Today we continue the ESI Scale Interview series where people answer questions about their success at working the ESI Scale.
In short, the series focuses on what the interviewee is doing in the areas of earning, saving, and investing. They also get an opportunity to ask ESI Money readers for suggestions if they choose to do so.
With that said, let’s get started.
My questions are in bold italics and his responses follow in black.
OVERVIEW
Please tell us a bit about yourself.
I am 37 years old and my wife is 33.
We have been married for 9 years and have a son who will be turning 3 in just a few months.
We live in the Midwest but are both originally from the Southeast.
We have an interesting situation where both my wife and I are at home. My wife quit her job right before our son was born and spends time raising him while I work out of our home office. It is not always easy but it is a true joy to be engaged with my family throughout each day.
What is your current net worth?
Our current net worth is: $483,000
Cash: $143,000
- HSA: $3,000
- Checking: $7,000
- Savings: $133,000 (categories include: downpayment for a house, emergency fund, car replacement, travel, taxes)
Investments: $320,000
- Individual Stocks: $12,000
- Roth IRAs: $82,000
- 529 Plan: $5,000
- 401k + Rollovers $221,000
Vehicles: $20,000
How did you accumulate your net worth?
My wife and I started with a negative net worth when we married in 2010. Our student loan debt along with a car loan came to a little over $30,000.
My wife had seen first hand how poor financial choices could bankrupt you. Her mother and her grandparents all lost homes due to overspending, putting their life on credit, and never saving for the future.
Fearful of falling into the same way of life my wife wanted a plan.
I reluctantly followed my wife into a Dave Ramsey class in 2010. This gave us the encouragement we needed to really start looking at how we could get out of debt and build our savings.
The most significant factor that enabled us to start saving toward financial independence was when I took a job that increased my pay by 50% in 2011. This enabled us to pay off our student loan and vehicle debt quickly.
Our net worth has been made through the slow and steady accumulation by investing in my employers matching 401k and individual Roth IRA contributions every year.
EARN
Tell us a bit about your career.
My professional career began in 2005 in the Midwest where I took a job as a software analyst. The starting pay was $36,000.
In the 6 years I worked at the company my pay slowly increased to $48,000 but it was not without casualty. The financial crisis of 2008 put a hold on the companies matching 401k benefit for two years and when it returned a new decreased matching structure was put into place. From 2005-2011 I saw little growth.
In 2011 I had two job offers on the table that would increase my salary by 50%. One offered a work at home opportunity and the other had the normal in office environment that required a big move.
Looking at our financial situation and wanting to try something new, I took the remote position. I started that job making $75,000.
I spent the next 5 years working with some really great people and saw my salary increased to $92,000 and held the title of Senior Software Engineer.
In 2016 I took a new job as a Senior Software Engineer in a new part of the country which increased my salary by 25% pushing me into the six figures.
Do you have a side hustle?
I have worked on small iPhone projects and websites in the past. Neither have made me much money. The value for me has been in the relationships they have enabled me to build and in learning new technical skills.
I am most recently working as a consultant for a startup that looks promising.
If you were rating these results on a scale of 1 to 10 (with 10 being best), what rating would you give yourself and why?
7
The financial crisis of 2008 lead to paralysis that kept me from jumping into a different job. I often regret not taking a risk during that time by moving out of a small town into a larger city where I could have had greater earning potential.
What are your future plans regarding growing your income?
My plan is to stay with my current company and work toward the level of Software Solutions Architect.
I also plan to continue working side hustles as an entrepreneur.
SAVE
What percent of your gross income do you save?
Currently we save around 36% of my pay as follows:
- 8% of my gross pay goes into my company’s 401k plan.
- 8% per month of my paycheck goes into our Roth IRAs
- 20% per month of my paycheck we save toward long term expenses including car replacement, house downpayment, and emergency fund.
We receive 13% from my employer toward my 401k.
How did you get to this level?
I believe the influence of our parents played the largest role. My mom taught me the importance of balancing a budget and saving up to pay cash for everything. Over the years I have seen the power and freedom it provides.
My wife experienced a lot of financial uncertainty within her family. She would say they demonstrated the pitfalls of consumerism and debt.
Our willingness to work together toward a common goal to live within our means by saving and investing has provided a great deal of security and peace for both of us.
One tool that truly helped us was You Need A Budget or YNAB. We enjoy saving up for a category and knowing that we don’t have to feel guilty when we spend from it because its been budgeted.
If you were rating these results on a scale of 1 to 10 (with 10 being best), what rating would you give yourself and why?
6
We have been saving and budgeting for almost a decade together and still feel like we could do better.
The most challenging category for our family is saving for a home.
It was not until after our son was born I chose to start looking for a new job. We had just refinanced our home of 6 years to only sell in buyers market and move across country. Within a year my company provided me with the ability to work remote and we moved back to the Midwest only to find ourselves now in a sellers market.
We are still renting and trying to determine when and where to purchase a home.
What are your future plans regarding saving your money?
We plan to continue saving up and paying cash for all items with the exception of our home.
We hope to finance no more than $225,000 with a 15 year mortgage when we do purchase another house.
INVEST
What are your main investments?
The majority of our investments are with Vanguard in the VTSAX fund.
We contribute $900 a month to our Roth IRAs.
We made a one-time contribution to our son’s 529 of $5,000.
I contribute 8% of my salary each pay period to my 401k to receive my employer’s match of 8%.
I receive an additional 5% of my salary once a year toward my 401k from my employer.
I purchased around $10,000 individual stocks back in 2006.
If you were rating these results on a scale of 1 to 10 (with 10 being best), what rating would you give yourself and why?
8
I made some rookie mistakes when I first started investing. If I had stuck to the sage advice of “invest in what you know” I would have over 100k in my individual stock portfolio today from my initial investment.
What are your future plans regarding investing?
My wife and I would like have a passive income stream through rental property one day.
We also have thought about maybe being more conservative in our investment strategy. Our portfolio is heavy in stocks at 95% with 5% in bonds. We plan to evaluate a more balanced portfolio in the near future.
WRAP-UP
What would you say is your greatest strength in the ESI wealth-building model (Earn, Save or Invest) and why would you say it’s tops?
Investing has been so incredibly easy to automate and not think about.
A great deal of sacrifice has been made in order to Earn what I now make and Save. We have never regretted the money we have put into our investments.
What money mistakes have you made that others can learn from?
The greatest mistake my wife and I have made was in the timing of our move to Texas. For us, relocating to a place we had never been with a newborn put a great deal of stress on our family.
If I could go back, I would not have prioritized the additional income over the security of owning a home, close relationships, and living in a place we enjoyed.
That’s not to say those things can’t be found in a new place. It’s just important to understand there is more to life than earning, saving, and investing.
Are there any questions you have for ESI Money readers regarding any parts of your finances?
We currently have $100,000 saved as a downpayment for our next home. We want a 4 bedroom house with a total budget of $325,000.
Should we buy or build a house now or wait and see if prices come down?
We would also appreciate any advice regarding the purchase of a home for a young family with a work from home parent. We are doing our best to be patient and not purchase a home that is too large or over our budget.
My wife and I were lucky that we were apartment dwellers in Manhattan during the 2008 crash. When we were married and looking for our home which we closed in January 2012, prices had still not recovered. We did not have a home to sell, and we did have a similarly large down-payment in cash. Our newborn came a couple of years later. The suggestion I have about the home is to check the prices on Zillow or some such site to see how they have been moving in the specific region, town or part of a town, you are looking at. We noticed that while in the part of town we live in, they were doing better than other parts. Also, some towns bordering ours are doing better than others. this was true then, and is true now 7 years later. FYI, I am also a senior software engineer. Timing is never easy, and you should prepare for that fact that a better house may come on the market 6 months later, while also great ones could go off before you start a negotiation. Both happened to us, although we do like our home.
Size matters about your future plans. Consider this, you plan on 3 kids, and want each to have their own room, but only get a 3 bedroom home. Then you decide 5 or 10 years from now to move. Well, you will have closing costs on the new home, sales costs on the old, and of course moving costs. It might, and I say might as it depends in your area, be cheaper to buy the bigger home now, and not move. On the other hand, if the market does well, housing and the stock market, then you might be better off to buy, and then move later. The costs associated with moving kept us from doing so to get the marginally better home. We preferred to keep that money in our savings. Also, heating and cooling matter. As energy prices change, it might become expensive to maintain that larger home, and of course if it’s well insulated, it could not be.
The devil is in the details!
Wow. You’re rockin’ it! Are you planning on saving to pay cash for your house? Or are you looking to do a mondo down payment? Keep it up!
As you probably know as an experienced SW engineer, your salary still has room to grow. I work with a number of SW engineers/architects/managers and those with skills in high demand can command even higher compensation ($200k+). If you push the “E”, save as much of the extra earnings as you can (kids are expensive) and invest like you are now, you’ll be fine.
That’s encouraging to know. I am sure I could earn more. Hard lessons have shown me that more is not always the answer but it is nice to know 200k exist for the SW Engineer. Part of the challenge for me is that these high salaries often require one to move to an expensive area of the country.
SWE here. you should look for a fully remote FAANG role. You can 2x your current comp for the same level.
My view is to treat your house purchase like you would any other investment ie dont try to time the market. The sooner you buy the sooner you stop paying rent and mortgage payments over time will grow your equity.
I am assuming that you want to live long term in the house so therefore just like shares the up and downs of the housing market will only impact you if you want to sell. Even then jf you are buying and selling in the same location it does not really make a difference