If you are thinking about entering the world of software engineering, reading this might save you a fortune. The lifestyle of a typical software engineer is about ten to fifteen years. Here in the valley, companies are infamous for downsizing and hiring younger more eager engineers.
There is a fundamental philosophy underlying your personal finances. Lets call it the "Millionaire Next Door Principle." This principle states that it does not matter whether you make 40K, 100K or even 250K when it comes to determining how long your will last through retirement. What matters most is the percentage of money you save regularly. The reason is that your spending habits will tend to match your income. As you make more, you will spend more. Once your habits are set, they are very difficult to change, which means that during retirement, you are likely to spend the same amount. Doesn't it make sense that if you have 500K saved and you make 100K per year, you will only last 5 to 7 years in retirement?
Here are the reasons the software engineer is in trouble:
- They have no plan for retirement
- They are typically given a "do it yourself" 401(k) plan
- They are in risk of a drastic pay cut in the near future
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