MONEY Income equality

Why This CEO Pays Every Employee $70,000 a Year

Dan Price
Dan Price

Dan Price's decision to dramatically increase wages at his company sparked a lot of controversy. Here's why he did it.

Growing up in rural Idaho, Gravity Payments CEO Dan Price remembers learning that one’s values are most sacred.

“My dad would ask me a question…He’d say, ‘How much money is your integrity worth?’ His point was there’s no amount of money that he would be willing to sell his integrity for. And that was ingrained in me at a very, very young age.”

Fast forward to today, the 30-year-old CEO is staying true to those principles. Just last week he announced he’d be taking a $930,000 pay cut to help afford raising the minimum wage at his Seattle-based credit card processing company to $70,000. This means that out of the 120 employees, 70 will be getting raises and 30 will see their incomes double.

For Price, this will also mean reducing his $1 million annual salary to $70,000. “I may have to sell my house, to be honest,” he told me.

I spoke with Price on my daily podcast, So Money, about how he arrived at choosing $70,000 as the company’s starting salary and how he’ll be measuring the success of this bold decision. While Price’s move was born out of a desire to bring more income equality to his workforce, he’ll be looking to his customers to learn if, in fact, he made the best decision.

Farnoosh Torabi: You were inspired to raise the minimum wage because of a well-known Princeton study that found that emotional well-being rises with income—but only to an extent, which is around $75,000 dollars. Was it just the study that was the game changer for you? The numbers also had to make sense for the business, right?

Dan Price: To me, once you know the right thing to do, and it’s the right thing for everybody involved and it’s going to be beneficial to everyone, it becomes a moral imperative to actually do it. In the past, as much as I would have wanted to do something like this, it wasn’t practical, it wasn’t the right timing. And so, with that Princeton study, one of the other aspects that really hit home with me was, “The dollars that you’re making underneath that amount are causing harm to your well-being.” And that, to me, is powerful stuff. And we only get to live this life once. And I want everybody that I’m partnered with at Gravity to really live the fullest, best life that they can. And so, that was a big part of it. And to be honest with you, all of those studies and stuff, you can throw them out the window. If you just talk to people around Seattle, or really anywhere, and you see how it’s impacting them, that’s the top thing for me.

The day I decided to do this, I was on a hike with a friend who had her rent hiked up a little bit. And she’s incredibly smart, very hard-working, and her employer does a great job taking care of her, but market rates being what they are, and living expenses being what they are, it was creating a very difficult, stressful situation for her.

[Editor’s note: The cost of living in Seattle is 24% above the national average, according to PayScale, mainly due to the high price of housing. Home prices are 51% above the national average.]

FT: You said from the beginning that this is really just an experiment for now. How will you be measuring its success?

DP: First and foremost will be our client satisfaction. That’s what we’ve always built the whole company on. In my mind, I am a butler, I’m a servant for our clients, which are amazing independent businesses all over the country, and we help them accept credit cards for less and give them great service. And so, if our clients are more satisfied, that’s going to be, for me, the most important bellwether.

We never really had trouble attracting talent because we’re very purpose-oriented. We never really had trouble retaining talent because the most important thing we provide our team isn’t money, but an opportunity—an opportunity to serve, an opportunity to grow. But I do think that there was some level of distraction, and there must be when you’re living paycheck to paycheck. And so, I honestly believe that removing that distraction will significantly increase our ability to take care of our clients.

Every day, MONEY contributing editor Farnoosh Torabi interviews entrepreneurs, authors, and financial luminaries about their money philosophies, successes, failures and habits for her podcast, So Money—which is a “New and Noteworthy” podcast on iTunes.

More from Farnoosh Torabi:
How to Raise Kids Who Aren’t Obsessed With “Stuff”
Self-Help Guru Tim Ferriss Confesses His Biggest Financial Mistake
How I Conquered My Fear of Going Broke

MONEY couples and money

How to Get Your Tightwad Spouse to Loosen Up

fingers untying change purse
Chris Gash

If you've ever felt frustrated by your partner's frugality, try these 4 tactics for untying the family purse strings.

Lauren Greutman’s couponing began as a practical way to trim her family’s household budget, but the Oswego, N.Y., mom’s mission to save quickly escalated to the point where she wouldn’t buy anything that wasn’t at a deep discount. “I went overboard,” she now admits.

Her husband, Mark, concurs—and says he frequently felt frustrated by her frugality. “There were many eye-roll moments,” he recalls not too fondly.

Perhaps you can empathize? When one spouse is more anxious than the other about spending, marital discord over money is pretty common. In fact, one study found that “tightwads” tend to marry “spendthrifts”—and those couples are 23% more likely to fight about money. “Everyday spending decisions can gnaw at them,” says study co-author Scott Rick, a professor of marketing at the University of Michigan. If your partner is economical to a fault, use these tips to pry open the wallet.

1. Find out what fuels the fire. Rather than passing judgment (again) on your spouse’s stinginess, discover what’s driving it. Break the ice with, “Honey, I’ve noticed that you are very conscious about our spending. Tell me what concerns you.” Is it a fear of going broke? Patterns learned as a kid? A countermeasure to your overspending? “The reason doesn’t necessarily justify the behavior, but if you can understand the fear or goal, you may be able to find a more agreeable way to address it,” says Brad Klontz, a psychologist in Lihue, Hawaii.

2. Look at the bigger picture. While you may never see eye-to-eye on spending, you’re likely to value similar financial goals, like retiring at 65 or going on vacation. From this common ground, analyze your finances to gain perspective on what’s rational (or not) when it comes to purchasing. “You can see where you have room for improvement or relaxation,” says Ed Coambs, a marriage counselor in Charlotte. Seeing where you stand may convince your spouse that spending $10 on lunch or $10,000 on a renovation isn’t apocalyptic—or may convince you that it is.

3. Request free rein day to day. Keep yourself from feeling hamstrung by your partner’s rules by asking him or her to allow you a splurge limit—say, $200 a month or 5% of each paycheck. That way you have limited license to spend as you wish, no questions asked.

4. Put a price on penny pinching. At the same time, help your frugal spouse do a cost-benefit analysis of his or her deal hunting. You might show how driving around to gas stations to save 3¢ a gallon actually wastes money. Or help your partner assess the hourly wage of cost cutting, as Lauren now does with couponing. “If I spend two hours a week and save $50,” she says, “then I feel it was worth my time.”

More Love & Money:
How to Tell If Combining Finances With Your Partner Is a Bad Idea
A Simple Rule for Raising Unspoiled Kids
How Well Do You Know Your Spouse’s Financial Habits?

Farnoosh Torabi is a contributing editor at Money Magazine and the author of When She Makes More: 10 Rules for Breadwinning Women. Her new podcast So Money features intimate interviews with leading entrepreneurs, authors and influencers. Visit SoMoneyPodcast.com.

MONEY Love and Money

How to Tell if Combining Finances with Your Partner is a Bad Idea

joint finances
iStock

Sometimes separate accounts make for happier couples

A joint bank account can be the ultimate form of financial intimacy.

So say Derek and Carrie Olson, co-authors of the new book, One Bed, One Bank Account. “Sharing a bank account gives couples another opportunity to connect with each other and build up their relationship,” says Derek. “The oneness that a couple will experience through combining bank accounts can’t be achieved any other way.”

That sounds great. But in my experience, it doesn’t work for everyone.

If one or both of you has money drama, co-mingling could backfire. A separate but equal approach to managing money in your marriage—at least until you each sort through your finances—may prove wiser.

A Case Study

Take newly married couple “Brian” and “Theresa” (who prefer to remain anonymous).

They knew just six months into dating that they wanted to spend the rest of their lives together. “We also realized we didn’t want to merge our finances,” says Brian, 33, a school principal. “We each had independent financial baggage, but we had systems in place to deal with that baggage.” Merging their accounts would only make things more complicated, they explained.

Brian was paying—and continues to pay—for a doctorate program out of his own pocket.

Meanwhile, 27-year-old Theresa, an engineer, has been focusing on paying off student loans. There’s about $65,000 remaining, she says. Her auto debt repayment system is a tad “convoluted,” she explains, with multiple checking accounts tied to various student loan balances.

“It’s complex because of the number of accounts I have and number of transactions I have to keep things moving smoothly,” she says.

How to Manage Money Separately Together

If you plan to split costs evenly, you’ll want to jot down your monthly expenses somewhere that’s accessible to the both of you. You can either both slap down cash or credit when shopping or eating out, or designate one person as the household “spender” and the other as the “payer backer.”

Brian and Theresa adhere to a “modified roommate system,” where they record all shared expenses from rent to dining out on a spreadsheet. Brian usually pays for everything throughout the month and Theresa reviews the itemized list, checks for any errors and cuts Brian a check or transfers money to his account to cover her portion.

“Our agreement is, unless one of us has expressed wanting to treat the other, we split it,” says Brian.

It helps that they each earn roughly the same amount of money; they can evenly afford all their joints costs.

They also communicate a lot. Brian and Theresa hold weekly business meetings to talk about everything from large expenses coming up to the groceries they’ll need to buy for the current week’s meals.

Communication is important in any relationship no matter how you choose to manage the money, but it can be extra important if there’s no bank joint account representing joint goals.

If you’re both going to manage money on your own, you’ll want to check in more frequently to make sure that your saving and spending is measuring up to the goals you want to afford—both big and small.

Now two years into marriage both Brian and Theresa are en route to completing their financial obligations by summertime: Brian will be done paying for his grad program and Theresa will be debt-free. And once they hit those milestones, when “life will be simpler,” they plan to start sharing accounts with the goal to invest in real estate together.

But for now, they’re happy going Dutch. The couple admits that the arrangement isn’t super romantic—“but it’s what’s good for us,” says Theresa.

Every day, MONEY contributing editor Farnoosh Torabi interviews entrepreneurs, authors and financial luminaries about their money philosophies, successes, failures and habits for her podcast, So Money—which is a “New and Noteworthy” podcast on iTunes.

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MONEY Kids and Money

How to Raise Kids Who Aren’t Obsessed With ‘Stuff’

Chris Gash

As parents we want to give our children everything—but hope they don't start to expect it.

Years ago, after I’d gone off to college, a job opportunity led my parents out of the affluent suburbs of Philadelphia and into an economically diverse town in Massachusetts. They were happy for the move because it offered a more affordable life with the bonus of separating my younger brother, Todd, then 7, from the “spoiled rich kids.”

In Philly my parents had rented a two-bedroom apartment while my brother’s classmates lived in million-dollar homes. And it had become increasingly difficult to explain to Todd why he couldn’t have the newest videogame or why we didn’t go to Europe over spring break. “It was a bad environment for all of us,” my mom recalls. The move was a blessing as my parents aimed to unspoil my brother.

No matter where you live, raising kids who appreciate the value of a dollar isn’t easy—and it’s only gotten tougher since my parents were doing it. “We’re in a world that conspires against waiting,” says Ron Lieber, author of The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money. “So much is available so easily and for so much less money. It’s easy to be in a situation where kids can get what they want without having to sweat it out.”

But what if your child is already obsessed with “stuff”? Can you reverse the trend before you end up with an entitled adult? Experts say yes (phew). Start with these steps.

Share Your Narrative

Explain to your kids why they can’t have certain things by laying out your values and priorities. Maybe you want to uphold attitudes you learned from your hardworking immigrant parents. Perhaps you’re saving for a bigger home. Sharing your stories and showing you’re maintaining the values yourself “can help take some of the sting out,” says Lieber. “Kids like knowing they’re part of a continuum.”

Set Limits…to an Extent

Rather than rejecting your child’s wants outright, allow him to make choices—and learn about trade-offs. With a teen, for example, you could set a clothing budget and let her decide how to spend it. You could help a littler one create a list that ranks desired toys in order of importance.

Make Them Earn It

Requiring kids to earn some wants through chores or a job can help curb entitlement, experts say. Case in point: When Susan Beacham, founder of financial education firm Money Savvy Generation, sent her two daughters to college, she and her husband paid for tuition but refused to cover extras like sorority dues—for those costs, the girls had to get jobs. Beacham found that this motivated her daughters to dispute certain charges they didn’t think were fair. “We gave them a sense of personal responsibility,” says Beacham. “That value would not have surfaced if they hadn’t been spending their own money.”

Farnoosh Torabi is a contributing editor at Money Magazine and the author of When She Makes More: 10 Rules for Breadwinning Women. Her new podcast So Money features intimate interviews with leading entrepreneurs, authors and influencers. Visit SoMoneyPodcast.com.

MONEY #financialfail

Self-help Guru Tim Ferriss Confesses his Biggest Financial Mistake

Tim Ferriss
Tim Ferriss

An entrepreneurial flub helped turn him into the successful author and investor he is today

Tim Ferriss knows a thing or two about how to launch a product: His books, starting with The Four Hour Workweek, have become multiple bestsellers. His podcast is often ranked #1 in Business on iTunes.

But to enjoy the success he has today, Ferriss has had to suffer some mistakes. He shared with me one big product failure he experienced early on his career and what he learned on my podcast So Money.

His Biggest Financial Failure

The first failure that comes to mind is an entrepreneurial one…right on the heels of a seminar I did about speed reading. I thought, ‘Well, this is great, but what would be even better is if I didn’t need to be physically located at a seminar to teach people.’

So, I created an audio book called How I Beat the Ivy League and it was about how to optimize your college applications to get into schools where, perhaps, based on your track record, report card or SATs, you shouldn’t be able to get in. (I had attended Princeton undergraduate but I flubbed my SATs.)

I was convinced the audio book would sell itself. I spent a ton of time on it, took out the vast majority of my savings to have 500 or 1,000 tapes produced and proceeded to sell exactly…two of them—one to my mom!

What He Learned

There were two big lessons there. The first was you should not make a product and then find your market.

You should choose your market and then make your product. You should know exactly who you’re making something for, and not get stuck as a lot of engineers do, creating something with a bunch of features and then attempting to figure out who you’re going to sell it to. I approached it in exactly the opposite way.

Second was I produced and paid for, you know, 500 to 1,000 tapes because I was seduced by the lower per unit cost and that’s really, really, really dangerous. What I should have done is paid three or four times the per tape cost, even if I lost money on a per tape basis in the beginning, so that I didn’t have such a huge capital investment right up front.

Every day, MONEY contributing editor Farnoosh Torabi interviews entrepreneurs, authors and financial luminaries about their money philosophies, successes, failures and habits for her podcast, So Money—which is a “New and Noteworthy” podcast on iTunes.

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The 5 Best Antennas for Watching Free TV

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