I'll never forget how I felt as I showed my family the first offer letter I was ever extended. Not only was I finally able to tell them that all those hours I spent on the family computer led to a career, but I could also show them a $50,000 salary at 22. We weren't poor, but we were far from rich, and all of us were under the impression that money like that would only come after at least a decade of work.
I received the offer letter on September 4, 2013. The good news came at a time we needed it most. Only a month prior, my 16-year-old sister was killed. We buried her on August 13, 2013. Each day that followed would be a blur.
"What? No! Let me see!" yelled my mother, a sweet Trinidadian mango. My father, a bull birthed by southerners, raised by the deadliest wolves of the South Bronx, kept his shock under control. "See! If you keep going down the right track! See?! The right track!" My oldest sister, a product of everything I'm a product of, just said "Wow!" and stared at our parents.
After everyone finished gasping, all we could do was cry.
Excited, I did the math. After taxes (without insurance), I'd take home a little over $1,500 every two weeks. Imagine: $1,500 rolling in consistently, doing something I started doing for fun as a 12-year-old. "Now what?"
I worked, I made money, I spent it on food. Let's fast-forward a bit.
After about a year of doing grunt work there, I left. I took a new job for a $55,000 salary and more grunt work. After about a month doing that, I left for a $60,000 gig. Then, a $70,000 gig. Then—about 3 years into my career—I landed an $85,000 gig that turned into over 6 figures about a year and some months after starting. Today, I earn considerably more, and there's no way I'm going to work for less in the foreseeable future (unless it's to pursue a venture I have a major stake in). "Unbelievable growth," I kept telling myself, so again, "now what?"
I know at least 3 things:
- I don't want to write code to eat forever. In fact, I told myself that if everything works out as planned, I will not write code because I need to code to eat beyond the end of 2019.
- I don't want to worry about money the way my parents did growing up. They did a lot of the right things, and I can't be more grateful for that (I have the greatest parents in the world). As I witnessed their worry, I realized that's no way to live—at least not freely.
- I don't actually know what it means to make more money than I need. What does that mean in terms of retirement, my current and future families, my wealth prospects, etc? No matter which company I'm in, I probably won't bring home less than about $100,000 a year. How should that influence my decisions?
While my parents taught me a lot about finance for survival, their advice falls short of addressing the life someone with my sort of income brings. They can speculate and say "Well, if I had enough money to buy that house, I would because it'd be a great investment." They can say "Well, I read that people with your income invest in X." A good amount of their advice is rooted in generalizations about the wealthy from the perspective of the poor. Although some things are obvious, like saving some money for a rainy day, other things aren't so obvious, like what kind of IRA to contribute to so that I still live comfortably after retiring from this awful industry.
I'm 27, and I'll be 28 in 3 months. While I've made some small investments, I'm not wealthy by most definitions of the term, and I have yet to fully capitalize on what I'm earning. I'm lucky enough to be in this position, so I don't want to waste my opportunity.
In order to pick up some practical advice, I reached out to the tech community. I asked people what they do with their money. Here's what they said:
- "Find a low-fee diversified index fund, such as from Vanguard. Take 20% or a reasonable portion of your income and place it in this fund with each paycheck."
- "For a young person with a high paying job, 50% may be a reasonable portion of your income to save."
- "...spend money on things that can save me time on a variety of things in my life so I can spend more time doing things I enjoy."
- "Yes, the money is crazy. It disappears surprisingly fast."
- "Save 15% of your income."
- Save towards "a down payment on a house."
- "Disciplined investing is how you should be thinking about money."
- "Getting married is fine ... But it does complicate financial planning and decision making."
- "Don’t get married unless you’re having kids, waited for relationship stability of at least 5-10 years and have a solid prenup that also captures video evidence of willful understanding of each and every one of its terms. You don’t also do cohabitation without a [prenup] and similar acknowledgement as above, due to palimony."
- "Never commingle finances [with your spouse] except for common house expenses and the primary residence. Keep both of your finances and everything else separate, for sanity’s sake."
- "Invest early and often."
- "Invest as much as you can afford to in 401k (see if your company has matching)."
- "Keep emergency savings in a money market fund."
- "Buy shares of an index fund (or two)."
- "Make a budget."
- "Save up until you have a rainy day fund that can cover at least 3 months' worth of expenses in case of unemployment."
- "Highly recommend getting a good financial planner. A good financial planner should be certified (have their CFP)."
- "Pay off literally all debts."
- "Open a Roth IRA and contribute the max at $5500/year."
- "Max out your 401k contributions."
- "After the rainy day fund, follow the great advice others have said and invest aggressively in ETF's with very low admin costs. I'm personally a huge fan of Vanguard Admiral Shares."
- "I tell myself I have just a lower middle-class wage to spend, even if it is a bit more."
A lot of those tips seem rather obvious: save a percentage of your paychecks, start a retirement fund of some sort. I already have that covered. What isn't obvious is how to maximize my money. That seems to be where a pile of question marks are stuffed for a good chunk of individuals of my pedigree.
Look out for a part 2 in which I explain some of the options mentioned!