Step 1: Get a high-paying job with your high-value degree.
Step 2: Save a lot of money. Invest intelligently, but mostly save truckloads of money.
Step 3. Profit!
Most people fail at Steps 0 or 2. I think Step 1′s the easiest, although in another comment my friend Luke explained an innovative way to fail at it.
Warning: the rest of this comment contains hard numbers. If you’re averse to hearing/sharing financial data, stop reading now.
“High-paying” doesn’t have to be zillions of dollars, although that would help. I graduated with self-taught C++, a bachelor’s degree in computer science, and an accepted job offer. I’m now 27 years old and I’ve been working for 6.5 years. My income has increased from 74k to 112k. (I’m very lucky—this is more than my father ever made after 25 years of continuous employment.)
I achieved Steps 0 and 1 by luck (I never thought about becoming a programmer before I went to college, and until I was hired I was planning on going to grad school). Step 2, I think, requires the most rationality.
The income effect is your enemy: the more you make, the more you’re likely to spend. In my amateur opinion, this has two main causes. First, nice stuff is nice (I certainly like my HDTV), and having a high income leaves you unconstrained from buying nice stuff (without going into serious debt). Second, and I think much more insidiously, when your income is high, the incomes of your friends and acquaintances will tend to be similarly high, and you’ll feel social pressure to spend like they spend. (There are probably other factors, like spending new income immediately, without sufficiently considering the quality of that spending or the advantages of saving it.) These factors can be resisted to varying degrees. For example, I have minimal interest in owning a car or a house, which are the traditional money sinks for Americans. I’m also single—I have no idea how my father managed to save money while supporting a wife and two kids—although perhaps now I can appreciate why I couldn’t always have the latest video games growing up.
In my case—and I said there’d be hard numbers—I’ve managed to accumulate 331k in 6.5 years, which is an insane pile of money for someone my age to have. Part of that is due to careful investment, but most of it is due to the fact that my spending has a very weak relationship to my income.
this is my current plan, and I think the step 2 has a variety of methods to it that people fail to use.
acknowledging the treamill that causes you to increase your spending, but hacking it via staying 1-2 raises behind in your living standards.
not moving into higher income areas just because you can, where you will be a small fish in a big pond and exacerbate 1.
focusing on relative (zero-sum) signals of success instead of on having good experiences.
erroneously assuming you will always be able to make at least as much money as you currently do.
not taking direct/real satisfaction in having a large cushion. This can be accomplished by thinking about how many years you can get by without needing to work on your current cushion. This is easier for entrepreneurial types as it is also “how much time I can spend working on my own projects if I find a business opportunity/co-founder”.
not setting up systems of investment where you don’t even see portions of your income and/or not taking advantage of tax advantaged or employer contribution programs (roth IRA, 401k, etc)
not contributing to SENS :p (many years of mental alertness > few years of mental alertness)
If anyone has anything to add to this list please comment.
not moving into higher income areas just because you can,
At least in the US, the biggest reason for moving into a higher-income area is because the quality of public schools tends to track the median income ( and schools are funded mainly through local property taxes).
If you are already taking --step 0. Do not have children--, then that can probably save you more money than several of these other steps combined. But it’s not really helpful advice for the people that do decide to have children.
Step 0: Get a high-value degree.
Step 1: Get a high-paying job with your high-value degree.
Step 2: Save a lot of money. Invest intelligently, but mostly save truckloads of money.
Step 3. Profit!
Most people fail at Steps 0 or 2. I think Step 1′s the easiest, although in another comment my friend Luke explained an innovative way to fail at it.
Warning: the rest of this comment contains hard numbers. If you’re averse to hearing/sharing financial data, stop reading now.
“High-paying” doesn’t have to be zillions of dollars, although that would help. I graduated with self-taught C++, a bachelor’s degree in computer science, and an accepted job offer. I’m now 27 years old and I’ve been working for 6.5 years. My income has increased from 74k to 112k. (I’m very lucky—this is more than my father ever made after 25 years of continuous employment.)
I achieved Steps 0 and 1 by luck (I never thought about becoming a programmer before I went to college, and until I was hired I was planning on going to grad school). Step 2, I think, requires the most rationality.
The income effect is your enemy: the more you make, the more you’re likely to spend. In my amateur opinion, this has two main causes. First, nice stuff is nice (I certainly like my HDTV), and having a high income leaves you unconstrained from buying nice stuff (without going into serious debt). Second, and I think much more insidiously, when your income is high, the incomes of your friends and acquaintances will tend to be similarly high, and you’ll feel social pressure to spend like they spend. (There are probably other factors, like spending new income immediately, without sufficiently considering the quality of that spending or the advantages of saving it.) These factors can be resisted to varying degrees. For example, I have minimal interest in owning a car or a house, which are the traditional money sinks for Americans. I’m also single—I have no idea how my father managed to save money while supporting a wife and two kids—although perhaps now I can appreciate why I couldn’t always have the latest video games growing up.
In my case—and I said there’d be hard numbers—I’ve managed to accumulate 331k in 6.5 years, which is an insane pile of money for someone my age to have. Part of that is due to careful investment, but most of it is due to the fact that my spending has a very weak relationship to my income.
this is my current plan, and I think the step 2 has a variety of methods to it that people fail to use.
acknowledging the treamill that causes you to increase your spending, but hacking it via staying 1-2 raises behind in your living standards.
not moving into higher income areas just because you can, where you will be a small fish in a big pond and exacerbate 1.
focusing on relative (zero-sum) signals of success instead of on having good experiences.
erroneously assuming you will always be able to make at least as much money as you currently do.
not taking direct/real satisfaction in having a large cushion. This can be accomplished by thinking about how many years you can get by without needing to work on your current cushion. This is easier for entrepreneurial types as it is also “how much time I can spend working on my own projects if I find a business opportunity/co-founder”.
not setting up systems of investment where you don’t even see portions of your income and/or not taking advantage of tax advantaged or employer contribution programs (roth IRA, 401k, etc)
not contributing to SENS :p (many years of mental alertness > few years of mental alertness)
If anyone has anything to add to this list please comment.
At least in the US, the biggest reason for moving into a higher-income area is because the quality of public schools tends to track the median income ( and schools are funded mainly through local property taxes).
If you are already taking --step 0. Do not have children--, then that can probably save you more money than several of these other steps combined. But it’s not really helpful advice for the people that do decide to have children.