The Hidden Cost of Replacing You at Work, with “Money with Katie” host Katie Gatti Tassin

Summary

Afford Anything Podcast Summary: “The Hidden Cost of Replacing You at Work” Featuring Katie Gatti Tassen

Podcast Information:

• Title: Afford Anything
• Host/Author: Paula Pant | Cumulus Podcast Network
• Episode: The Hidden Cost of Replacing You at Work, with Katie Gatti Tassen
• Release Date: July 1, 2025

Introduction: In this insightful episode of Afford Anything, host Paula Pant welcomes Katie Gatti Tassen, the host of the popular personal finance podcast “Money with Katie” and author of the new book Rich Girl Nation. The conversation delves into smart financial decision-making, saving for retirement, and understanding one's value in the workplace.

---

1. Rethinking Retirement Savings

Katie’s Fresh Perspective: Katie introduces a novel approach to determining how much one should save for retirement. She emphasizes that saving decisions shouldn’t be based solely on income but also on invested assets.

• Formula Introduced:
  • Average of Income and 4% of Invested Assets
  • Katie: “You take the average between your income and 4% of your invested assets... that should be maybe a better guide for what is a reasonable amount of money.” [02:10]

Practical Examples:

• Scenario 1:

  • Income: $200,000
  • Assets: $0
  • Calculation: Average of $200,000 and $0 = $100,000
  • Spending Limit: $100,000 annually with a recommendation to save at least 50%, potentially up to 80% for hardcore FIRE enthusiasts. [04:01]

• Scenario 2:

  • Income: $200,000
  • Assets: $1,000,000
  • Calculation: 4% of $1,000,000 = $40,000; Average with $200,000 = $120,000
  • Spending Limit: $120,000 annually, allowing an extra $20,000 from assets. [05:03]

Key Insight: Katie underscores the importance of considering both income and asset base to create a sustainable and personalized saving strategy, moving beyond mere income-centric models.

---

2. The Power of Automation in Investing

Automated Savings Story: Katie shares a poignant story illustrating the efficacy of automated investing:

• Case Study:
  • Friend’s Situation: A successful fitness instructor overwhelmed by financial stress.
  • Solution: Katie set up an automatic recurring investment using Betterment, which accumulated $30,000 unnoticed over 18 months.
  • Outcome: This automated investment provided a crucial financial safety net during unforeseen hardships, highlighting the transformative power of automation. [09:50]

Takeaway: Automation can help individuals save consistently without the cognitive load of manual tracking, acting as a reliable financial buffer.

---

3. Valuing Your Worth in the Workplace

Framework for Understanding Your Value: Katie presents a comprehensive framework to assess an employee’s worth to their company, which is pivotal for effective negotiation. The formula she introduces is:

• What They’re Willing to Pay = Market Rate + Replacement Costs + Special Sauce [23:04]

Components Explained:

1. Market Rate:

   • Definition: Baseline salary based on industry and geographic standards.
   • Resources: Glassdoor, LinkedIn Salary Insights, job postings with salary ranges.
   • Components: Base salary, bonuses, commissions, incentives, and benefits. [23:04]

2. Replacement Costs:

   • Definition: Expenses incurred by the company to replace an employee.
   • Factors:
     • Recruiting fees (15-35% of annual salary depending on role seniority).
     • Interview costs and time.
     • Onboarding expenses and productivity gaps.
   • Example: For an $80,000 role, replacement costs can range from $40,000 to $160,000. [23:02 - 23:37]

3. Special Sauce:

   • Definition: Unique value an employee brings, such as specialized skills, deep relationships, leadership qualities, and institutional knowledge.
   • Importance: These are non-replicable assets that enhance an employee's value beyond their base role. [23:37]

Practical Application:

• Negotiation Tips:
  • Socialize Your Wins: Ensure that your accomplishments are visible to key stakeholders.
  • Manage Up: Build strong relationships with managers to advocate for your contributions.
  • Document Total Compensation: Include benefits and intangible perks when discussing salary. [15:37 - 22:45]

Notable Quotes:

• Katie: “Your worth to your company is not just your current output. It’s the current output plus what it would cost them to find and train someone else to replicate what you do, plus any unique value that you bring.” [23:20]

---

4. Effective Negotiation Strategies

Pre-Negotiation Preparation: Katie emphasizes that successful negotiation starts long before the actual conversation. It's about setting the stage so that the other party is primed to agree.

• Socializing Wins:
  • Regularly communicate achievements in a team-oriented manner.
  • Example of a colleague who adeptly shared team successes, leading to consistent promotions. [17:12]

Managing Up:

• Building Relationships:
  • Make your manager's life easier by presenting problems with solutions.
  • Progress through "levels" of problem-solving to demonstrate initiative. [17:12 - 20:55]

Timing Your Negotiation:

• Strategic Moments:
  • Align negotiations with significant wins or peak periods to maximize impact.
  • Utilize moments when your value is most evident to the company. [23:10]

Formula for Salary Negotiation:

• Total Compensation Calculation:
  • Base Salary + Bonuses + Benefits = Total Compensation
  • Present this comprehensive figure during negotiations to justify salary increases. [21:17]

Additional Tips:

• Know Your Replacement Costs: Understand how much it would cost the company to replace you to strengthen your negotiation stance.
• Highlight Special Sauce: Emphasize unique contributions that differentiate you from other candidates. [22:45]

---

5. Practical Examples and Real-Life Applications

Case Study – Replacement Cost Illustration: Katie breaks down the tangible costs a company faces when replacing an employee, illustrating how these costs justify higher compensation.

• Example:
  • Role Salary: $80,000
  • Replacement Cost: $40,000 (lower estimate)
  • Negotiation Leverage: Use this cost to argue for a raise, as retaining you is economically beneficial for the company. [23:37]

Negotiation Scenarios:

• Internal Raises:
  • Approach negotiations by showcasing consistent performance and the cost savings of employee retention.
• Job Switching:
  • When negotiating with new employers, account for total compensation including benefits and intangible perks. [21:17 - 22:45]

---

Conclusion: Empowering Financial and Career Decisions

Paula and Katie conclude by reinforcing the importance of understanding both personal finances and one’s professional value. Katie’s insights equip listeners with actionable strategies to enhance their financial independence and career advancement.

Final Takeaways:

• Automate Savings: Leverage technology to build financial security effortlessly.
• Understand Your Worth: Use the comprehensive value framework to negotiate effectively.
• Communicate Achievements: Ensure your contributions are visible to foster recognition and rewards.

Where to Find More:

• Katie Gatti Tassen: Listen to her podcast “Money with Katie,” read her book Rich Girl Nation, and subscribe to her newsletter for ongoing financial insights. [23:23]

---

Notable Quotes:

• Katie Gatti Tassen: “Your worth to your company is not just your current output. It’s the current output plus what it would cost them to find and train someone else to replicate what you do, plus any unique value that you bring.” [23:20]
• Paula Pant: “The power of automation.” [09:50]

Key Highlights:

• Introduction of a balanced formula for retirement savings.
• Real-life example showcasing the benefits of automated investments.
• Comprehensive framework for assessing and negotiating personal value in the workplace.
• Strategic negotiation techniques to maximize career and financial growth.

This episode of Afford Anything equips listeners with the knowledge to make informed financial decisions and effectively advocate for their professional worth, fostering a blend of financial independence and career satisfaction.

Transcript

[Paula Pant]

Hey there. Quick disclaimer before we get started. Today's interview is shorter than usual, but you know what that means. It's more efficient. Enjoy.

You know, money with Katie. One of the most popular personal finance podcasts out there. Katie Gotti Tassen now has a new book called Rich Girl Nation. And we're gonna talk all about money, including a new take on how much you should be saving for retirement. Welcome to the Afford Anything podcast, the show that knows you can afford anything, not everything. The show covers five financial, psychology, increasing your income, investing, real estate, and entrepreneurship. It's double fire. I'm your host, Paula Pant, and welcome, Katie.

[Katie Gotti Tassen]

Thank you. I'm so happy to be here. I love your tagline, by the way.

[Paula Pant]

Oh, thank you.

[Katie Gotti Tassen]

Anything, but not everything.

[Paula Pant]

I came up with it when I was traveling, and so many people said, I would love to do that, but I can't afford it. But they were the same people who were buying $15 cocktails and they had stainless steel appliances in their rented apartments.

I was like, if you made just.

A couple of changes. Right. Rent a less nice apartment with white appliances instead of stainless steel.

[Katie Gotti Tassen]

The white fridge, Right?

[Paula Pant]

Yeah, exactly. Exactly. And that might be a $200 differential, which is 2,400 a year. And so you do that for a couple of years. Right. Do that for three years. Now you've got 7,500 in the bank. That plus this and that and the other, you can save 10 grand. Yeah, yeah, exactly. On the topic of saving, Katie, you've got a new fresh spin on how much a person should be saving for retirement.

[Katie Gotti Tassen]

Yes. So this was an idea that I came up with because I felt as though as I was reaching fi, I was still having a hard time deciding with my income, how aggressive should I be right now? Should I continue to be pedal to the metal, foot on the gas, or can I ease up a little bit? And it was actually, for me, less about, should I be spending more and just, can I afford to earn less? Could I work less? Actually, could I have that slow off ramp? But I didn't want to disrupt all the progress that I had made. And I started thinking about how there are a lot of young people today who, through finding jobs in the finance sector or becoming influencers or whatever, they're making a lot of money. But they're in that Henry category. High earner, not rich yet.

[Paula Pant]

Yeah.

[Katie Gotti Tassen]

And how we often think about the types of decisions that we should be making around saving and investing based on how much we're earning. But as we know, our Incomes are very subject to change. They can change overnight. Most of us are at will employees if we're not entrepreneurs, which means that our company could make a decision at any point that for whatever reason, they don't want us around anymore. So it made sense to me, especially as I watched other young high earners really expand their lifestyles really quickly. Hey, that actually might, on paper make sense for your income, but does it make sense for your assets? So when we think about living beneath our means, I was wondering, is there a way that we can maybe expand that formula and think a little bit more robustly about it so that we're not just looking at our income, we're looking at our assets, too. Our income might justify this, but do our assets justify it? So the formula is you take the. The average between your income and 4% of your invested assets. So assuming we're talking about investing in the stock market. Right. Real estate. I'm sure you're going to have a different calculus here. But if you're talking about I'm trying to reach 5 by investing in the stock market, what type of spending could my assets currently support? 4% of your assets averaged with your income. So you take that average, and then that should be maybe a better guide for what is a reasonable amount of money. What's a reasonable amount of lifestyle expansion that you could shift into comfortably without really jeopardizing your future?

[Paula Pant]

Okay, so let's walk through a couple of examples. So let's say you've got somebody who has an income of $200,000, but they have zero assets. Maybe they've just graduated from law school and they're in their first job. I'm sure I'm going to get some emails from people being like, paula, that is not a starting salary. Just hang with me here, all right? You're a highly compensated professional. You're making $200,000, but you're still relatively new at your career.

[Katie Gotti Tassen]

Yeah.

[Paula Pant]

And you have zero assets.

[Katie Gotti Tassen]

Now, I'm like, fast math in my head. I'm like, I think the average of $0 and 200,000 is 100,000. So that should be by far the upper limit for what you would be spending. You need to be saving at least 50% of that. I think for some people in the FI space who are really hardcore, they're going to be like, oh, 50%. I could do that in my sleep. They should be saving 80% of it. I try to create advice for people who are maybe five curious. They're like, they're interested. They don't want to cut all the way back when I got into fire, I was like, oh, I'm going to spend $2,500 a month, ma maximum. I am going to live on as little as possible because I was just so desperate to reach that point. But I do think that there are a lot of professionals, particularly those who make hundreds of thousands of dollars a year, who don't want to live on $40,000 a year. They just don't want to. And so I try to find that happy medium between. Okay, if your average is a hundred thousand, that might be a ton of money for some people and not very much for others. Obviously this is all context dependent, but that's how I would think about that.

[Paula Pant]

Okay, so let's take that same person income of $200,000, assets of $1 million. So now 4% of a million 40,000 income 200,000, I guess 120.

[Katie Gotti Tassen]

You would get 20,000 extra dollars a year of spending money in that case. I always try to tell people like depending on where you are, if you can afford it, 40% save rate is the sweet spot where above 40% you're actually not going to be buying that much time back. Like any additional incremental 5 percentage point increases that you make, you're going like a year or two at most. So depending on how much you earn, again, that might be like way too much or way too little. But 40% is a good benchmark. I know like JL Collins likes the 50% save rate. So everyone has different approaches to how we think about this psychologically.

[Paula Pant]

Right.

[Katie Gotti Tassen]

But I think with the chart in the book, I wanted to show people, hey, you can personalize this further. If you already have made a lot of progress in investing, you might be the type of person who needs to be told, yeah, you can spend more, it's okay, you can afford to spend more and that's okay.

[Paula Pant]

And just to clarify, when we're talking about the savory, we're talking about as a percentage of your take home pay.

[Katie Gotti Tassen]

I always use take home pay. I guess I understand that gross income is just easier because people know that off the top of their head they probably don't know their take home pay off the top of their head. At least annualized. But I have never understood the point of using gross income. You're gonna lose 30 of it. So.

[Paula Pant]

Yeah, exactly.

[Katie Gotti Tassen]

You don't really have a choice.

[Paula Pant]

Exactly, exactly. And the difference between your gross income and your take home is so variable depending on just all the deductions. Yeah, exactly.

[Katie Gotti Tassen]

I guess I also add that speaking of deductions, I'm sure your audience is well versed in this, but it's a question that I get so often that I just feel like I have to do my due diligence and say it. If you're already saving 10 or 15% into a 401k, that is a 10 to 15% head start on that save rate. So your 401k contributions, your employer contributions, absolutely count toward that number.

[Paula Pant]

Yeah.

Because you said you get contacted by people who say, hey, I've been maxing out my 401k, but am I ready to start investing?

[Katie Gotti Tassen]

Yeah. And I'm like, oh, you're all ready. It's a funny thing where I think we mentally bucket those retirement accounts as somehow separate from investing. And so it's something that has come up so consistently over the years. I always want to make sure that I'm clarifying for people like, no, you are already investing in that retirement account. That does count toward this save rate 100%.

[Paula Pant]

And I think you see it in two regards. On one hand, people who these automatic paycheck deductions into employer sponsored retirement account, like a 401k or a 4.3b, you don't think of it as investing because it's just money that comes off the top right away. On the other side, you also see people who put money, I'll say, myself included, who put money into a taxable brokerage account which we could tap at any time, but who like mentally were like, no, that's for retirement.

[Katie Gotti Tassen]

Yeah.

[Paula Pant]

And we're so attached to that idea that even if things get hard, like, even if something unexpected comes up, we're like, I'm not touching that money.

[Katie Gotti Tassen]

Yeah, we accumulators.

[Paula Pant]

Yeah.

[Katie Gotti Tassen]

I definitely think that it's funny how that shakes out where people do tend to fall in one of two camps and people who are good at accumulating obviously do a very good job of saving and investing and then have a hard time putting it in reverse. I got to witness this firsthand with a friend of mine who doesn't have that. I think of it as a pathology. Personally, I'm like, that just like inability to withdraw where you're like, no, it can only go up. But I had this friend who back in, I think it was like early 2019 timeframe. We were both cycle instructors, like indoor spin classes. It was my side hustle, my part time job outside of my full time job to make a little bit of extra money. It was a great gig, highly Recommend. And she was a full time instructor. She was amazing. She was an incredible instructor. Every single class she taught, waitlisted. She was earning a lot of money. She made more as a full time fitness instructor, probably $20,000 more than I made working full time, nine to five, corporate plus teaching spin. So she was excellent at her job and was paid very well to do it. And she told me one morning at coffee, I'm very overwhelmed by money and I just don't feel like I can invest. And in my head I'm like, oh, I'm investing and I make a lot less money than you. And like, I'm familiar with the lifestyle you have. Like, you can definitely afford to invest. No doubt. So we whipped out my laptop, we spent 15 minutes together. I set her up with a robo advisor. I just pulled a betterment. We went through the flow and I got her permission. And we looked at her bank of America account so I could see what was coming in and what was going out. And I just said, can I set up an automatic recurring contribution to this brokerage account for you every two weeks? I know when you get paid because it's. When I get paid every two weeks, it's going to take out this money and just send it right to the investment account. And are you okay with that? And she was like, sure. So I showed her how to turn it off in case she needed to, but we set it up. We never talked about it again. I honestly forgot about it.

[Paula Pant]

And.

[Katie Gotti Tassen]

And then that was early 2019, as we know what happens 18 months later, she's a fitness instructor teaching indoor classes in real life. And we weren't really doing that for much of 2020. So after the PPP loans ran out and those paychecks stopped coming, she was really getting desperate of like, how am I going to make money? This is my profession. She's trying to figure out an online studio and she was venturing into entrepreneurship. But then she remembered the account we set up. I get this text one afternoon late that summer and she says, katie, oh my God, there is $30,000 in this account. And she was shocked. I was shocked. I was like, I know investing works, I know automating works, but oh my God, that's a lot of money. I can't believe you never turned it off. Like, I figured you probably turned it off a year ago.

[Paula Pant]

Right?

[Katie Gotti Tassen]

She completely forgot about it. She was dumbfounded to find this money and it really provided a great bridge for her and gave her that level of security and comfort that, okay, I can fig this out. I can build a business on my own. I have some Runway here. I can be smart about how I'm spending it. It was a huge safety net for her when she needed it most. And it was based on one good decision that took 15 minutes.

[Paula Pant]

It really speaks to the power of automation. Absolutely. Speaking of which, then, because you talk about the amount that we have invested versus the amount that we're earning, but how do you think about it? What's your framework for thinking about it when some of that money that you're investing is not in public equities, which are easy to track, but rather in starting a business because it is an investment, but it's really nebulous. And you can't 4% rule that.

[Katie Gotti Tassen]

Oh, that's a really good question. Yeah, it's tough. I guess, for me personally, I don't have a strong opinion on this, but I feel like with the businesses that I am building, I don't really think about them as part of my net worth. In a weird way, I invest aggressively with the income that I take from them. But as far as a lot of money being tied up in the business, in my head, that's where my mental buckets come in, where I'm like, no, that's different. That is a different thing. So I guess it would depend on how much of someone's retirement is tied up in the equity of a business that they own. I know that is very common for people who are extremely high earners or have very high net worths for the majority of their wealth to be in a business. I just have really never thought about it that way. I don't know why. I have always thought about the diversified public equities route as that's my savings, that's my net worth. This business that I might be able to sell for a million dollars. I don't know. I don't think about it that way. I'm like, oh, I'd rather just not count it.

[Paula Pant]

So that's.

[Katie Gotti Tassen]

I know it's weird that way.

[Paula Pant]

So what's interesting about hearing you say that is your business actually got acquired. I don't know what the numbers or the details of the acquisition are, but, like, you actually did sell a business.

[Katie Gotti Tassen]

Yeah.

[Paula Pant]

A lot of people might have a business where you technically, you just own your job and then eventually it like peters out. Right. But you actually sold.

[Katie Gotti Tassen]

That's true. And I guess in a way, I consider it a hybrid where I did sell. I also do feel like I own my. In a sense, I'm like, It's really hard to run a business called Money with Katie without Katie, unfortunately. Word to the wise, don't put your name in the title if you think you're going to want to exit someday. But yes, I had this experience in early 2022 where I had this Aqua Hire arrangement with Morning Brew and signed this three year contract. I had never really up until that point read in a personal finance book. Here's how you do this. If somebody approaches you to buy your intellectual property. I just so you know, this term and this term are all negotiable. Just so you know, these are the things that are way harder to value but are actually probably going to be more important later than what you think right now. And for me at the time, only having the corporate W2 negotiating playbook where you're negotiating a few small levers, base pay time off, maybe bonus, maybe profit sharing, but you're limited to a couple of things until you start to get up into those higher levels of leadership where your comp packages can be more complex. I didn't really know how to think beyond just compensation. So I'm like, how much do I want to make? How much am I making doing it now? Plus my full time income from my other job? Because at the time I worked in tech, so I had a good salary and good benefits there. So I'm just cobbling all these pieces together. In retrospect, I now know, oh, the IP was by and large the biggest part of that deal. That was the thing that I should have been willing to concede other terms on to make sure that I retained some sort of ability to claw that back or to buy it back or whatever. So lesson learned, Right? When I went back to renegotiate the contract again when the first one ended, that was something that we added because I was like, this is really important to me and I'm willing to see other terms. I'm willing to actually be paid less now in order to get some of this back. And so I think that that sort of deal making, that sort of negotiating prowess, so you know how to represent your interests in those conversations confidently and know what you actually can totally reasonably come to the table with and the demands that you can make, especially if someone's trying to buy something from you, that was really important to me to include in a chapter about how to earn more for a lot of people. That is going to be a path.

[Paula Pant]

Yeah. And I want to expand out in the conversation on how to earn more because for everybody who's listening to this we all want to earn more. People often don't negotiate or do a weak job of negotiating. So can you share some broad tips around? To me, negotiation is like a huge focus for afford anything. We're building a course around it because, like, oh, amazing.

[Katie Gotti Tassen]

I'm going to take it.

[Paula Pant]

Yes.

Oh, please do.

[Katie Gotti Tassen]

I would love to.

[Paula Pant]

It's called you'd next raise.

[Katie Gotti Tassen]

Ooh, I love it.

[Paula Pant]

It's all about how to get a raise and it's because it's so critical, particularly now when inflation is high.

[Katie Gotti Tassen]

Yeah.

[Paula Pant]

So, yeah. What are your favorite tips in terms of how to negotiate and how to get hired?

[Katie Gotti Tassen]

So a couple things that I think about from negotiation is that that negotiation, particularly if you're negotiating for a raise in a place you already work, that negotiation begins long before you sit down to have that conversation. So in my mind, there are a couple ways that you can set yourself up. Up to have the easiest time where you walk in there. Yeah, you're going to hit your talking points. Yeah, you're going to nail all the semantic fancy footwork, all that's important. But you got to go in there with this person already primed to say yes to you. So I think the high level thing to remember and what I noticed when I was working in a corporate setting is workplaces are a lot like glorified high school lunchrooms. Perception is reality. It is just as important that people perceive, perceive you to be working hard as that you are actually working hard. So if you're like, ooh, if I just keep my head down and work harder in silence and like, without anyone realizing it, eventually I will be recognized. Unfortunately, that's just not how it works because we human beings are imperfect creatures and like, we take social cues from one another. So you have to make it other people's business when you're doing a good job. So one very popular piece of negotiating advice is you should keep this lists of accomplishments that you have, right? Track all your wins. And then when you go in to have the negotiation conversation, you unfurl the scroll in front of them and you go, look at all the amazing things that I've done. That is good. But what's better is if everyone around you knows the entire time that all those good things are happening. So I call that socializing your wins. I think it's a very jargony corporate phrase. I'm like, please forgive me. I didn't invent it, guys. It was not me.

[Paula Pant]

It's like launching a PR campaign.

[Katie Gotti Tassen]

Yes. It's like running PR for yourself. Being a publicist for yourself. And there was one woman that I used to work with who was just world class at this because the way that she would do it, she couched all of it in, like, team player language. So her team would be working on something or she would be spearheading something and she would share out the learnings and share out the. Oh, we wanted to share this win with everybody in case it's useful for you. Oh, we had these results in this user experience study. Oh, hey, I've been working on this thing on the side. Just wanted to let y' all know in case it's helpful for you later. It doesn't feel like bragging when it comes across that way because it's like she's being a team player, she's framing it all relationally. But we were constantly aware of what she was working on. We knew she was engaged, we knew she was getting stuff done. And every promotion cycle that I had at that job, she got promoted. So that's one thing is keeping in mind that, yes, perception is reality. Unfortunately, the office politics of people need to know that you're doing good stuff. That is true. I think the other piece of this is about managing up and the relationship that you have with people whose opinions of you directly affect your compensation. So it's the same thing as socializing your wins, but with a more direct eye on your manager. The first thing I would say is if you have a manager that has it out for you, get out from under them immediately because they will make it impossible. You have to have somebody on your team. You have to have an advocate in a manager. So it doesn't matter how hard you work, if that manager does not like you, it's not happening. So I would just note that. But you can really affect that relationship in a positive way. So if you have a manager that you have a good relationship with or you see a path forward, then you essentially want to think about how you are presenting problems to this person. Your job is to make their life easier. And so if you are communicating problems to them in a way that makes their life easier, you're going to be on a fast track. So this is what this sounds like done poorly. It's, you come to the meeting and you say, here's the problem. We have this problem. This is what it is. You're basically dumping the problem in their lap, so you're giving them a job effectively. Level two is a little bit better. It's here's the problem. And I've started to look into it. And I think this is what's causing it. Okay, thanks. You're still giving me a job. Level three is, okay, here's the problem. Here's what's causing it. I think these are some solutions that you could choose. Okay, we're moving in the right direction. That's great. But you really want to be in a level four or a level five. That's ideal. That's where you are going to set yourself up for really easy, breezy, beautiful negotiation conversations. That is. You're coming in. Here's the problem. Here's what's causing it. Here are some solutions. This is the solution that I recommend. If you say, go ahead, I'll go do it. Perfect. Yes or no, easy. Or if you have the level of seniority and authority and decision making latitude. Level five is, hey, here's the problem. Here was what caused it. Here was the solution. Just keeping you in the loop. I already handled it. It's done. If you can hit a level five, you're not even gonna have to ask for the promotion. You're just gonna get promoted. And bottom line is, if you're doing all those things and you feel confident that you are delivering value, that you are socializing your wins, that you are managing up and still, for whatever reason, it's not happening, don't be afraid to seek employment elsewhere. Like, at some point, once you have put all that in motion, some workplaces are just not equipped to recognize and promote talent. And if that's the case, and you know that's the case for you, it might be time to go somewhere else. And so we also talk about how to negotiate in conversations with hiring managers where you don't have that track record already in your company. You can't look back on that scroll of accomplishments and be like, look at all the things I've done.

[Paula Pant]

Part of that is also recognizing when you're in a hiring conversation with a hiring manager, like when you're switching jobs, it's recognizing what your comp at the old company was because it wasn't just your base salary. This is the value of all of my benefits, and this is the value of all of the intangibles. And like, you put all of that together and sure, my base salary was 60,000, but you add in all of these extras and I was actually making closer to 70.

[Katie Gotti Tassen]

Yeah.

[Paula Pant]

And I want to jump, so you're.

Gonna need to pay me 80.

[Katie Gotti Tassen]

Yeah. This is the strategy that I've always used because for me personally, and I think a lot of women feel this way in particular. But I could see this being a thing for really just any human who feels uncomfortable asking for more money because it isn't inher uncomfortable conversations sometimes is. You want to have a reasonable proof point to gesture to that any reasonable person would look at and go, oh, totally get it. So what's more reasonable than I already make that much. And in order to make this jump, I am looking for an increase in income. I'm looking for a higher salary in order to make this change. And so what you're referring to here is just a little formula that I like to think of and how I build this launch pad in my head. If I'm going into a negotiation conversation of, okay, my base salary, my 401k match, maybe an HSA match, if you have a particularly generous employer, if you know how much your health insurance costs, if you were to look at yourself on a spreadsheet for what you cost your company, Take all of that together. That was your total compensation. That's the number that you should be confidently moving into new negotiations with. Knowing that, like, that's what I'm working with. So sometimes the new place is going to offer you way more to begin with, and you'll be like, great, love it. But if it's close and you need that thing to push you over the edge, that has always felt like a very comfortable place for me personally to work from. Because it's not. I'm not asking for anything crazy. I just want to make more than I'm making now.

[Paula Pant]

Perfect. And you also have a formula around the market rate. Plus, what it would cost to, like, replace you is actually what you're worth to the company. I know you have to go catch a flight right now. We're going to take a break to hear a word from our sponsors, and when we come back, I'm gonna unpack that directly from your book.

[Katie Gotti Tassen]

Oh, thank you.

[Paula Pant]

For everybody who's listening, love it.

[Katie Gotti Tassen]

Thank you for having me, Paul.

[Paula Pant]

It was a pleasure. Yeah. Thank you for being on. I'm sorry we can't talk for longer. I know you're going to LaGuardia. Good.

[Katie Gotti Tassen]

Yes, I'm avoiding Newark at all costs.

[Paula Pant]

Yes, avoid Newark at all costs.

[Katie Gotti Tassen]

That's the best advice I have to offer today is don't go to Newark. Thank you.

[Paula Pant]

Well, thank you again, Katie. Where can people find you if they'd like to know more?

[Katie Gotti Tassen]

If you like podcasts, the Money with Katie show. If you are more of a reader, Rich Girl Nation is great. And if you want read resources and More like newsy newsletter type stuff. We do have a newsletter that comes out every Wednesday.

[Paula Pant]

Wonderful. Thank you, thank you.

You know, when I was a kid, I remember how much time my mom would spend going from store to store to store to pick up basic goods that the family needed. Groceries, laundry detergent, things like that. These days I order all of that online and it feels like the packages just magically appear. Well, if you run an e commerce business, you know packages don't arrive by magic, but it feels like it if you use ShipStation. Because last year alone over 700 million orders were fulfilled with ShipStation. And with ShipStation you can sync orders from everywhere you sell into one dashboard and replace manual tasks with custom automations so that you reduce shipping errors and you do it all at a fraction of the cost. It can be the fastest, most affordable way to ship products to your customers. You get huge discounts with major global carriers and there are tons of features that help ensure accuracy and get your shipments out the door faster so your customers are happy. Now inside of afford anything, we don't ship physical goods. We only sell digital products and services. But I have many friends who are in E commerce and I know many people inside of this community are e commerce entrepreneurs. And shipstation creates these automations that makes it easier to scale your business faster. During the time of this spot, another 1400 packages were shipped with the help of ShipStation. Upgrade to a smoother shipping experience. Go to shipstation.com and use code Paula to sign up for your free trial. No credit card or contact required and you can cancel anytime. That's shipstation.com codepala.

The Black Friday in July event from Dell Technologies is here with great offers on trusted technology.

You'll also discover huge deals on new AI ready laptops like the Dell 14 plus featuring Intel Core Ultra processors starting at $699.99.

Save on top accessories plus enjoy fast.

Free shipping and other benefits.

Upgrade today by visiting Dell.com deals Small business owners State Farm is there with small business insurance to fit your specific needs. Whether you're starting a new venture or growing an existing one, State Farm helps you choose the right coverage to protect what matters most. Working with a local State Farm agent helps you understand your coverage options. Offering local support to help you achieve your goals. Focus on turning your passion into a thriving business. Knowing your insurance can change as your business grows. State Farm here to help you succeed with your business like a good neighbor. State Farm is there.

Welcome back. Now Katie had to head out to catch a flight. She came to visit us here at our studios in New York. When she was in town for her book launch, we kept our conversation focused and efficient. But before she left, we touched on something that I wanted to unpack further for you. And that's her framework for understanding what you're actually worth to your company. Because this is information that you can carry with you into that negotiation conversation. Here's the conceptual framework to understand what your company is willing to pay you equals your market rate plus your replacement costs plus your special sauce. And now let's break down each individual component. The foundation is your market rate, and this is typically what the position pays in your geographic area and in your industry. So think of this as the baseline. This is what they have to pay to get somebody qualified to do the job. You can research this through sites like Glassdoor or LinkedIn, salary insights. You can talk to people in similar roles. Many states now have salary transparency laws, so you can look at job postings for comparable positions. And those job postings will often have a salary range. So add base salary plus, plus bonuses, commissions, incentives plus benefits. The monetary value of that benefits package, including any intangibles, such as if you get to work from home two days a week, all of that together, the value of that is your market rate. Now, this is one of three components of what they're willing to pay you. So market rate plus replacement costs plus special sauce equals what they're willing to pay you. So market rate is the foundation. That's one of three components. The second are your replacement costs. And this is an area that many people overlook. Think about this from your company's point of view. If you were to leave your company, they would face recruiting costs, interview costs, onboarding costs. There'd be knowledge loss, there would be a productivity gap. There would be significant costs costs to the company in order to handle that turnover. So let's break this down a little bit so you can get a sense of what your replacement costs would be. First, you look at the recruiting costs. Depending on the seniority and the speciality of your position, your company may or may not need to hire a headhunter. But if they don't, they are at least hiring either a general recruiter or they're assigning the task internally. And that comes at an opportunity cost to just somebody who's already working there. So let's break all of this down. If you are in a senior position or if there's an executive search, your company's going to use a headhunter. And the fee structure is that that headhunter is typically paid between 25 to 35% of the candidate's first year total compensation. So for a $200,000 executive role, that could cost $50,000 to even up to $70,000 in fees alone. Because this headhunter is going to be proactively hunting, often for months. This is a longer process that will go three months, four months with extensive vetting because they're looking for somebody who can fill a C suite or VIP level position. If you're listening to that and thinking, well, that's not the role that I'm in, therefore my company's not going to pay a lot of money to replace me, well, you might be surprised at how much it costs to find someone like you. Because for many mid level positions, companies will use what's called general recruiters. And a general recruiter will typically take a fee of about 15 to 25% of your first year salary. So for an $80,000 role, a general recruiter might cost anywhere between 12,000 to up to $20,000. Now, these people are working with active job seekers and posted positions and there's a much faster turnaround, typically within three to six weeks. And these recruiters work, you know, they make their money in volume, so they're handling multiple searches simultaneously. But that's still a significant cost. It's a significant expense for your company for the purpose of finding another you, a replacement for you. And if you're listening to all of this and you're thinking, well, you know what? But in my company, I didn't talk to any recruiters. My manager was the person who interviewed me. Maybe you work for a very small business and they handled everything in house. Even if that's the case, there's a substantial, especially if it's a small business, a substantial cost to the time and therefore the productivity of that existing internal team. So regardless of whether your company uses a headhunter or a general recruiter or they handle internally, that recruiter fee is part of your replacement costs. And remember, what they're willing to pay you is market rate plus replacement costs plus special sauce. Now, we've been talking about recruiting costs for a while, but I want to emphasize there are recruiting costs and there are also interview costs. Because if there are multiple rounds of interviews, that's going to cost the time of not just hiring managers, but also of other team members of management. So there's a productivity loss that comes from the cost, the time cost of having to do these interviews. Then we've got the costs of onboarding knowledge loss and the Productivity gap, right? So when you're onboarding a new employee, there's a training period, there's reduced productivity. During that ramp up period, you lose institutional knowledge, you lose the context behind projects, you lose the strength of some key client relationships. And all of that combined creates this loss, this productivity gap between the time when you leave and the time when a replacement becomes fully effective. Fully onboarded, discovered, recruited, onboarded, trained, and now is fully effective. There's a big lag there. And so broadly speaking, and this is a very generalized rule of thumb, but it costs anywhere from 50% to 200% of your annual salary to replace you. So if you have a job where you make $80,000 a year, it could cost anywhere from 40,000 to 160,000 to replace you. Once you factor for all of the replacement costs that we just talked about, including the opportunity cost of decreased productivity. So let's just take the lower of those numbers. Let's say that you make $80,000 per year and you estimate that it would cost your company $40,000 to replace you, including everything that we just talked about, including the cost of decreased productivity during that recruiting and onboarding period. Now, your company isn't going to be willing to give you a one time payment of $40,000 in order to encourage you to stay for the next 10 years. That would be silly because of course if they did that, there's no guarantee you'd stay. But they would likely be willing to pay an extra $2,000 a year for the next 20 years. They'd likely be willing to reward that seniority and that longevity because the longer that you're with a company, the less money that they've had to spend on turnover. And so the value of seniority at a company, it isn't just experience, it's also the basic fact that the company hasn't had turnover costs associated with your role. That's a major piece of why seniority gets rewarded. Think about it. If you were a rental property owner, if you have a long term tenant who you've never had to replace in 10 years, often you give that tenant loads of incentives to stay because you haven't had any turnover costs and you haven't had any vacancy costs in that unit in a decade, and if they're a good tenant, you're going to bend over backwards to keep your tenant happy, because that's a win win for both of you. So it's very much like that, but applied to an employment context. And so that's the conceptual framework to understand when it comes to thinking about your value to your company in terms of your replacement costs. So we've talked about market rate, we've talked about replacement costs. Remember, the formula is what they're willing to pay you equals market rate plus replacement costs plus your special sauce. So now we'll talk about that third component, special sauce. And that's any unique value that you bring to the table. Specialized skills, strong relationships with clients or vendors, deep institutional knowledge, cross functional expertise, any particular leadership qualities, especially in the world of AI, those types of quote unquote soft skills, leadership qualities, mentoring, conflict resolution, those types of things will become increasingly valuable, especially as AI becomes a bigger and bigger piece of every industry. Your human centered skills become your competitive advantage. And the relationships that you have with clients, with vendors, with key people also become a competitive advantage. That's the one thing that I can never replicate. And so when you take all of this together, the key insight here is that your worth to your company is not just your current output. It's not just the salary range that you see posted on a comparable job posting on Glassdoor. It's the current output plus what it would cost them to find and train someone else to replicate what you do, plus any unique value that you bring that would be hard to replace. All of that together is what you're worth to your company. And knowing that will help you negotiate much more confidently. Because you're not just arbitrarily asking for more money, you're presenting an argument, you're making a case for your total value. You also, with this knowledge, you can time your negotiations much more strategically because there are points at which you are most valuable to your company after specific big wins or during busy periods. And those are the times when you're likely to get the biggest either raise or some other form of value. So if they don't have the budget to give you a raise, maybe they'll give you an additional week off. Those are the key moments. So when it comes to timing the negotiation that you want to center around and you begin to understand those key moments better, when you have this understanding of this bigger framework of what you're worth to your company, that's the framework. Market rate plus replacement costs plus special sauce. That is the framework that Katie lays out so beautifully. It's a framework that comes directly from her book. And it's a framework that I wanted to share with all of you because I think this is a conceptual understanding that every employee should grasp before you go into your next conversation with your boss about your next raise. Big thanks again to Katie for coming on the show. You can listen to her podcast Money with Katie wherever. You enjoy listening to podcasts and her new book is available now. Thank you so much for tuning in. If you enjoyed today's episode, please do three things. First, share this with the people in your life. Your friends, your family, your college roommates, your neighbors, the parents on your kid's soccer team, the other families at swim meet the people at the barbecue. Share this with the people that you encounter every day because that is the most important way that you spread the message of F II r e number two subscribe to our newsletter affordanything.com newsletter number three talk to other members of the community affordanything.com community and number four open up your favorite podcast playing app. Hit the follow button so you don't miss any of our amazing upcoming shows. And while you're there, please leave us a review. Thank you again for tuning in. This is the Afford Anything podcast. I'm Paula Pant and I'll meet you in the next episode.