US). It would make sense as peoples purchasing power diminishes they reassess their earning potential.

> Why is compensation #1 though?

Is this a serious question?

Retirement. I invest excess into sp500 and bonds and plan to retire early. Comp is a big factor here.

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