[pyrrhotech]

salaries in the Bay Area are very high, and if you avoid the common pitfalls, you can save a lot. Personally I made about $200-220k average during my 10-year career and lived on 30-40k while saving the rest and investing mostly in equities (of course taxes take a big chunk). Now I spend $50k-ish but I pay for everything for me and my fiance. I plan on spending $75kish once we have a family of four eventually which is the maximum level I'd feel comfortable spending with my current wealth. It wouldn't cover all our wants but definitely most of them and all our needs, hence there is still some additional utility from growing wealth but not enough to justify the stress and anxiety of a career IMO

[uniclaude]

To anyone confused by the explanation (as $220x10 < 2.5M!), I would assume the key is likely in the investments.

Given the market of the last decade, investing everything above the 30-40k expenses and income tax in the S&P500 and re-investing the dividends would have brought GP there. Not really sure about how one can make it with 30-40k including rent in the Bay Area, but this sounds like the most reasonable takeaway for most readers.

[ckdarby]

Apartment $5k/m ($2.5k your half).

Prior to covid, find apartment within 30 biking to work, get two bedroom, split with roommate.

Going out $150/month

Limit yourself to going out with coworkers once a week, social gatherings once a week and a rule of only buying one drink while out.

Groceries & clothes $400/m

Make all your meals at home unless your work offered fully subsided meals and or on specific days subsided meals.

For clothing, only buy once the piece no longer serves it's function. Do not buy simply because it looks good or it has some "new feature".

Subscriptions $70/m

Netflix, Spotify, GitHub, Youtube Red, and Audible.

Books $50/m

Libraries are a good saving spot here but sometimes you're unable to get some of the new technical books.

Bike maintenance $500/yr

You're going to put wear and tear onto the trusty bike.

Remaining $0-10k/Yr

Yolo. Flights back to see family. Replacement bike if it gets stolen. Random transit trips to see friends.

[ckdarby]

Prior to covid an additional hack for those in SF was to attend a bunch of interesting tech related meetups.

Free beer, pizza and get to meet interesting people.

[analognoise]

Live like a hobbit while never marrying and being in the top .5% of all tech salaries for a decade.

You might as well get the advice "marry rich" - it's probably more likely.

[pc86]

I mean the snarkiness just doesn't have any reflection of reality.

Debt is a killer. I used to have a lot of credit card and personal debt, and was paying over $1,500/mo in interest on less than $100k USD/year. If you get stuck in that trap it's damn near impossible to get out of if you overextend yourself.

A lot of folks grossly underestimate what they spend eating out and drinking. Probably less of a problem now than a few years ago, but coinciding with my credit card debt phase I would have told you I spent "$100, maybe $150" a month when it was closer to $400-500.

If you're not set up for retirement (see below) there's little to no reason to be leasing a brand new BMW. I was absolutely guilty of this and it's tens of thousands of dollars I essentially set on fire for three years. You don't even have to sacrifice the nice car, my 2016 5 series was less than $25k out the door and I got it right after someone turned it in off-lease. My payment is less than theirs was and it'll be paid off before the warranty runs out. I'll then have an "asset" (not really) worth $5-10k, and can get another $25k off-lease car which will cost me less and get paid off quicker, if not in cash.

If you max out your 401(k) you are saving about $20k/yr while only reducing your taxable income by ~$15k/yr depending on your marginal tax rate. A Roth adds another $6k to that if you're under the cap (something like $140k for 2020) and you can withdraw the contributions from that account at any time without penalty. Not helpful for someone making $40k/yr but if you're making $100k it's hard to make a good argument not to max out your retirement unless you live in one of the outlier cities as far as rent and expenses.

There are absolutely the /r/personalfinance types who act like if you go to a restaurant more than once every six months you're going to end up destitute and starving while homeless. And the FIRE community is a borderline cult. But nobody working in our industry, even in super high-COL areas, really has to worry about retirement, even if they've made dumb mistakes like I did that ended up costing hundreds of thousands in the long run.

[ryandrake]

> If you max out your 401(k) you are saving about $20k/yr while only reducing your taxable income by ~$15k/yr depending on your marginal tax rate. A Roth adds another $6k to that if you're under the cap (something like $140k for 2020)

Even if you are above the Roth cap, you can contribute post-tax $6k to a tradtional IRA, then immediately roll into a Roth IRA. This is known as a "backdoor Roth".

Additionally, some employer 401(k) plans allow you to contribute post-tax money to your 401(k). The IRS specifies an upper limit of the total of [employee pre-tax + employer match + employee post-tax], which was $57k in 2020. The post-tax portion of the above can also be rolled into a Roth IRA. This is commonly referred to as the "mega-backdoor Roth"

Also, don't forget catch-up contributions to each if you are over 50.

Point is if you have the income to support it, you can save much more in a tax advantaged way than just that $19.5k pre-tax 401(k). Please look up the tax consequences of any of these options before doing them. They are straightforward but contain a few pitfalls, such as the pro-rata rule affecting rolling over traditional IRAs into Roth IRAs.

[burntoutfire]

Hobbits actually focused greatly on quality of life.

[bumby]

Out of curiosity, what timeframe were your working years? My concern is that "investing mostly in equities" (assuming a decent percent of growth stocks) can be the deciding factor if you happen to hit a good bull run but potentially disastrous if your market timing is off.

[pc86]

Time in the market >>> timing the market.

Even the absolute worst luck gives you perfectly acceptable returns on 30-35 year timelines. Multiple orders of magnitude better than a savings account, for sure.

Time and time again the best approach for highly compensated people who don't want to actively manage their finances is to put a chunk of every paycheck into a broadly diversified range of index funds and forget that it exists. In the US this means a) getting your company 401(k) match no matter what; b) putting the rest into a Roth IRA as cash flow/debt service allows; c) putting the rest into the remainder of your 401(k) as cash flow/debt service allows; d) putting the rest into a non-tax-advantaged brokerage account that basically mimics your 401(k) but probably has better fund options.

[bumby]

Except we mere mortal humans have the added constraint of limited time.

Meaning if you were planning on retiring during one of the long sideways or downturns your required "time in the market" may have just been extended by a decade. The impact of that depends on the unique time constraints of the individual and how well they addressed risk exposure.

Add to that, most economists don't think the long-term market returns will approach the past returns. Most now think 6% is reasonable, when the past was 10%-12%. This extends the horizon further unless you are willing to increase risk exposure by selecting higher growth stocks.

[pc86]

Future returns could certainly be less. But all we have to go on is what's happened so far. In the past even the worst entry+exit points are acceptable for retirement if not astounding, if you've saved something like 15% of your income for age 30-65 (I forget the exact numbers but that's more-or-less close to it). Yes, some people have to choose between cutting their standard of living and retiring on time, and retiring later for the expected standard of living. I'm not sure what we can do to change that? Like you said, we have limited time and everyone's situation is different. Go onto any of those retirement income calculators and compare the person who starts saving in their mid-30's but maxes everything out to the person who starts saving with their first job out of school and gradually increases from $100 or $200/mo.

Your comment was that equity investing can be disastrous if you hit the timeline wrong, and my only point was that unless you're speculating or are only in the market for 5-10 years, that has never happened. We have no way of knowing if that will happen in the future or not, but there's no reason to believe that we're going to see decades of middling or negative growth. There's really no other option if you want to have a real retirement unless you plan to just rely on whatever government assistance you can get.

[bumby]

Your point is well taken on future returns and how starting the compound interest cycle is a major contributor to success.

>that has never happened

This is the part that I disagree with. Talk with anyone who planned on retiring around 2008-ish. As a hypothetical, if the market is the proxy measure they lost around 5-8 years of retirement because they had to have "more time in the market" to re-coup losses. If they actually retired and were drawing down their money, it's even worse. Granted, the hypothetical is biased because someone of retirement age shouldn't have that much market exposure, but the point still stands that, while true at the population level, waiting for the market to recover doesn't always work out well at the individual level. I tend to think the people who tout long-term averages of market returns tend to ignore the long periods of sideways or downward movement that may align with an individual's specific circumstances.

[pc86]

You make a good point that I tried to address but didn't do so very eloquently. My "never happened" was to a sustained period (12, 15+ years) of returns where your contributions weren't worth much more than they were when you put them in. That would destroy an entire generation's retirement. Your point about losing 5-8 years in your goal was to retire in 2008 is well taken. Folks in that position, assuming they had massive market exposure (which like you said is a mistake and extremely risky), had to either take a standard-of-living cut in retirement, continue working, or draw down principle and risk running out of money early.

[joshribakoff]

Statistically the best way to max returns is going all in as early as possible, not trickling money in with a DRIP/DCA