Agree. In your 20s, your main competitive advantage is your ability to take risks. Plus your skill set is incomplete, so you’re likely to see much better returns from investing in yourself than the market.
Even in the Bay Area when I was getting paid $120k with a lot of stock and supporting a family I could still put away $2k/month. (Granted, that was after student loans and all other debt were gone).
Tangential question if you don't mind. I'm currently staring at an offer in the bay area, and the cost of living is mind boggling. Where did you live on that 120k, while still saving 2k a month and having a family? I'm not asking this sarcastically, I'm asking because I'm looking for a place with good schools, 3 bedrooms, and not $5K a month in rent in order to decide whether this is the right move. If that's possible without commuting 1.5-2 hrs each way, I'd really love to know!
I make $70k in the midwest and save $3k/month. That's $3k after taxes, insurance benefits, rent, food, etc..
So I'm surprised the 120k guy isn't putting away more.
I guess from that savings rate and the fact you only make 70k that you are fairly young with no kids? How much do you pay for rent/mortgage?
Many in the Financial Independence community are upwards of 70%. Having a partner with the same goal can keep that savings rate as high even with kids. Otherwise it's not very likely.
What exactly are people spending on? I'd think it'd be really easy for people in tech companies to save upwards of 70% with high salaries and the performance of tech stocks.
If that CEO salary figure is even close to accurate (I have doubts a successful German tech CEO is taking home just $120k a year), that arguably speaks to how few enormous .com/tech success stories have emerged from Europe (we're not exactly overflowing with Googles, Apples, Facebooks and such), which is arguably a problem in itself in 2017.
I don't know when the OP was last working here, but I'd also point out that ~$120k is increasingly a pretty common level of remuneration this area for a reasonable entry-level engineering position, if you are good and make the most of opportunities significantly more than this can be made, worth remembering when looking at cost of living comparisons.
> it's not like the quality of life in the Bay Area is ten times greater than in the top cities of Europe either, not to my knowledge anyway.
This is clearly a hugely subjective, not to mention anecdotal measure, but having lived in several major European cities as well as the Bay Area for a number of years in each instance, I definitely do have the best quality of life I've had for my family in California, and for me anyway it's been absolutely worthwhile. There are very few cities anywhere that offer the incredible range of activities, nature, jobs and educational establishments etc all within driving distance that the Bay Area offers, which is a huge factor in why so many people are trying to move here.
The primary appeal of California is outdoor activities. If you're not interested in the great outdoors, it's pretty thin gruel, IMO. I far prefer Europe, for the sheer density of diversity in culture, food and way of life.
IMO companies on the continent, outside of places like Switzerland, pay peanuts for developers. And you know what they say: pay peanuts, get monkeys. It's a bit of a head-scratcher if people with talent didn't leave. Could have an impact on that innovation, too.
You might have luck on the other side of the bay (Alameda is where I'd live if I ever went back) or far enough south out of the city. But no matter what cost of living will be higher than it should be.
At $120K, you're looking at a tax rate of close to 30%, which puts the usable figure at $80K or so. You want to maximize your 401(K), so your salary goes down to $65K, which is about $5K/mo. A decent 3BR with good schools (Cupertino) will run about $3500/mo (1), which leaves $1500/mo for everything else. Not doable, unfortunately.
(1) https://sfbay.craigslist.org/sby/apa/d/1500-off-move-in-book...
The missing piece here is the salary inflation over a very short period of time.
As a Stanford engineer, one should use the leapfrog technique (stay at a job no more than 18mo) to increase your salary by 2x in 5 years. That would mean by 27-years-old, this person should be in the $250k range, 35% tax = $160k usable, $15k 401k = $12k/mo.
YMMV, but this is should be entirely doable by the median Stanford grad.
Also if you’re maxing out your 401(K) I’d call that “saving”
you should be able to save upto 3k a month with a 120k salary
I make $70k in the midwest and save $3k/month. That's $3k after taxes, insurance benefits, rent, food, etc..
so your total costs (rent/mortgage, food, kids, all in) is only 1.6 k? and you're saving ~65% of what you take home? you must live extremely frugally, this is not normal. so kudos, but don't try to make it sound like everyone should do what you're doing. most people do just fine saving 20-30%, even less.
But i'm not super frugal.
I pay $700/month with utils + internet for my own 1Bedroom apartment. I could've gone much cheaper if I didn't live Downtown (120,000 city population) and could've gotten a roommate in a 2Bedroom aprt. Plus I also eat out at Chipotle/Jimmy Johns almost every other day, then I go drinking maybe once or twice a month. So I could easily save another $500 if I wanted to.
i know its expensive out there in the Bay but its still my $70k/year vs his $120k/year
I think $3k is totally doable, but “way more” involves very substantial loss of quality of life. Also some of that after-tax savings will be eaten by medium-term projects like travel and moving.
$70k in the Midwest and $120k in the Bay Area are pretty close on CoL calculators.
the big difference is that i don't have a family. But i'm not super frugal. I pay $700/month with utils + internet for my own 1Bedroom apartment. I could've gone much cheaper if I didn't live Downtown (120,000 city population) and could've gotten a roommate in a 2Bedroom aprt. Plus I also eat out at Chipotle/Jimmy Johns almost every other day, then I go drinking maybe once or twice a month. So I could easily save another $500 if I wanted to
Disagree. In your 20's, your main competitive advantage is time and exponential growth.
Why is this some "special ability" of 20-somethings? I definitely prefer the approach of becoming financially independent and then having 50+ years to do what I want ... seems like having 50+ years to take risk after saving aggressively for 10-12 allows for even more risk/reward tradeoff by eliminating the worst consequences of failure without a safety net.
It's also true that most people tell themselves that very thing to justify buying dumb shit.