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Ask HN: What are the best strategies for a new grad engineer to build wealth?

5 points by lowiqengineer ↗ HN
I know about a few finance blogs but most don’t address folks like me - single, no debt, but crushed by high rent and a mediocre 401k match.

I currently put in 28% of my pretax income into my 401k and have been for 4 months now (only started using it in December 2018). So far it is not much and I have a similar amount in my mutual fund portfolio, but I’m concerned I bought in at nearer to the peak of the market.

Since my net worth is already pretty mediocre, what can I do to increase it more quickly? I’ve considered switching jobs but I’m resigned to the fact that I can’t get into Google or FB, and my current total compensation is unlikely to rise even to new grad G/FB levels.

Is it hopeless for me or should I keep pressing?

22 comments

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arthurcolle
28% is huge. Good job for doing that. Not many more options here. Reduce expenses or increase income, but remember to live a little! Also noticed your username and your thinking that you "can't get into FAANG." A lot of interesting work is being done at companies that aren't Internet company superstars, and if you enjoy what you're doing, you shouldn't be so hard on yourself. Just my $0.02.
lowiqengineer
I already work at a FAANG, the problem is my rent is absurd (~3k all in) and I have a higher tax burden than HQ. Also I work at the FAANG that isn’t respected and pays poorly - feels like reading HN is just a series of microaggressions some days.
RayMan1
What are you renting for 3K? Seems to me your rent is your biggest problem here.
lowiqengineer
A < 500 square foot studio. It’s close to work at least.
arthurcolle
That's absurd. For $3K, that's highway robbery. If you have decent credit, why don't you try to get a mortgage or something?
lowiqengineer
Ive considered it. I have around a 770, but I don’t have anywhere close to 20% down on the $700-1mil condos/townhouses near by (my total net worth is only around $120k today, which is honestly pitiful).
CoffeePython
That is not pitiful.

I think you should recalibrate to the average. Most new grads have a negative net worth. You are far ahead of the curve and it’s good you are thinking about wealth building, but it’s very dismissive to say 120k net worth is pitiful.

lowiqengineer
I'd wager with 1.5 years of experience + internships most Google/Facebook new grads have a net worth that's double or more, especially including vested RSU appreciation.

I was talking to a new grad engineer at Lyft who joined the same time I joined my company - his net worth is around $300k now not including unvested RSUs.

aprdm
Comparing yourself to others is a sure way of feeling upset , there’s always going to be people with more money than you.

Life isn’t just about money or work. I have less net worth than you and a lot more years under my belt, the country I am in doesn’t pay as much for software engineers and that’s ok.

jklein11
Call me naive but I really don't believe that most google/facebook new hires have 250k in net worth.

Let's say that they started at 200k per year(that seems really high). Their take-home would be 135,000 in California. That means after 1.5 years they would have taken home 202500. Even if they managed to graduate from college not only free from student loans but with a net worth of 50k, they would need to save all of their take home for the first year and a half.

Do I think that some people with 1.5 years of experience have a net worth of 300k? Sure. But I certainly don't think it is most.

lowiqengineer
It's 200k, plus bonuses, plus RSU appreciation, plus savings from having a lot of needs taken care of (transportation, food, laundry, etc). A lot of them also made a bunch during their internships and got bigger signing bonuses than I did (I only graduated with around ~$40k through a handful of internships and college jobs)
jklein11
Is an entry-level engineer's base salary really 200k?

> plus savings from having a lot of needs taken care of (transportation, food, laundry, etc)

This isn't additional revenue earned, this is just lowering your expenses. Yes, these perks are nice but they don't really contribute to net worth.

Graduating from college(which would cost somewhere between 150,000-500,000 for four years with limited ability to earn income) with a positive net worth is amazing. It is awesome that you were able to do it. I doubt most people are able to do so.

WnZ39p0Dgydaz1
Congratulations, you've just insulted 99% of the population, and probably 99.9% if you are including countries other than the US. I hope you find a way to get "wealth", but you may want to start thinking about how you come off to other people. Calling everyone except for a few FAANG employees pitiful doesn't make you sound like a like-able person.
lowiqengineer
Perhaps that’s true, but it’s apparent to me that those people are the only ones with a chance at class mobility in this country now. At this point at least, it’s out of reach for me.
gshdg
Consider a room in a share instead? There’s a reason that’s the norm for the first 5+ years or so of a new grad’s life in a major city.
lowiqengineer
That's basically my only limit. I refuse to have a lower standard of living than my parents did when they immigrated to this country. And at best, I'd save $12k more a year, which is good, but that's like half of a FANG bonus.
gshdg
If the 401k limit is no less than 28% of your income, that’s a fairly low salary, although not totally unreasonable for a new grad.

My suggestion would be to focus on getting to be an excellent engineer. Ask for raises at every cycle. Put in 18-24 months at your current job. Then you should be able to get significantly higher comp at the next one.

When you get a higher salary, don’t increase your expenses.

As a new grad you’re not going to become a millionaire overnight. Building wealth is a game of patience.

But you’re already saving a lot, and that puts you ahead of the curve. Especially since you’re doing it early in your career when it will have the most time for interest to compound.

Put in 10 years of career growth without spending growth and you’ll find yourself socking away a whole lot of money. Put in 20, 30 years and you’ll find that wealth has grown.

lowiqengineer
The limit ($19k contribution) is around 17% of my pretax, I'm just frontloading it right now. A lot of my friends put in 90-100% into their 401k because they are already wealthy.

Our compensation cycle is 1 per year, and it's unlikely to get more than a COL raise at my company unless you have top 5% performance. I've tried getting other offers but the best I've gotten is still less than Google new grad (I now have ~1 yoe)

jklein11
What do you mean by frontloading?

Also, that is a pretty solid salary for someone with 1 year of experience. Congrats!

lowiqengineer
I’m putting in more at the start of the year to reach the cap faster.
jklein11
What is your reasoning for doing so? That sounds like a lot of extra work for not a lot of benefit.

TBH it sounds like you are treating building wealth like a sprint. It is more like a marathon

hello_moto
From the tone of your responses in this thread, you are definitely comparing your financial situation with your peers of the same age but at the same time you aren't getting paid like them and you have given up pursuing similar opportunities like your peers (or you missed the boat..)

There are a few ways to increase your net worth:

Spent less, move outside bay area.

Go work at Faang, but make sure you a++ the interview to negotiate higher pay and make sure you have competing offers as well. Kinda like hoping the stars align.

You can work day job and make money after work. Consulting, babysitting, dogsitting, sell cracks, online business, mlm, sell dreams (buy my interview preps to score 6 digits job), etc.

Jokes aside, welcome to the new phase of your life. This is when nobody can tell you what to do and no one can help you to decide what's best for you. Only you can decide what's best for you.