I Finally Feel…Rich

You couldn’t really tell with my net worth update for April, but I got a huge raise this year on my base salary. As in a raise bigger than I got with the promotion last year. I definitely feel like my compensation is more in line with the market rates now, which is awesome. Plus, I have quite a bit more net income to save each month with the raise. I’m pretty excited for that.

I never really had a definition for feeling rich, but apparently having about $1,000-2,000 in disposable savings (i.e. amount available to save after maxing out my 401(k) evenly and taxes) per month with six months of cash reserves in the bank and investing 20% for retirement does it for me. I definitely feel like I can buy whatever I want. In my life thus far, I’ve built up a good frugal mentality, which has changed to a conscious spending mentality over the last year or so. I know that I have definitely experienced some lifestyle inflation, but I’m happy with how I’ve been spending my money.

Since I now have my raise for the year, barring a promotion at the other review cycle (which I really don’t see happening for at least another year or two, let alone later this year), the only variable in my total compensation for this year is my company’s stock price and whether or not I stay at my company (which is my current plan for the next few years). I won’t reveal the range (until the end of the year), but suffice it to say, I’m still shocked that I could even be seeing that number at this point in my life.

My projection for next year (2013) – Oh. My God. I don’t even want to think about that number because it still seems so insane. I’ll believe it when I actually see it.

I will most likely hit the social security tax maximum in October/November this year. It could be in August/September next year. That is a pretty nice amount of extra monthly cash flow.

Maybe being financially independent by the end of 2020 isn’t such a crazy goal.

Don’t get me wrong – I’m not going to go out and buy a $50,000 luxury car. That’s just not me. But I definitely feel like I don’t really need to worry about money and that is an amazing feeling. (Not that I have ever really worried about money…)

I now see why your career is one of your most valuable assets. So far, I’ve been grossing $15-20k more each year. I keep doubting that kind of growth is sustainable long-term, but then the subsequent year’s numbers get completely pushed up from my initial projections. Because of my salary growth, both my salary and savings are starting to compound now, which is amazing to watch. A 5% raise now means far more than it did on my starting salary a few years ago and that’s only going to continue.

I am so excited and enthralled to watch this journey.

How do you define being rich or wealthy? Do you meet your definition? If not, when do you think you will?


28 thoughts on “I Finally Feel…Rich

  1. Congrats! If you keep saving like you are you will have so much freedom and flexibility in a few years.

    I think of wealth more as money in the bank than monthly income. We have plenty of extra money at the end of every month which makes me feel lucky and like I don’t need to worry about money.

    To feel wealthy I would need a paid off house, full college savings accounts for both kids, money to send the kids to

    • (oops) private school, and great retirement account. Thanks for forcing me to think about that. Maybe we’ll be there sooner than I thought.

      Does your industry feel very stable or could there be a bit of a bubble?

      • I already feel like I have pretty good freedom and flexibility :) If I don’t buy a place, I could live without a job at my current spending level for almost 3 years. If I tapped my retirement accounts, I could survive for another year.

        I agree that wealth is more about money in the bank than monthly income – but I also see it as the gap (as FMF calls it) between what I’m spending and what I’m bringing in. And with this raise, that gap widened quite nicely. I love not having to worry about money.

        My current employer definitely feels like we’re in a stable spot. The industry seems a bit crazy right now in that I get a ton of emails from headhunters, so maybe we could be in a bit of a bubble. And the best thing I can do to combat that really is to keep excelling at my job and keep saving a ton of my income.

  2. Congrats on your raise and that must be an awesome feeling. I don’t know what would make me feel rich – I would probably define it similar to you, to have a couple thousand dollars in disposable savings. I think I’d feel rich if I could do that myself, like you, and not in a couple.. I’m not too sure though.

    • Thanks :) I definitely think that being able to do that by myself makes the feeling even stronger. I’m pretty confident that I could reach FI quicker if I had a partner making the same income, but I’m not going to rely on that since that’s not reality.

    • I love Throreau! Congrats on the promotion, and best of luck with the self-restraint that comes with it. :p It sounds like you’ve got you’re head on right about it. If I had enough to save for retirement and kids’ education and travel I’d be good.

      • Thanks! I set up direct deposit to put the money for my monthly spending plan into my checking account and the rest into an Ally savings account, so that only my savings account would notice the amount of the raise :) That was a smart plan.

    • Thanks! Some days, I start to think that my net worth and income can’t possibly just keep going up this much so consistently…

  3. Congratulations on getting to that feeling!! I think that says a lot more about your balanced view of spending(/desire) than it does about your specific income. I don’t know if I’ll ever get to that feeling no matter what our income, though I really want to. I’ve been thinking about “living at the median” but can’t seem to make myself even take the thought seriously because I want want want more.

    As for your career, though, what opportunities for advancement are there? Could you work at your current company as long as you want or are you going to be weeded out at some point because your salary has grown too high? Would you transition to a different type of career when you’re more senior? Or are you going to stop/cut work when you reach FI?

    • Thanks Emily!! I agree with you – it’s the gap between my income and my spending that gives me this feeling. I think that since you guys are planning on having kids after grad school (right?), it’ll probably be harder. Just work on that gap and I think you’ll get there eventually. For me, it really helps that I don’t want a lot other than a nice place to live.

      There are plenty of opportunities for advancement. I’m currently a second-level software engineer (that was the promotion last year). I could move up the ranks of software engineer or I can move into management. I’m currently working on my soft skills and trying to determine whether I want to move into a Senior Software Engineer (approximate title) role or manage a team of software engineers. My company is also pretty big and it’s not too difficult to move between different roles.

      I may stop/cut work when I reach FI – I won’t be able to answer that question for sure until I do. One of my goals is to reach FI, with a partner, before we have kids, if we do choose to have kids. That’s why I want to reach FI in under or about 10 years :) Sheryl Sandberg, COO of Facebook, made the statement “Don’t leave before you leave.” She was referring to the women who plan their careers to make it easier to have kids, but I think that can also be adapted to planning what you’re going to do when you reach FI. So I’m going to keep on growing my career, growing that gap in income and spending, and enjoying life and work until I reach FI. Only when I reach FI, would I consider leaving work. Maybe if I’m a VP of something cool, I might want to keep working :) Who knows where I’ll be in 10 years! Although I do hope I’ll be married…

  4. Congrats on one year of blogging! I just starting catching your blogs last week and I like the niche you have created a whole lot! Please keep the posts coming. On the question of defining rich…..to me its like what NoTrustFund describes as “money in the bank.” The litmus to that would be, for example, if there was a fountain of youth discovery and I was the exclusive few who could pony up the cash and maintain my financial independence (~$4mil)

    How about the top 1%? Are you there yet? Where do you fall?

    • Thanks Luis! I think it took me awhile to find my niche, but I feel like I definitely have now. And I doubt I’ll ever run out of things to talk about since I spend way too much time thinking about my finances.

      How do you define the top 1%? Last year, my gross income was in the $110,000 range. I’ll have grossed about half of that by the end of May this year. My net worth is just under $160,000. I’m in my early twenties.

      Financial Samurai suggests that the top 1% is comprised of those who earn over $380,000: http://www.financialsamurai.com/2011/10/12/who-are-the-top-1-income-earners/ I’m not there and I don’t know when I will be there, but I think I’m doing pretty darned well for my age. I don’t know how long it will take to make that kind of money or if I ever will. I am currently forecasting grossing about $200,000 including bonuses in 2014-2015, depending on when my next promotion happens and how much I see in stocks.

        • I should definitely be pretty close to making $200,000 by 25! I should also be pretty close (if not at) a net worth of $250,000 by the month of my 25th birthday. I saved about 47% of my net income in 2010 and 61% last year. My goal is to get that up to 65-70% without hurting my lifestyle.

          I’m keeping a metric of (net worth / average monthly expenses) = # of months I can live off of my net worth and that’s been going up by at least one month almost every month since the month after I bought my car. That is pretty cool to watch :)

  5. Congrats on feeling rich! That is a priceless feeling.

    I felt rich when I found someone I want to spend my life and my savings with. After a while, it starts feeling pointless saving and investing if you don’t have anybody to share with.

    • Thanks! I’m definitely starting to get to that point… Most of my finances are close enough to being on autopilot and I bring in a great paycheck every month, plus regular RSU vests that seem to keep coming. I’m fit, playing as many sports as I can get in a week while still working 35-50 hours a week. If I don’t find a relationship that I want to last more than 4 months by my 25th birthday next year, I’ll go back to trying online dating.

        • One of my female friends actually keeps recommending it… So far, I’ve mostly met guys through work and friends (but most of my friends are in my industry).

        • Don’t know if you mind me asking, but are you still with the boyfriend who gave you a free tank of gas? Do you find that some (or all) of your breakups happen because of some lack financial discipline on their part? I imagine you are doing most of the breakups, haha!

        • (This reply is to Luis.)

          Nope, we broke up months ago – actually, just after the tank of gas that you’re probably referring to. That break-up was completely unrelated to finances.

          I’ve only had one serious problem with a guy being unhappy with me making more money. Mostly though, it was just awkward in college because a) I made more money and b) I had more money since I had no student loans, so sometimes I would want to do things that a guy I was dating couldn’t really afford. Or I remember one grocery store trip together and he didn’t understand why I was spending so much to make a particular pasta sauce (it might have been $10 for all of the ingredients…), but that’s something that I wouldn’t even think about. The one guy I dated who didn’t have student loans either, he was a total douchebag.

  6. I’m striving towards FI too, although it will still be a few years until I start making the big strides you are making now. It’s great (and encouraging!) to read about your progress, keep it up!

    • Thanks Julia! Good luck with your path towards FI :) My strides in 2010 were a lot smaller. This year is amazing me already! Compounding your salary is so key.

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