(upbeat music) - Did you actually, when you decided to leave, get Financial Samurai to a place that it was gonna replace your job? Or did you more just get it to a place that you saw an opportunity to do something different? - So my goal, first of all, was to save and invest at least 50% of my after-tax income every year until age 40.

But I didn't last till age 40, I lasted till age 34. And the reason why was because I was able to negotiate a severance. Because during the global financial crisis, you know, talk about making lemonade, I saw many people get laid off, and some of them were my friends.

So I asked them, "Hey, is everything okay? "Can I help you find a job? "Do you wanna interview with me? "You know, I'm still surviving." And a lot of them were thankful, and we tried. But I also asked them, "Are they okay?" And they said, "Yeah, I'm okay, "because I got a severance equal "to two to three weeks per year work, "two to three weeks worth of pay." And that was when I realized, oh, well, come 2012, I will have been at my previous firm, Credit Suisse, for 11 years.

So if they gave me two to three weeks worth of severance, you know, that's 22 to 33 weeks, and if they could give me my deferred compensation, because I was an executive director then, and I had three years of deferred compensation in stock and cash, and a private investment that they made us buy in 2010, which were full of those, quote, toxic assets.

If I could get that severance and all my deferred compensation, there was no reason why I shouldn't take that leap of faith, because it bought years of living expenses. - Most people listening to this are not, I mean, hopefully we aren't in the middle of a global financial crisis, maybe just like a minor recession.

But, you know, are the tactics you use something that anyone could use, or are they really dialed into, I'm in the financial company in the middle of a financial crisis? - Yes, these are the tactics that anybody in any organization can use. Because the biggest pushback I have is, why would anybody give me a severance if I'm a decent employee, right?

I'm great, whatever. The point is, if you wanna leave anyway, and your heart is not into it, your employer doesn't really want you. They want someone who's hungry, who wants to do their best to stay overtime, do whatever. And if you are a manager in this environment, still in this environment, it is very hard to find a replacement.

It could take three months, six months, and once you find the replacement, it could take three to six months to train them to be up to par with your level. And so if you say, peace out, see you later, two weeks notice, you actually leave your colleagues and your manager in a lurch.

They're gonna be scrambling to find your replacement, and they're gonna be suffering while they're looking for your replacement. And so the idea of negotiating a severance is to think about the classic win-win scenario. How can you help your colleagues and your manager find your replacement, provide seamless transition during that replacement finding, and train them so that when you leave, hopefully they'll save money and they'll replace you with someone who's hungrier, cheaper, and just more motivated in general.

- And so that's the simple trade-off. It's I'm going to help you make this transition easy, and in return, you're going to give me money or vested stock or something. And how have you seen that work? I'm sure you've gotten readers write back, say this worked, it didn't work.

What's the kind of hit rate? - The hit rate is high. It's like 80 plus percent. And a lot of people just come back to me and say, I cannot believe I was able to leave on my terms. I mean, a severance can not only be just a severance check, but it can be, hey, how about work three days a week out of five, and we'll still pay you the same amount of money.

So if you're working 40% less, it's kind of like getting a 60% raise. If you do that for six months, a lot of people will be like, hey, I'll take that. I mean, that's pretty good bet. Don't have to work for two days a week, shut it off and do my own thing.

I mean, so it's really great. And a lot of people have just surprised and shocked by how they were able to negotiate something that they thought was not possible. And in this day and age, I think the reason why a lot of people will ghost people on the phone, text message, email, or not, they wanna just break up over the phone is because they're afraid of confrontation.

And that's, I would say like natural, but it's also kind of cowardly, right? You wanna face your oppressor. You wanna face the people who could help you and say, look, these are my reasons for leaving. I've been a loyal soldier. And the other thing is companies are afraid of backlash.

This is one of the things that companies are really afraid of. There's social media, there's bloggers. You can blow up a company online and say like a lot of bad things in like a tell-all. That's the last thing a company wants. That's reputational damage. And so companies understand this.

They don't wanna get into a long litigation process. They don't wanna get their reputation smeared. So they wanna work with employees who have actually been there for at least a couple years, three years, and try to come up with a win-win scenario. - Is that metric that you had at Credit Suisse of two to three weeks pay for every year worked, is that a general benchmark that kind of still applies or what do you think kind of is a broadly applicable benchmark for a severance package?

- One to three weeks. And three weeks being at the high end, maybe four weeks, but it's usually one to three weeks. And there's one thing that people don't really understand and that is to differentiate between the Warn Act, which is a worker adjustment training notification and a severance.

So Warn Act pay is reserved for larger companies. Usually I think it's in the hundreds or thousands of people and they do a mass layoff. They're mandated by law to provide, it's one to three months of severance pay or not severance pay actually, one to three months of pay.

That's by law, mandatory. Whereas a severance is optional. A severance is the company can pay you or they won't pay you, right? And so the idea is a lot of people who get two months, they think it's severance, but it's actually mandatory Warn Act pay. Severance goes above and beyond that.

- And so now you're on your own and you start financials or you're still, let me think where I take this. I know there are a lot of people listening who might want to use some of these tactics. So I'll link the book in the show notes 'cause we're not gonna spend a whole episode on how to engineer a layoff, though I'm sure we could.

And can people reach out if they have questions or how do you feel about comments and feedback? - So yeah, just go check out financialsamurai.com to buy how to engineer layoff. It's about severance negotiations. And I also have a lot of articles online about severance negotiations for free. So you just Google severance negotiation financial samurai, leave a comment and I'll be able to see it because I can see it from the backend.

And if you have a question, I can respond to it.