One of the watershed moments of my life was as a 20 year old intern attending a workplace presentation about personal finance. Over the course of one hour, I learnt about the power of buy-and-hold investing and compound growth. I learnt that even an average engineer with a five-figure salary can become a millionaire by her late 30s, through financial discipline and investment planning. This was both inspiring and energizing. I had always thought that I would need to work until I was 60, just to pay the bills and make ends meet. That being a “multi-millionaire” is something to dream of, not something to plan for. This talk changed the way I thought about my financial destiny.
Ever since then, financial independence is something I have prioritized and pursued. And as of this year, after 12 years in the corporate world, I have finally attained that goal. This article is about the nuts and bolts of my journey, if anyone else finds it useful in charting their own course.
Disclaimer: I acknowledge that I’ve been very privileged, especially in the educational opportunities I’ve had. There are many steps in my journey that would be hard or impossible for others to replicate. But maybe there are others that you would find useful in your own life.
A second disclaimer. It’s unfortunate that there’s much societal stigma around talking about money. I think this is a shame. Money should be treated like health. It’s a necessity of life, and something we should prioritize. But not something that defines you or your value as a human being. The more openly we talk about money, the more we can learn from each other, and the better we can manage our own finances.
Without further ado, here’s a summary of how much I made during every year of my career, how much I saved, and how my savings grew over time.
|Year||Employer||Annual Income||Amount Spent (excl taxes)||Net Worth||Notes|
|2009||Intel||100,000||38,000||35,000||New college grad with a Master’s degree in Engineering|
|2015||Hedge Fund||230,000||56,000||450,000||Career pivot from Hardware -> Software|
|2018||330,000||68,000||990,000||Income boost due to increase in Google stock price|
|2021||Amazon||625,000||78,000||2,400,000||Income boost due to increase in Amazon stock price|
Some lessons I’ve learnt along the way:
- When you get a big pay raise, it is very tempting to spend it on luxuries like a nicer apartment, or a flashy car. To some extent, this is certainly something I did as well. But as much as possible, avoid accelerating your hedonic treadmill, and save that money instead
Where possible, spend money on experiences, not things – I’ve gone on numerous intercontinental trips and ate out multiple times a week, while still being frugal with my rent and car payments. Compared to all the things I’ve spent money on, financial independence is the greatest luxury of all
- I see a common meme that cities like San Francisco and New York are absurdly expensive. For almost the entirety of the above time period, I was living in SF, NYC, or places which are a very short commute away. I cannot speak to the expenses involved in raising kids, but as someone without children, I was able to find reasonably priced options relative to my income (which wouldn’t have been possible in most places). I was paying ~$1000 in rent when living with roommates, and ~$2000 in rent when living alone
People love to hate the idea of living with roommates (I’ve heard it unironically described as poverty). But it made for an extremely fun social life, and a fountain of interesting life experiences. Not to mention the significant rent savings
- Invest your money. Do not let it sit idle in a bank. As a young person with a long career, you can afford to take risks. Invest most of it in the global stock market. You will take losses periodically, especially during recessions. But on average, you’ll come out ahead. Compound growth is extremely powerful and added almost a million dollars to my net worth
My own investment portfolio has consisted entirely of US equity (VTI), Developed Countries (VEA) and Emerging Markets (VWO). In recent years, I’ve also added real-estate (REET) to the mix. My exact allocations have varied, but I’ve generally invested an equal amount in each of the above. If you’re more risk averse, add a bond fund (BND) to your portfolio
Do not try to time the market or pick winners and losers. On average, these are both losing strategies. If you’re convinced that you have an exceptional talent and want to time the market or invest in specific stocks, spend at least 20 hours every week on investment research
- Home-ownership is the biggest financial decision you’ll make – go into it with clarity about the pros and cons. Use expert calculators to evaluate how much money you stand to make or lose by purchasing a specific home. There are plenty of situations where renting is financially better than buying.
Make no mistake about it – housing is a basic need, whereas home-ownership is a nice-to-have. Saying that you “need” to buy a home, is like saying that you “need” to own a million dollars worth of Google stock
- If you’re still a student or open to attending grad school, do everything you can to gain admission into a top-5 Master’s program. It only takes about a year to graduate, and will open doors for you for the rest of your career
If your student days are done and you don’t have an attention-grabbing resume, you can get the same result by working at a FANG (or similar) company for a couple years. The good news is that unlike law firms or investment banks, FANG companies will grant interviews to most local software developers (though the hiring bar is indeed very high)
- The biggest boost in my career earnings came when I transitioned from a Computer Hardware engineer to a Software Engineer. Software engineers at leading companies can make a tremendous amount of money, comparable to doctors and investment bankers. There are many other professions, even as an engineer, where I would have earned far less despite being equally talented. The career path you choose will have a tremendous impact on your compensation
Making the career switch was the hardest thing I had to do, required a significant investment of my free time for multiple months, and I had to swallow my ego for many years into my new career. But it has paid off very well. Always keep an open mind when it comes to lucrative career opportunities, and don’t be afraid to pivot your career. If I were 20 years old today, I would seriously consider specializing in Machine Learning
- In a similar vein as above, I hear that it is almost impossible for talented software developers to earn similar amounts in any country besides USA. If early financial independence is a priority for you, strongly consider moving here. The easiest way to do this is probably to take a 1-year hiatus from work, and enroll in a Master’s degree in USA. Though I have also met others who moved here on a work-visa
- Don’t let short-term fears get in the way of your long-term success. The first 5 years of my career in the Hardware industry stunted my career growth, and I’ve been playing catch-up ever since with my classmates who went straight into the Software industry. Ironically, when I was a freshman in University and someone asked me why I didn’t want to major in Computer Science, I replied that “there are many people who have been programming since high school, and I would be at a disadvantage compared to them.” Funny enough, I eventually came around and switched careers anyway … 7 years later … at an even greater disadvantage
- If you are good at interviews, the biggest decision you’ll need to make is startups vs FANGs. At any point in time, you’ll make more money at a FANG company, while also working fewer hours. The difference is smaller when you first graduate, but becomes especially pronounced as a senior developer, when you can make 250-500k at the FANGs, while working 40 hour weeks.
On the flip side, you can grow your career faster at a startup, and more quickly pick up leadership experiences. You’ll also get more opportunities to work on greenfield projects, build more things in a short period of time, and be less hampered by bureaucracy.
If your goal is to make 300k/year while working 9-5, you should stick with FANG companies.
If your goal is to build lots of cool stuff or become a VP/SVP/C-level executive one day, you should do early-stage startups.
If I could do it all over again, I would spend the first 6 years of my career doing startups. And later join a FANG company as a senior engineer if none of my startups are successful
- You should strongly consider interviewing elsewhere every ~3 years. This requires effort in interview prep and dealing with rejection, but you can secure significant pay increases and promotions. Practicing your interview skills is the best financial investment you can make.
- Which is not to say that your current job doesn’t matter – it does. Always aim for excellence and put yourself in situations where you can learn and grow. I spent my evenings and weekends bootstrapping a startup in the year before I interviewed at Google. And again in the year before I joined Amazon. I wasn’t doing this to impress anyone, but I suspect it helped me land unusually lucrative job offers. Your reputation, network, the skills you’ve picked up, and the lessons you’ve learnt, will all stay with you no matter where you go.
- I’ve heard many people say you should ignore equity and only look at base salary in a job offer. This is poor advice – always look at the total compensation, not any one piece of it. If anything, equity gives you optionality. If the stock price drops significantly, you can reset it by switching companies. If it rises significantly, you’ll get a significant compensation increase. This helped me greatly at both Google and Amazon.
A number of states are making it illegal for prospective employers to ask you what your current salary is. Even if you don’t live in such a state, that is a good guideline to follow. Tell recruiters what compensation you’re expecting, not what you’re currently making. As a rule of thumb, whenever I switch jobs, I expect a 30% compensation increase. Anything less than 20%, I would recommend waiting for something better to come along.
The higher your compensation expectations are, the more you’ll have to impress them during interviews and on the job. So this is a double-edged sword. Be prepared to deliver on what you’re asking for
You might be wondering what the point of all this is. Money doesn’t buy happiness. Besides, what’s the point of optimizing your career so much, if you’re just going to retire in your 30s.
It is true that money or career success doesn’t buy happiness. But what does buy happiness is independence and autonomy. Hence my goal of optimizing my career and finances, so that I can afford to “retire” in my 30s.
Now that I’m “retired”, I could in theory spend the rest of my life sleeping in and relaxing on a beach. But that isn’t what I want, nor is it why I pursued financial independence. My true aim has always been to pursue my life goals, on my own terms, without having to worry about money.
As someone who has spotted frustrating problems in every corporation I’ve worked in, my present goal is to build a startup from the ground up. One where I can work independently and make decisions quickly without sitting through endless meetings or waiting multiple days/weeks for approvals. One where I can attempt to fix the problems that I’ve seen arise repeatedly in other companies. One where I can try my hand at leadership, not just mid-level management.
Outside of my startup goals, I also have other goals that I’m excited to pursue in the coming years. As you might have guessed from this blog, writing is one of my hobbies, and I’d like to be a published author one day. Tutoring and mentoring others is also something I’ve enjoyed in the past – I’m toying with the idea of working as a part-time tutor/mentor. Lastly, I intend to give a significant portion of my savings to charitable causes, and have already put $300,000 in a donor-advised-fund. If any of my startups become successful, I also plan to start a charitable foundation and become actively involved in philanthropy.
These are all things that I’ve done to some extent in the past, but I was never able to give them the time and energy they deserved while still juggling a full-time job. Besides, I know for a fact that if I tried to become a full-time writer in my 20s, I would spend most of my life stressed out over financial stability. And that the allure of making money would threaten the integrity of my creative endeavors.
But now that I’m financially independent, I can afford to pursue my life goals whole-heartedly and with full commitment. Without any monetary expectations, or worries about paying the bills.
Ultimately for me, that’s what financial independence is all about, and why it is all worth it. It’s not about sitting on a beach and drinking your life away. It’s about having the freedom to pursue your life purpose, whatever it may be, and however impractical it may be.