Being an Engineer
Being an Engineer
S7E31 Stanley Leong | Engineering Your Finances: A Former Electrical Engineer’s Guide to Building Wealth
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Stanley C. Leong brings an unusual and highly relevant perspective to the world of engineering career development: he started as an engineer, then built a second career helping engineers manage the wealth and financial complexity that can come with technical success. He earned both his Bachelor’s and Master’s degrees in Electrical Engineering from Cornell University before working in chip design roles at IBM and Agilent Technologies.
That early engineering background still shapes how Stanley approaches financial planning today. As a private wealth advisor and founder of Wisdom Pointe Wealth Advisors, he focuses on working with engineers and executives at high-tech companies, using what his Ameriprise profile describes as an analytical and process-driven approach to financial planning. His expertise includes areas that are especially relevant to technical professionals, such as concentrated stock positions, workplace benefits, retirement income planning, tax-aware strategies, and behavioral finance.
Stanley is also the author of Engineering Your Finances: The Tech Professional’s Roadmap to Financial Success, a guide written specifically for high-earning technology professionals. The book draws from his own experience in the tech industry, including the volatility he witnessed firsthand after being laid off shortly after buying his first home — a moment that helped shape his understanding of risk, planning, and financial resilience.
For the Being An Engineer audience, Stanley’s story opens up a practical and often under-discussed conversation: how engineers can apply the same discipline they use in product development, systems thinking, risk analysis, and optimization to their own financial lives. His career is also a compelling example of how technical training can translate into a completely different profession while still remaining central to the way someone thinks, solves problems, and serves others.
LINKS:
Stanley C. Leong LinkedIn: https://www.linkedin.com/in/stanleycleong/
Engineering Your Finances website: https://www.engineeringyourfinancesbook.com/
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So when I'm at a party and I want to talk to someone about what I do, there's there's a very very tiny percentage of the population that can that can talk with me. Whereas when I when I when I got into finance, now all of a sudden this is something that everyone deals with, right? So.
Aaron Moncur:Hello and welcome to another exciting episode of the Being an Engineer podcast. Today we have with us Stanley Leong, a former electrical engineer turned private wealth advisor, best-selling author, and financial advisor practice consultant. After earning his bachelor's and master's in electrical engineering from Cornell, and working as an engineer at IBM and agilent, Stanley transitioned into wealth management, where he now focuses on helping engineers, executives, and high-tech professionals think more strategically about money, risk, equity, compensation, retirement, and long-term financial decision making. He's the author of Engineering Your Finances and brings a uniquely analytical systems thinking approach to personal finance. Welcome to the show, Stanley.
Stanley Leong:Great, thank you, Aaron. Thank you for having me.
Aaron Moncur:So we were talking about this a little bit before we we hit the record button, but I've been I've been excited for this episode because I have done now I think over 350 of these being an engineer podcast interviews, and they've been wonderful. I've gotten to know so many exciting people, and I personally have learned so so much. Nevertheless, if I'm being perfectly honest, I would like to start introducing some different topics. Right, same old thing every time. Engineering is great; I love it. Obviously, it would also be interesting to start introducing some new topics. So, when when your name came across my desk and the wealth advisement that that you do, and you have an engineering background. I thought, oh, this is perfect. This would be a great kind of segue into to testing out some new types of content that engineers, I hope, will still find very interesting and relevant and useful, but deviates a little bit from the typical, you know, very strictly engineering focused content that that we've been producing for the last seven years. So great! Here we are, Day of We get to jump into this new topic that I think everyone is going to be interested in. I mean, you know, who doesn't want more money, right? Who doesn't want to plan a little bit better with their personal finances for the future, and and I think that's what you're going to help us with today. Am I right?
Stanley Leong:Absolutely. Yeah, I'm looking forward to it. And it's funny you bring that up. It it is one thing I found very different from the engineering world to the finance world. Is as an engineer, I I I worked on a very specific you know part of a computer chip that you know most people wouldn't even know what that was unless they worked in the industry. So when I'm at a party and I want to talk to someone about what I do, there's there's a very very tiny percentage of the population that can that can talk with me. Whereas when I when I when I got into finance, now all of a sudden this is something that everyone deals with, right? So so it's a very different thing just from that. Yeah,
Aaron Moncur:that's right. You know, running a business. I mean, the podcast is not my business. It's it's a part of the business. the The real business is engineering services. We build automated equipment, machine design, fixtures, tooling, all that, all those things. And 17 years now, we've been in business, and obviously, I think a lot about the finances of of the business, and I've I've had a chance to think very deeply about this over the years, and it it might seem you know hindsight is 2020 I guess, but I've come to this epiphany or or realization, and probably 98% of the people out there who are all much smarter than me, including yourself, Stanley, are going to be like, yeah, duh. Of course, that's the case. But this realization that took me many years to come to was that the closer you are to the closer you you are directly to the revenue, the more you can charge for your your product or service. And so we're engineering services. We build these machines that then manufacture a a widget that then the company sells for revenue. So we're at best one step removed from the widget that actually brings the revenue in. Which means that in our customers, you know, budgets, we're just we're we're an expense. We're a line item expense that they want to minimize, and you know, as a result, sometimes we do okay, and sometimes we don't. But if if we can, if we can, this is something we're working on internally. If we can sell our own product, then we're no longer one step removed. We're we're directly associated with that revenue generating and. Anyway, all that is to say that I think that money and wealth are very interesting topics, and I'm I'm very eager to talk with you today.
Stanley Leong:Yeah, absolutely. I'm looking forward to it.
Aaron Moncur:Well, tell us a little bit about your background. So you were an electrical engineer. You still, I mean, once an electrical engineer, always an electrical engineer, but how did you make this transition into wealth advising?
Stanley Leong:Yeah, so I got my engineering degree in the late'90s, and so it was you know the peak of the tech bubble, and I was in New York, you know, worked for IBM at the time, and everyone said if you were I did I did hardware design, I designed computer chips, and so everyone said if you were in Harvard design, you had to be in Silicon Valley, and so I pick up. You know, I was in my early 20s. You know, pick up and and went to California. That's when I started working for Agilent Technologies in 2000 and then 2002 I bought my first house in California, and I moved in on a Saturday, Sunday, sitting in my living room, just kind of patting myself on the back, how proud I was of buying my first house. Monday, I went to work and then got laid off, and so I was
Aaron Moncur:no, yeah,
Stanley Leong:yeah. Two days after I'd moved into my new house, and so kidding,
Aaron Moncur:yeah. So
Stanley Leong:a financially stressful, yeah, yeah, financially stressful time for me, of course, at the time, and and I didn't know what to do. Of course, I do. I do I just cash out my 401k to pay my mortgage, or do I sell the house I just bought? And I think the most frustrating thing was really that I didn't have anyone to go to for help. So I'd ask my my parents; they said one thing, my colleagues said another, my friends said something else, and so just really frustrated, didn't know what to do. As I was looking for for new engineering jobs at the time, I came across an ad for a financial advisor position at a large financial firm, and I thought, well, that might be interesting to do. You know, not only would I get to learn what to do for my own situation, but then I could also help other people that were in similar situations, you know. This was 2002. Now the tech bubble would just burst. Lots of engineers are now getting laid off, and so with the encouragement of my girlfriend at the time, who is my wife now, I went in for the interview. Somehow got through a couple other interviews and and got the offer. And I still remember driving home from that offer, just thinking, "Oh, financial advisor. You know, how hard could that be? And then the next three years of my life were the most miserable, miserable years. No, yeah, mainly. Well, you're starting your own business, so it's all the difficulties of you know starting things up. It was it was 100% commission, so you're really not getting paid much because I didn't have a client base at the time. It was you know working 60-hour weeks and just lots of pressure. The main thing, though, I think in hindsight, the thing that really stressed me out was back then we got all of our clients through cold calling, and that that's as an engineer I didn't know what cold calling really was. I thought you just read a script. How hard could it be? And and I was just miserable. It's so
Aaron Moncur:hard, isn't it?
Stanley Leong:Yeah, I've, I've in my whole in my whole life, I'd never have to had to face rejection like that, you know, day in, day out, all the time. It was that that I'm had I known what I was willing through, I, I, I don't think I would have done it. Wow, I said so. I'm glad I. My wife,
Aaron Moncur:my wife worked in a call center for just a few weeks back in college, and she recently reminded me of this story we were talking about cold calling for some reason. And she she reminded me that when she was working in this call center, same thing you said, right? Just rejection, rejection, rejection. It's just constant, right? And some people can be kind of mean, which you know I get. You're you're kind of bothering them, whatever. Anyway, she she started getting like seriously depressed, and she had to quit because it was just so depressing taking all these sometimes hurtful comments and just rejection. So yeah, yeah, that's a a rough job. Yeah,
Stanley Leong:yeah. They actually have a colleague, but that when when I was doing that, he actually had to quit his. He started getting like pre diabetic, and because of the stress, I think I think it was diabetic, and and the doctor basically said you can't, you have to quit this job. And as soon as he quit, he got healthy again. So so yeah, it was it was a lot of pressure. It was tough. I I and it actually started affecting my health as well, even my relationship. My wife at some point was actually starting to give my resume out behind my back to her engineer friends, hoping I'd go back to engineer because because I was making her miserable. And so, but how
Aaron Moncur:did you get past that? You said a few years. It was really really tough. How was it? Just time and getting used to it, or was there like a trigger that changed things? A
Stanley Leong:couple things. Yeah, one was just persistence. As as with a lot of things, you just got to keep grinding away. As you start building up a client base, you don't have to cold call as much. I also proactively looked at just because I hated cold calling so much. Looked at although. Ways to get clients, and and so I was starting to do things like lunch and learns, and and little presentations and things. So I was starting to I branched out to other ways of getting clients earlier than most others. Just I hated that cold calling, but I think the big thing too in 2006 I actually went independent and became an independent franchise owner of a large financial firm, which is where I am now, and and then things got started getting better there. I I started, you know, that was after three years, so I started getting my client base under me. I started just kind of getting my feet under me as well, and understanding the business and how to run things. And and then fast forward to today. Now now, of course, it's wonderful. Now I love it. I I can't imagine doing anything else. I actually I I have to pinch myself sometimes. I just I'm so blessed to be where I am. I I look forward to going to work. I look forward to seeing my clients. It's emotionally gratifying. I get to help people reach their financial goals in retirement. You know, I become a best-selling author now. I'm a go-to advisor for tech professionals. So it's just I can't believe I'm. I am where I am now. It's just wonderful. And so, in hindsight, you know, getting laid off was the best thing that could have happened to me. But of course, it didn't feel like it at the time.
Aaron Moncur:I intimately understand that statement. I had a very similar experience getting well, a little bit. I mean, I I had worked there for more than two days. Yeah, that was good. But yeah, after a few years, I got I got laid off from where my first engineering job, and we had just bought a house, and we had a mortgage, and we got a new baby, right? So I spiraled into to crisis mode. But just like you said, I went through a few years of like this is really hard starting a new business, figuring out all that stuff, and now, wow! I look back, and what a great blessing that was! One of the best things that has ever happened to me. So, you probably don't use your engineering skill set on a day-to-day basis for
engineering, but I'm curious:how has that engineering background supported or or informed the financial the wealth management work that you do.
Stanley Leong:Yeah, yeah, a couple ways. One, my certainly my approach to personal finance is very analytical and I guess engineering like. In in the book, for instance, I break up personal finance into seven key areas, and each chapter is essentially one of those areas. And so I I kind of visualize it as like you're trying to fix a machine, so you have to take it apart, you have to look at each part, make sure each part's working correctly, fix everything up, and then you have to put it back together and make sure it's working. And so it's kind of a similar approach where I kind of break up finance into those seven key areas. We, you know, you want to address each of those areas, and then at the same time, you you want to understand that even though you're looking at them in isolation, they all do work together, sort of like years in a machine. And so, when you put it back together, you have to understand how one thing affects another. And so, yeah. So the I think the approach is very engineer like, and I think that's why I tend to attract more analytic engineer clients because they like that approach, just because they're used to it. I would say the other big thing about my engineering background is it actually helps almost more so run my business through the processes I have in place and systems. I have a pretty lean practice, what we call in our industry. So I manage about 250 million in in assets, and most firms, most practices that manage that amount usually have maybe four to seven employees. I only have two. I have another advisor and then a non-licensed staff, and and and we're working regular hours. We're not working nights and weekends or anything. It's it's all it's all great. So my practice runs very efficiently, essentially, and it's very process and systems oriented, very consistent. And I think that basically comes from from my engineering background. And my wife, who also was an engineer, she used to be a process engineer, and so I think that that probably has some influence on me as well.
Aaron Moncur:Yeah, absolutely. I think that engineers make some of the best business owners because we're very logical and we're process oriented, and those are very important things when running a business. I know it's it's been that that way for me for sure. Yeah. So you you talked about these seven areas of focus in finance that you wrote about in your book. What are some of those areas?
Stanley Leong:Yeah. So those areas are: the first is just evaluating your current financial position. The second is investment management. Third is protection planning. So that's looking at your insurance coverages, life insurance, disability, long-term care, home health, auto, umbrella, so forth. Fourth is workplace benefits, so evaluating how your work, how to use your workplace benefits efficiently. Fifth is tax planning. Sixth is retirement planning, and seventh is estate planning. And so those are the the seven key areas.
Aaron Moncur:Okay, so you work a lot with engineers and technical professionals. Are there any mindsets that you've observed in in engineers, these technical people that that tend to hold them back? Like, is there any coaching that you you find is necessary and and you do for your clients?
Stanley Leong:Yeah, absolutely. So I'd say one on the positive side, engineers and tech professionals-they tend to be pretty good savers, especially high-income earners. I rarely come across a high-income tech professional that doesn't save a lot of money, which is great. You know, from a financial planning standpoint, that's that's wonderful. We love seeing that, and that's not true in a lot of other industries. Right? I also have clients that are doctors, attorneys, business owners that are that make a ton of money, but they also spend a ton of money, and then constantly have to twist their arm just to get them to save a little more. But I rarely have that issue with engineers. So, so that that's a great great mindset to have. The one thing I do find generally with engineers, they do tend to be a little more aggressive with their investments. Now, sometimes that's intentional, but oftentimes it's not. A lot of times, tech professionals don't really understand how much risk is in their portfolio until I point it out to them, and oftentimes this takes the form of individual stock, employer stock, most of the time. So if it's a if it's a self employed person or a person that works at a at a at a startup type of thing, it's it's sort of the stock and the options that they have at startup. Or if it's an engineer that works at a big company like Google or Apple, then they have all these different ways they get paid through stock, restricted stock units, and and stock purchase plans, and and and they end up accumulating a bunch of stock and not realizing how risky that is, especially as they get close to retirement, and then the other, probably the big one, just sort of as a more general thing. Most when when I tell people I work with engineers, most people think that engineers and analytical folks, because they're so logical, they tend to make very logical decisions and they don't make emotional decisions. And I've actually found the opposite is true. The more analytic they are, the more emotional decisions they make. True, so it's a counterintuitive, and the reason is one of the things we learned early on in Mike in the financial career is people generally make decisions with their emotions, and then they rationalize it with logic. And engineers are so good at rationalizing that they can convince themselves that they're really making the right decision, even though behind the scenes it's really an emotional one. And so I do spend a lot of time just trying to coach coach my engineer clients to try to get them off the emotional decisions and and really do what's rational, logical. So that that's that's a big one I had to deal with a lot.
Aaron Moncur:Well, hopefully, people listening to this have some kind of advisor that they can work with, or maybe they want to reach out to you and and work with you. And by the way, Stanley didn't pay any anything to be on this. This is not a sponsored episode. He's I just thought it would be interesting content, so I'm not being paid to say this. But if they don't, and and you you mentioned how a lot of us engineers don't realize that we are rationalizing or or making emotion based decisions, how can we catch ourselves? How can you know if if we're blind to it? What are some ways that we can maybe more more deeply evaluate some of these choices and and figure out. Oh yeah, I am making an emotion based decision, not a logic based decision.
Stanley Leong:Yeah, yeah, it it is tough. I say the first is just awareness, just understanding that we all have human biases, we all have emotions, and no matter how analytic you are, we all we all make emotional decisions. I do as well. I'm I'm human as well. So just awareness is is I I think of a movie the usual suspects movie one of my favorites when I was younger I remember the the one quote he said now it's now it's now I'm losing it I'll. it'll come to me. The point is, you have to be aware. Oh, the that's I got it. The greatest trick the devil ever played was to convince the world that he doesn't exist, right? So that that's that's that's emotions, right? If you don't, if you're convinced that you don't make emotional decisions, then you are the one that's most susceptible to making them. And so, first is just pure awareness, being aware that that you make those decisions. I go through a couple that I see the or rationale or biases that I see often with engineers. The first one, and this is not just engineers; is with everyone. A confirmation bias is probably the most common one that I see. If only it might just be the most noticeable. And confirmation bias is simply, you know, you you have a belief, and when you see something that supports your belief, you know, you remember it, and you see, see, I was right. When you see something that doesn't support your belief, you tend to ignore it or forget about it. And so that that one is is we all have that. And but if you're aware you have that. You can be a little more cognizant of it, and and the way the way I personally like to fight that is I'm always looking for things that go against what I believe. If you're constantly searching for the opposite thing, then that helps offset that confirmation bias. The another one that I often see is they call the disposition effect, and this is essentially just the the the tendency to want to hold on to things that have gone down, and we'd rather sell things that have gone up. And so, great example is if if you and I had a house, the exact same house, we live right next to each other. It's exact same house, same color, everything. And someone comes by and says they'll pay a million dollars for this house for either one of our houses. Now, let's say I bought it years ago for 500,000 You bought it recently for 1.1 million. And so, if I sell it, I make 500,000 If you sell it, you lose 100,000 Right. So, which one of us is more likely to sell? I am because you know I made money on it. You you kind of don't want to because because you're going to lose money. But in in reality, from a rational standpoint, it shouldn't matter what you bought it at, right? The fact of the matter is, right now it's worth a million. That's what it's worth. That's what the person's willing to pay. It doesn't matter who, what price you bought it at, when you bought it, or so forth. That's just what it's worth now. And so, and of course, this comes into play with stocks. You know, people don't want to sell their stocks when it's down. I like to tell people the stock doesn't care what you bought it at. It's not going to go up or down in the future simply because you decided to buy it at a at some point in the past. And so, what matters is what you think will happen moving forward with that stock. But what you bought it at should have no consideration as to whether you buy or sell it. So that's that's the disposition effect, and that often causes people to not let go of bad investments as they're going down because they don't want to sell it when it's at a loss. Yeah, yeah. Is that
Aaron Moncur:related to the the sunken cost fallacy? Yes. Where you put this money into
Stanley Leong:the? It's it's probably yeah. I'm sure there's correlation or there's I'm sure there's overlap. There a lot of these biases kind of have overlap with other things, so yeah, sunken sunk in cost fallacies. It sounds sounds pretty much the same. It's the same idea. Yep.
Aaron Moncur:Okay. Yeah. Yeah.
Stanley Leong:Yeah. Just kind of chasing bad money with chasing good money with bad or whatever they say. And then another one is the third one. I think is regret aversion. I do face this a lot, and this is just the the. the the the fact that making a decision and then having that be a mistake is more painful than not not making a decision and having that be a mistake. And so, kind of same idea. We would rather hold on. You know, if if we have a stock that we know we should sell, and I see that a lot of my clients will be, I know I should sell the stock, but I just can't get myself to do it because they know as soon as they sell the stock, the price is going to go up, right? And and
Aaron Moncur:right, but they
Stanley Leong:so they would rather not sell the stock, even if the stock, if they hold onto the stock and it goes down, that's less painful than selling the stock, making an actual decision, and then having that be wrong. And so that that's regret aversion, and so that that's one I see often too. People tend to not make decisions because they're afraid that something bad will happen.
Aaron Moncur:Interesting. Okay. A few minutes ago, you had talked about stock options in companies, RSUs, right? Yeah. Restrictive stock options. Can you talk a little bit about that? Because I bet a lot of tech professionals deal with that, and what are some of the I don't know maybe blind spots that that engineers don't see when negotiating stocks? If there are any best practices that you have, both for negotiating them as well as for executing them, we'd love to hear about that.
Stanley Leong:Yeah, yeah. So restricted stock is probably the most common way people are getting paid these days, especially at the big tech companies. And and for those that might not know, restricted stock is essentially it's it's like a bonus that's paid in stock instead of cash. And then usually it's it's a you you get you get it granted to you, and then it vests over the next four years or something like that. I mean, or a fourth of it each year is when it vests, and so it's a very common way now to get paid. A lot of these big big tech companies, especially, are are paying now are starting to pay lower salaries, but then giving more restricted stock as as as bonuses and as a way to give them raises, so to speak, and so yeah, and so and they're great. I mean, bonus is a bonus, whether it's stock or cash, and so they're great. I think the the issue that a lot of folks run into is again, they tend to have a lot of stock in their own in their own company, and they don't do it on purpose. It just kind of sneaks up on them, right? You you start at a company and they give you restricted stock, which is great, and they have a stock purchase plan oftentimes where you can you can buy stock at a discounted rate, and that's great to do as well. And so you do that, and and and so you start out, everything's great, but then you're working for 510, 1520, years at this company. And if the company's done well, it's you know in technology, it's probably skyrocketed, and and now all of a sudden, you know, half of your net worth or more is in this company stock, and you're about to retire, and that and that's that's way too much risk to have when you're about to retire, and so it sneaks up on you. Now the problem I think most people have is once they're at that point, what do you do, right? People don't want to sell it at that point. If you sell sell it and and it's really high, well, now you have to pay all this capital gains tax, right? No one wants to pay the capital gains tax. But if you if it's down, then again the same disposition effect. If it's down, no one wants to sell it because it's down and it's going to come back up. And so so there's never a good time emotionally to sell it, and so then they just hold on to it again, kind of status quo. Again, that that regret aversion, and and then of course at one at some point the market's going to crash, and and it hurts them. I've I've I've had unfortunately several seen seen it firsthand several times. Someone just refusing to sell the stock even though they know they should. They want to retire soon. The market crash, like 2008 happens, and then and then you know I had a client that had to put off retirement for 10 years because basically because they that kept telling them telling them that they have to sell their stock, and they they had a real emotional tie to it, and they they even admitted that hey we we we we just can't. We just have an emotional tie to it. They they had worked at this company their whole life, and they felt like they owed the company, and they felt like they were kind of betraying the company by selling the stock. And I told them, you know, CEOs even sell their stock. It's it's not a betrayal of the company. It's it's just good finance, but unfortunately, and then bad timing. And so yeah, so it it really is important to address that risk, as painful as it might be. I think that one of the first things I try to train my clients is not to be afraid of capital gains tax. Capital gains tax means you've made money. In fact, I joke with them that you want to pay more capital gains tax than anyone else you know, because that means you've made more money than anyone else you know, and so yeah. So don't be afraid to pay capital gains tax. If it makes sense to sell the stock, then just sell the stock and pay the tax. You know, it's it's just like you don't want to make less money and earned income, right? You want you don't want a lower salary because you'll pay less taxes, right? No, you want a higher salary and pay more taxes, and so it's kind of the same idea, and there are some there are some ways to to defer capital gains, but when you defer it, you again you're just deferring, you're just putting it off till later, and then you're going to have an even bigger capital gain later. You know, assuming that that investment keeps going up, and so that just makes it even more painful sometimes. So so so yeah, I try to tell clients don't be afraid of paying capital gains tax. It's it's it's it means you've made money. So let's see. Are there
Aaron Moncur:any any strategies to to pay less capital gains tax? I mean, there's there's real estate, right? What's it called? The 1010 3110 31 something like that. Yep. Yeah.
Stanley Leong:So yeah, there are that that that also is a way to defer capital gains. Just defer. Yeah. But when you do that, you're still you're still deferring it to later when you sell that second property. You know, assuming you don't keep doing the 1030 ones, then then all of a sudden it is it is going all of it. Then will be taxable. I would say there's there there are a couple ways you can avoid capital gains tax, but most of them are not ideal to most people's goals. One, of course, is just don't make money, but of course that doesn't make any sense. You you you don't you want to make money, so that's not. I'll show you,
Aaron Moncur:Uncle Sam. Exactly.
Stanley Leong:Yep. The second one is if you die, if you die, then when that money gets inherited, there is the capital gains are essentially waived for the for the inheritor. So for the beneficiary, yeah. So so and sometimes this can I mean you don't purposely die, but for clients that have more money, more assets, sometimes you know we will draw their their retirement plan, and they need this much to retire. They have more than that, and so they have this extra money that they know is going to go to their heirs, that they know they're not going to ever need to touch. And if they're fortunate, if you're fortunate enough to be in that situation, then then the tax deferral might make sense because then you're just putting taxes out, put a tax as far as possible, and then when you die and your kids or whoever inherits the money, then all those capital gains are waived. So that that's where tax deferral might make sense. And then the the third one is is
charitable giving. So same idea:if you if you have something with a lot of capital gains and you give it to charity, then then you can you can you that no one has to pay those capital gains, and and that does bring you to that's what some people will do. If let's say you you do give regularly to a charity, your church, or or whatever community charity that you have, and you happen to have really high high appreciated stock. You can actually donate the stock to charity instead of cash, and then you don't have to worry about the capital gains. So that is a very popular strategy to use if if they're more charitably in kind. And then similarly, you can gift to the stock to your kids if you know this is money you're going to give to your kids anyways. Instead of giving them cash, you can gift them the stock. Now, if you gift the kids the stock, they the kids then have to pay the capital gains tax. But if they're in a lower tax bracket, especially if they're a young, you know, a young young kid, or and they have they just they're just starting out, or they're in college, then then they're in a pretty low if if 0% tax bracket. So so that that might work as well. So there are some ways to to help mitigate the capital gains tax, but they are very specific to situations.
Aaron Moncur:Got it. Okay, let's go back to the topic of processes. You love processes. You're good at them. What are some financial processes that just you know the regular Joe can implement into his or her financial planning.
Stanley Leong:Yeah, so I'd say at a high level, the two main things are you want to save, especially if you're younger, you're you're just starting out. You know, you're not sure whether you should save or not. You should definitely save for the for the younger folks. I like to show them you can just do a really easy spreadsheet and show if you save $200 a month from ages 20 to 30, and then you just stop and never save again, you'll have a million dollars at age 60-five. You know, assuming 10% growth, all that stuff. And so, if you wait until 30 and then you start saving to get to that same point, not only do you have to save a lot more each month, but you have to save the entire time 30-five years later to get to to 60-five, just to get to that same point. So, just saving in in your 20s and 30s is is is has a big determination as to how much money you end. How much you save in your early years is a big determinant of how much money you end up when you're older. And so, so I always encourage the younger folks to even if it's just 50 bucks a month. Put away whatever you can. It it really makes a difference in those younger years, and yeah. And then saving, of course, the more automatic you can make it, the better. So 401k savings is great because it just comes out of your paycheck. You don't even realize it. If you're contributing to IRAs, just have it automatically. You know, X amount per month come out of your your your checking account, so you don't have to worry about it. You know the the whole personal finance strategy of pay yourself first. You know if you if you say oh yeah I'll just save what's at the whatever is left over at the end of the month. There's there's never going to be anything left over at the end of the month, and so so automatic savings is a really good you know sort of system to apply, especially when you're younger. The other one, and this is applies to anyone, is to regularly just have a system to regularly look over your finances once a year, maybe. So again, kind of like a machine, like a car, right? You don't just you have a great car and just and then just drive it for 60 years. You you have to maintain it. You got to change the oil. You got to you got to run tests, rotate the tires, and and you need to do the same thing with your finances. What most people do is is they they make their decisions when they when they're kind of triggered to right when they start the job. Oh, I have to figure out how much to put in my 401k and what to invest in, and then and then they never look at it again. And those type of things you do have to look at regularly. You have to rebalance. You have to adjust the amount you're putting in based on new tax laws or based on your income changing or your situation changing. And so, so just having a system in place, whether it's just an annual meeting with your spouse, maybe I have a colleague who's a financial advisor as well, and he actually has an annual meeting with his spouse, they make it a big thing. They they broke in a they broke open a nice bottle of wine every year, and and they just start going at their finances. And so so whatever it takes, if it is something, it is important to regularly review your finances. And and you know if a lot of people for a lot of people working with a financial advisor is is the best way to do it because that kind of holds them accountable, and hopefully, if it's a good advisor, they'll they'll review their finances you know regularly. If if you're not disciplined enough to do it yourself, but but that I think at a high level, just kind of monitoring your situation is really important. And then yeah, setting up things automatically. There's, I know there's a strategy a lot of tech people use called in our industry called the mega backdoor Roth, and so this is using the after-tax 401k So I'm not sure how familiar your your audience might be with this. The with the 401k most people know that you can contribute pre-tax and Roth into the 401k That's what they call an elective deferral. You can contribute this this year, 2026 It's like 24,500 You contribute a little bit more if you're if you're over 50. But on top of that, at many companies, you can actually contribute above and beyond that, which what they call after tax 401k And and the the it's not a set dollar limit. It's it's kind of a little more complicated equation they use to how much you can put in there. But it's usually around 20 to $30,000 more a year that you can put in, and then you can take this after tax 400k and you can convert it to a Roth IRA. And so that that's what they call a mega backdoor Roth. And essentially, if it's done correctly, it allows you to to get 20 to$30,000 a year more into a tax free position like the Roth IRA, where where the money comes out completely tax free when you take it out. You call
Aaron Moncur:this a mega backdoor Roth IRA? Yeah,
Stanley Leong:yeah, yeah, yeah. It's kind of a look
Aaron Moncur:into this.
Stanley Leong:Yeah, yeah. It's it's a silly name, but I don't know how it got. But but yeah, yeah.
Aaron Moncur:I've never heard of this. Interesting.
Stanley Leong:Yeah, it's basically taking after tax 401k contributing to after tax 401k which again is above and beyond your pre tax and Roth, and then converting it to Roth Roth either Roth IRA or Roth 400 and K. You can usually do either. Both tax-wise is the same, and yeah. So it's a especially with high-income engineers, they have trouble getting money into that tax-free position because they they make too much to contribute to a Roth directly. There there are rules how much you can make in contributing to Roth, and then they don't want to do Roth in their 401k because every dollar that goes into Roth is $1 you can't put into the pre-tax, and so and especially if you're higher income earner, you probably want the pre-tax to get get that tax deduction, and so this is a way for high-income earners to get money into the Roth position, even though they have high income, and and a lot of folks have it available and they don't realize it's there. It's that strategy's there, and so that that's that that's a that's one I see a lot of times missed by high tech professionals. So so yeah, go ahead.
Aaron Moncur:Just commenting what what amazing systems we have in place. These financial vehicles, right? I I'm thinking you know I don't even know when they started 100 years ago, many hundreds of years ago, before any of this existed, right? Roth IRAs, 401 ks, all of these financial investment vehicles. Like, how how did we, as a society, even come up with the idea that hey, if if we put together this financial vehicle and people contribute to it, and it's used honestly, I don't even know where it gets used, but it's it's going to come back a lot more than they put in, right? You're going to put in $1 and it's going to come back$1.50 a year later. Like, how did we even come up with that that idea that we are able to conceptualize and then turn into this this reality? It's kind of mind blowing to me. Like, who's the one that first came up with that thought and made it work?
Stanley Leong:Yeah, yeah. So I'm actually reading a book right now called The History of Money. Of course you are. Yes, I I can't remember the name of the author. It's very interesting though, and it actually talks about through our history from from from you know the Roman Empire days, and I'm I'm I'm I think half or three quarters way through now, but it's very interesting. Just kind of how how money became money, essentially, and then lending and borrowing and investing and all that stuff. From the tax code standpoint, you know the reason why we have all these different like strategies where and and it is kind of a they call it backdoor. It is kind of a backdoor thing, right? You're you're not really contributing directly to Roth, you're contributing through after tax 401k and then you're you're converting it to a Roth, and and so the reason they have that those complications is is just because the way the IRS code works is they never they never simplify anything. They just add on every year. They change the code. They just add things on, and so 1000s of pages later, right? There are always going to be all these loopholes and and rules and things, just because it just gets more and more complicated. Yeah, what
Aaron Moncur:a asinine way to do things. Yeah,
Stanley Leong:exactly. Yep, yep. I would add with with that after tax, just for your listeners who who might be interested. There's if you work at a big tech company again, like Google, Apple, Amazon, Nvidia, those four. They all of those big companies do do offer after tax 401k Some companies don't. So so if you your company may not offer it, but every big tech company I've run into, they do offer that after tax. And then the other way you can do it is if you're if you're self employed and and you have an individual 401k then you should also be able to do that after tax. The the folks that might have some issues is if you work for a small company or or you're self-employed, but you have a bunch of employees. Just because there are some they call them top-heavy rules, and so every employee has to be contributing a certain amount in order for you to contribute a certain amount, and so so you you you rent you might have some difficulties doing the after tax in that situation, but otherwise, it is a wonderful way to get tax free money in retirement.
Aaron Moncur:Yeah. So these are are all you know pretty traditional investment vehicles. Are are there any less traditional strategies that you can share with
Stanley Leong:us? Less traditional. Yeah, actually, well, well, yeah. I would say the the the 401k strategy is is pretty traditional. This after tax to Roth actually didn't really become available or popular until the most some more recent years, maybe the last 10 years or so. So, so that one is the other one is something that's become a little more available to folks. Is a HSA, a health savings account.
Aaron Moncur:Oh yes,
Stanley Leong:and so now this again isn't for everybody. You do have to have a high deductible health plan in order to contribute to a health savings account. But if you can contribute to the health savings account, it is also a wonderful retirement account. So we we encourage clients that have this account don't think of it as a health account. Think of it as a a retirement account.
Aaron Moncur:Oh, interesting.
Stanley Leong:And so yeah, and because from a tax standpoint, it's it's the best of of everything, right? A Roth IRA, you don't get a deduction for putting money in, but you actually get money tax free coming out. A regular pre-tax 401k, you get a deduction putting it in, but then it will be tax coming out, right? So tax, the IRS is going to get their hands on it on one way or another. The HSA is the one time the IRS can never touch it. It's pre-tax going in, it grows tax deferred, and then it comes out completely tax-free. So the IRS never sees it, so from a tax standpoint, it's an amazing vehicle, and so we don't recommend using it like like a regular health plan. Like most people are used to the flex spending accounts, the FSAs that have been around a long time, and so and those were use it or lose it, right? So I remember we we would we would put money in FSA, and we have money, you know, in November and December, we have to go to the the convenience store and buy a whole bunch of buy aspirin or first aid kits or whatever to use up the money. Otherwise, you're going to lose it. The HSA is not use it or lose it, right? So it's it's your account and you can keep it indefinitely. And so instead of using it, we actually recommend keeping the money in there and just letting it grow. Invest it and let it grow and really take advantage of the tax-free characteristics of it. So don't use them. So max it out, but don't actually use it for your you know medical copay or your aspirin or prescriptions. Pay that out of pocket. But at the same time, we also recommend saving the receipts, even though you're not using the HSA. One thing you can also do is when you're in retirement, one of the features of the HSA is you can reimburse yourself completely tax-free from the HSA for any medical expenses since the HSA started. And so, let's say you have$10,000 of expenses over the last 20 years that you've saved receipts for. You can literally just say, "Oh, I'm going to take out 10,000 from the HSA and reimburse myself all that for all those receipts back then, and then easily pull it every once. So, so yeah. So we do recommend keeping the receipts, but yeah. So that that's a that's a more recent development. But that definitely one that I think a lot of people miss. They most people still use the HSA just as a like the like the flex spending account. They try to use it all by the end of the year.
Aaron Moncur:Shoot, I had a a thought and I just lost it. So we're talking about oh yeah, the HSA. I didn't even realize that money compounds in an HSA. I thought you just put it in there and nothing happens. It just stays there, but there's no like interest or anything. Yeah, that's not the case. I
Stanley Leong:think the default is it just goes to cash, and so usually he's not making much, maybe a little bit of interest. But yeah, most HSAs now you can invest kind of like a 401k You can invest in like a target date fund or whatever, and and yeah, yeah. So you can have it grow.
Aaron Moncur:Wow, tax free going in and tax free coming out.
Stanley Leong:Yeah, exactly. Yep, yep. The best in the world. Yep,
Aaron Moncur:amazing. Okay, all right. Well, Stanley, I think we'll we'll start wrapping it up here. Maybe one more question to to end with. So you have this in the beginning. It was really difficult, right? First few years, kind of starting your own business and working through cold calling and things like that. But you successfully ultimately made this transition. Any advice that you would give to engineers who might be listening to this, thinking to themselves, "I'm interested in a career change myself that maybe takes me out of engineering into something else. But well, the the sunken cost fallacy, right? I've put all this time and effort into being an engineer. I can't just throw that away. What what advice or or you know feedback might you share?
Stanley Leong:Yeah, yeah, I I would say actually I think it is it is a that is a good thought in that you don't want to waste your background because starting over completely is really difficult. You have not you have nothing to give you have nothing to offer, right? You have no experience, you have no education in the in whatever new thing you're doing, presumably, and and so it's really hard to get off the ground just starting over. Usually, especially if you're older, you know. When I when I did this, my career chance. I was in my 20s. I didn't have any kids. I had lots of energy. You know, I don't think I could have done that today. You know, I'm I'm turning 51 So, so you know, I I do recommend, if possible, somehow leveraging your background in whatever it is you do. Most most careers and most things you can you can leverage two different things into one. You know, I I I I talk my my oldest child is in college now. She's a freshman in in college, and and she's studying physics. And but she's very musical. She's very talented with music and art, and and she wants to minor in in something like that. And and I said, yeah, you can you can absolutely do that. You can you know with physics, maybe we were at a symphony hall once, and they had these weird shaped things hanging from the ceiling, and you know that's for the acoustics, and so you can design those type of things if you're really good at physics, right? And and you understand music, you could design instruments. There's all different things you could do. I had a another one. My my youngest was more interested in computer science, and and we have a friend who actually a friend of a friend who was who was helped develop a golem in in you know Lord of the Rings right and he he had an art he had an art degree and he was a computer scientist he kind of put those together and there you go so so you can almost you can almost always find a way to kind of mix two seemingly ununrelated things together and myself you know, I I I went into finances in many ways completely the opposite of engineering, but I somehow found a way to kind of bring those things together to to be in the career I am now. And so I do think it really helps to leverage your background in one way or another just to help get get you off the ground with that business. Like for me, I if if I were to go back and tell myself my younger self to do something different, I that's what I would have told him because I didn't specialize in engineering until a little bit later until I I realized one day I don't know maybe 810 years into my career that oh I have a lot of engineers as clients maybe I maybe this is something I should pay attention to but if I could go back and do it again I would I would have started from day one and just specialize in working with engineers because that's what I know that that's who I am and that's who I would attract. So so yeah, I would say that the advice would be to try to leverage your background however you can into the new career and find find a way to do that.
Aaron Moncur:Yeah, wonderful advice. Very practical. All right. Well, Stanley, thank you so much for being on the show today. I learned a few things that I'm going to go off and and talk with my financial advisor about. Awesome. How can how can people get a hold of you?
Stanley Leong:Yeah, yeah. So I do have a website for my book. It's engineeringyourfinancesbook.com They can get a free copy of a free soft copy of the book, either PDF or a flipbook version. There's also a free audio version of the book, so so feel free to to visit the site and and get the book there. They can get the book on Amazon as well if they want a physical copy. It's only like four or five bucks. I just made it the cheapest possible, as well as a Kindle version if they prefer that. And then if they want to reach out to me, they can just reach me at stand@engineeringyourfinancesbook.com Happy to happy to answer any questions that anyone might have.
Aaron Moncur:Terrific! All right. Well, Stanley, thank you so much again for being with us today. Really appreciate you sharing all of this.
Stanley Leong:Yeah, thank you, Aaron. I had a lot of fun.
Aaron Moncur:I'm Aaron Moncur, founder of Pipeline Design and engineering. If you liked what you heard today, please share the episode. To learn how your team can leverage our team's expertise developing advanced manufacturing processes, automated machines, and custom fixtures complemented with product design and R&D services, visit us at teampipeline.us to join a vibrant community of engineers online, visit thewave. Engineer. Thank you for listening. Being an engineer has more than 300 episodes, and you don't have to listen to them in order. If you're dealing with a specific challenge right now, there's a good chance we've already interviewed an engineer who's been through it. You can jump around, search by topic, and listen to what's most relevant to you. See you on the next episode.
