I’m Making all this Money as a Software Engineer…What do I do with It?

You just graduated from college, landed a job, and now you’re making more money than you know what to do with…at the moment. You’ll find many ways to burn through all that cash, and it’s my job to tell you not to do that. Learn how to handle that big paycheck and set yourself up for a bright future.

According to Glassdoor, the average salary of an entry-level software engineer in the US is $85,629 per year (retrieved 04/12/2018, so that number will change over time). Well, what does the median US household make? “According to the Census, this measure was $59,039 in 2016, a record high.” (Wikipedia)

Already, you’re making a lot more money than the typical US household, all by yourself. You can do whatever you want, right? WRONG. I was stupid and did stupid things with my money, wasting so much time. Don’t be stupid. When you graduate and get a job:

Do you have any credit card debt? Pay that off.

Do you have a very small student loan balance? Pay that off.

Do you have a very large student loan balance? Make a dent, then make a plan to pay that off.

Owe money on a fancy car? This is no time for fancy cars.

Live cheaply — act like you’re broke — and you can amass some serious wealth with the money you’ll be bringing in. For those of you who are having an internal dialogue right now about how high the cost of living is in your area, I’ve got news for you.

Living costs a lot everywhere, so figure out how to make it work where you live.

Spend less than you earn, pay off high-interest debt, pay down (or pay off) low-interest debt, invest, save, and you’ll thank yourself later. I know because I did the opposite and kick myself over it at least once per week.

San Jose, CA housing costs are more expensive than housing costs in Bald Knob, AR. So you have two choices: Move to Bald Knob, AR, or figure out how to spend less in San Jose. I moved from a low cost of living area to Los Angeles, and overall I’m better off in this high cost of living area.

Figure out how to make it work, but the key is to spend less than you earn. The larger the chunk of money you keep, the better off you’ll be in the long run. Being a software engineer can put a lot of money in your pocket, even if you don’t work for one of the big shops (Google, Amazon, etc.).

If you’re making a lot of money and you’re tempted to spend wildly while in your younger years, you’re just being stupid. You don’t have to live like a monk, but if you’re smart you will set yourself up for an easy financial life later.

Start with a budget. I use YNAB (it means You Need A Budget), and it’s great. Check out YNAB here.

If you want more detailed tips on how to keep more of what you earn, listen to the professional financial badass, Mr. Money Mustache. Go read his entire site, starting here. And then go check out this page of tips in r/personalfinance.

Making a lot of money means you have more options and a shorter timeline to financial independence. It doesn’t mean you just get a bunch of toys. Software engineers are usually smart, so be smart with that fat paycheck you get every so often.