What I did once I got my first high paying engineering role
Tags: career, finance, salary
Published: 2020-03-12 18:12:28


Before my current role, I would've never imagined having a "high income" (it's high for me). I knew I wanted to be smart with my money, but I didn't know-how.

The resources I used:

- [This book](https://www.iwillteachyoutoberich.com/book/)
- [This website](https://www.investopedia.com/)
- [These podcasts](https://www.fool.com/podcasts/)

My situation will be different than yours, I'm 25, single and have no dependents, but I hope there is something here you can learn from. I am no financial expert, just someone who wants to share what has worked for her.

I think personal finance is like a ladder, each step builds from the previous one, if the previous one isn't strong, you'll fall.

## My Personal finance ladder

### Step 1: Mindset

I had a very unhealthy relationship with money, spending too much, saving very little, and not investing anything at all. A lot of it stemmed from lack of education on personal finance, and **you know when you're young you think that spending money is the cool thing to do.**

The most important piece of advice on personal finance mindset I learned is:
- With every bit of income, I have to pay myself. First, it has to go towards my financial system and then can be sent out or spent.

### Step 2: Emergency savings fund

I saved 6 months of monthly expenses in a [high yield savings account](https://www.investopedia.com/articles/pf/09/high-yield-savings-account.asp)

Once I had this done, I felt a huge relief, in case I lost my sources of income, I would have some buffer room.

### Step 3: Tackling Debt

I never went to college, so I don't have any loans, but I did rack up about $7000 in credit card debt as an insecure young person trying to impress people. I used the debt snowball technique to pay it off. [Here's a great resource on that.](https://www.daveramsey.com/get-started/debt)

I now avoid credit cards except for paying bills!

### Step 4: Funding my Retirement

I feel like a real adult because I have a [401k](https://www.investopedia.com/articles/retirement/08/401k-info.asp) and a [Roth IRA](https://www.investopedia.com/terms/r/rothira.asp)

- If your employer offers a [match](https://www.investopedia.com/articles/personal-finance/112315/how-401k-matching-works.asp), make sure to take advantage of the max percentage they will provide.

- I divide the total amount of money I can put into my IRA for the current year and make a monthly transfer, [for example this year 2020 the max is $6000 for me](https://www.fool.com/retirement/general/2019/11/03/2020-roth-ira-income-limits-what-you-need-to-know.aspx)
so I move $500 into my Roth IRA every month, some people choose to do it in one lump sum. I like to do it over the year. That way, I take advantage of market diversity over time and not just once.

### Step 5: Saving for big purchases

I am currently saving for the down payment on my first rental property in my high yield savings account. My rule of thumb for savings is, if I expect to need the money within 5 years, it will be put into my savings account. Otherwise, I invest it.

### Step 6: Active investing

I don't want to speak too much on this because of the risk involved in investing. However, I will say I have a dividend portfolio and a growth portfolio.

This is the only step I consider optional and don't do monthly. I like learning about stocks and keeping up with the news and research, but it's not for everyone.

### Step 7: Life isn't all about money

I didn't work my butt off to only save and invest, I do spend! But only on things I care about like food, traveling, video games (Can't wait for Cyberpunk 2077!), and not on what society makes me believe I should spend on.

I try to practice [essentialism](https://gregmckeown.com/book/). If it's an absolute YES, I'll get it. 

## What my financial pipeline looks like

What a month looks like, all money movements are automated except credit card payment and money into my active investing accounts.

- 1st of the month: Pay rent in cash.
- 16th of the month: Move $ in Roth IRA. (after 1st paycheck)
- 20th of the month: $?? I manually move money into my dividend and growth portfolios.
- 30th of the month: Move $ into savings. (after 2nd paycheck)
- All my bills except my rent are paid with my credit card. Which I pay off in full manually at the end of the month. I like to manually do this in case there are any unexpected charges, I'm talking to you cell phone carrier!
- I do keep some money in my checking account for spending, it's never a crazy amount of money though just so I'm not tempted with it.

That's it! Having control and knowing where my money goes has made my life a lot better. I continue to learn about personal finance, and when I make changes to my life, I'll update my pipeline.