My questions are in bold italics and their responses follow in black.
Let's get started...
Tell us a bit about yourself (age, marital status, kids, where you live, etc.)
I am 29 years old, my wife is 32, and we live in the Washington DC metro area. We recently just had a baby a few months ago, so we are getting back into the swing of things after maternity leave, and everything that comes with being first time parents. I would say it is not uncommon for people in this area to earn more than $100,000, considering all the lawyers/lobbyists/politicians/executives in the DC area. These higher salaries are offset by the higher cost of real estate, which is common in the larger cities. I have a Bachelor of Science with a focus in IT, and and MBA with a focus in IT.
What do you do for a living?
I work in the IT field and my wife works in the Hospitality industry.
How much do you earn annually?
My current salary is $128,000 (not including any bonuses or additional comp/benefits). I like to use these "base" salary numbers for any type of budgeting or planning, and not to include bonuses as they are not guaranteed (but I have consistently earned them in the past several years).
How does this amount break down (salary, bonuses, etc.)?
In addition to the base salary ($128k), I have been averaging a performance bonus that is paid every December of around $9,500-$10,500 for the past 3 years. This is highly dependent on the health and success of the firm where I work, but it is not uncommon for high performers to get this consistently, assuming the company is healthy.
Do you receive any additional compensation/benefits from your employer (401k match, stock options, etc)?
I have the following additional benefits that I receive from my current employer (outside of salary and bonus);
- Long Term Disability: 80% of my salary (my cost = $0)
- Basic Life Insurance: 1x my salary (my cost = $0)
- Pre-tax transportation: I have the option to designate money that will be allocated pretax for transportation needs. This could be for public transit (Metro) or parking. If I were to use this benefit, I would save about $28 for each $100 due to the pretax classification.
- 401k Matching: The firm matches 0.25% of every 1% I contribute, up to 4% -- this means if I contribute at least 4%, they will put in 1% of my salary. This is deposited into my 401k account with each paycheck, and is immediately vested at 100%.
- 401k Profit Sharing: I also receive a one-time deposit into the 401k every December 31 which is equal to 6.5% of my salary, regardless of what I contribute to 401k that year. This benefit started after being with the firm for 2 years. This contribution is immediately vested at 100%.
Total 401k contributions (mine + firm) for 2013 will be approximately $27,100
How long have you been working?
I have been working at some capacity since I was about 16. I didn't start full time work until 2005 and I was 21 and a junior in college. I was offered a full time job before I graduated with my undergrad degree, which made me extend my time in undergrad from a planned 4 years into 5 years, and to take courses at night to complete the requirements. At the time, I gambled that the extra full time work experience was worth delaying graduation by one year. This paid off immensely as some of my friends had difficulty finding full time work after they had graduated. I was able to "lock in" the full time position early. I've heard it mentioned before, and it's worth repeating, if you are in college don't wait until late senior year or graduation to start looking for a job! Putting in the leg work early does pay dividends.
How long have you earned at least six figures?
I have been earning six figures since I was 26 (so going on the 4th consecutive year of six figures)
Here is the breakdown of my yearly earnings since I started working full time at age 21 in 2005:
- 2005 - $38,000 (was working at a company that is over 100 miles away from the DC Metro area "Company 1")
- 2006 - $49,000 (Company 1)
- 2007 - $80,000 (moved to the DC Metro area, "Company 2")
- 2008 - $85,000 (Company 2)
- 2009 - $90,000 (Company 2)
- 2010 - $110,000 (Company 3 in DC Metro area)
- 2011 - $116,000 (Company 3)
- 2012 - $120,000 (Company 3)
- 2013 - $128,000 (Company 3)
What have been the key steps you have taken that have allowed you to earn this level of income?
As cliche as it sounds, you have to enjoy (to some degree) what you do for a living. The reason I mention this is that, for the most part, advancing your income requires you to be a top performer. In order to be a top performer, you have to put in work outside of the normal 9-5. I think this is especially true in IT, as technology changes so rapidly, keeping abreast of the new tech and changes and what is trending will stretch past your day-to-day schedule. So you have to be willing to at least follow industry trends and keep up with how your industry is progressing. I don't think you can keep a sane life if you don't at least enjoy what you do for a living when you are spending the most hours per day doing it.
You can also separate yourself from the pack if you are able to turn your tasks into things that either (a) generate more income for the company, and/or (b) reduce costs. Even more important than figuring out how to do this, and executing it, is quantifying it to management so they are aware how you are contributing to the bottom line.
I also think having the willingness and curiosity to always be learning. If you are not learning something new, then you are stagnant. Top performers are never stagnant. This is very evident in IT, as it is constantly changing, so I am constantly learning. I sometimes feel it is just a treadmill of learning that never ends; I realized this early in my career and I'm at peace know that my industry requires constant learning and training to keep alive.
Which of the following career advancing strategies did you employ (if any) and which were most effective: a. Doing well within your current company and being promoted. b. Jumping around from company to company always seeking a higher salary & responsibility. c. Entirely changing your career path from a lower earning field to a higher earning field (going back to school, etc).
I have always been in the IT field since I started working, so I don't have any exposure to completely changing my career path and the impact that would have on my salary.
I have done item "B" and jumped from one company to another for a bump in salary and responsibility. My jump from Company 2 to Company 3 was a pay increase of +22% along with a company size that was about 3x larger.
I think there are advantages to both a smaller company and a larger company. The smaller company allows you to get noticed faster if you are a top performer, and can lend itself to moving up the ladder faster, but the smaller companies do not always have the deep pockets that large multinational companies have. Larger companies seem to pay better, but it is more difficult to move up the ladder due to the many layers of management. I guess it all depends what your end goal is; a nice title or a nice paycheck. You can have both if you are willing to work for it.
I am working on item "A" at my current firm -- I've been branded as the "go to" guy by our CIO, and interact with them frequently. I'm currently working on my future career path with the help of my boss, carving out a new position that I can grow into. I'd like to stay with my current company for the foreseeable future, as I feel like I'm starting to gain some momentum.
Someone gave me a good piece of advice that answers the question "should I move on to a different company/job?" -- stay with your current company/job as long as there is something to learn and you haven't 'topped out'. I used this piece of advice when moving from Company 2 to Company 3, as I felt I was topping out at the firm, and did not foresee anything to challenge me to learn in the immediate future. In my current position with Company 3, I feel that I am around the 80% top out mark so I have a little bit more work to do until I reach the 100% mark and either need to get new responsibilities (promotion) or a new company.
What are you doing now to keep your income growing?
I think there a few things that I am doing that can be repeatable by most people. The first is working on my "hard" skills. Within IT, there are certifications from all the major vendors - Microsoft, Cisco, etc. Those are a somewhat cut and dry way to separate yourself from others, to build your resume, and to assist with the yearly review question of "what have you done to improve yourself in the past year?"
A second thing is working on my "soft" skills. Being able to communicate with upper level executives is a skill that needs to be practiced. I'm making a conscious effort now to try and stay on their "radar" by getting my name out there by volunteering for projects, providing input when I feel it's valuable, and generally stretching out of my comfort zone.
I believe these things will contribute to being a top performer at my day job, which in turn would hopefully increase my income.
I have also started dabbling into the world of dividend investing, to work as a second stream of income. This has been going fairly well so far, as I'm able to invest excess cash flow monthly to keep growing the stream. In 2011, my portfolio was kicking off an average dividend of $8/month. In 2012 this grew to $30/month, and in 2013 it is averaging $75/month. I feel I can keep at it for several more years and allow this dividend income to supplement my day job income, possibly allowing me to reduce my hours or responsibilities (and pay) if I wanted to go that route. I don't foresee that desire in the near future (10 years) but I'd like to have that option if the desire arises.
What are your future career plans?
At this point in time I would foresee myself staying in the IT industry. I am currently nearing the top of the curve on the engineering side, so I believe my next logical step would be getting into management of some sort. My career path thus far hasn't directly used the skills from my MBA degree, so it would be fun to try and leverage them in a new position while still keeping my hands in the IT side.
As I mentioned before, I would like to stay at my current company assuming that I am still challenged there and don't top out. I feel that if everything stays constant, I will possibly top out in the next 12-18 months, at which point I would start to actively look at alternative positions.
Have you been able to turn your income into a decent net worth?
I'd like to say 'yes' to this question, as I think our net worth has growth pretty well in the past few years. I started to keep track of a detailed monthly cash flow and net worth 2006. Here is the overlay from my salaries outlined above with my net worth ending on Dec 31 of that year;
- 2006 - $49,000 (Net worth: $20,500)
- 2007 - $80,000 (Net worth: $56,500)
- 2008 - $85,000 (Net worth: $72,000)
- 2009 - $90,000 (Net worth: $124,600)
- 2010 - $110,000 (Net worth: $169,600)
- 2011 - $116,000 (Net worth: $206,000)
- 2012 - $120,000 (Net worth: $365,000)
- 2013 - $128,000 (Net worth as of Sept 30: $440,000)
I do include our house equity and car equity in the net worth calculations.
2012 was a big year for the net worth jump due to a few factors -- my wife and I got married, so we combined financial accounts and started including that in the net worth. We also purchased a house, which appraised for higher than our purchase price so that invisible equity was included in the net worth as well -- since the purchase I have not adjusted the book value of our house, even though sites like Zillow and others have shown it increasing.
Why or why not?
I think a major factor in the growth of my net worth is the fact that I was able to go to college [undergrad and grad] without having to take on student loans. I would highly advise anyone in college, or going to college soon to do everything in their power to avoid student loans -- go after every scholarship, work as much as you can to supplement the needed income and minimize the amount of loans you take out any way possible. I have numerous friends [lawyers, doctors, etc] that earn an extremely high income, but their monthly student loan payments are more than my mortgage.
I think it has been important to invest money in the market each and every month, regardless of the ups and downs. This has been habit forming for me, and I still contribute monthly to this day, regardless of what the overall market is doing. This has helped my net worth accelerate in the past couple of years when the market has rebounded.
Another important contributing factor is our level of spending. We are able to keep our spending in control and have a pretty decent "gap" between net income and expenses. We average around $9,500 net income per month (after taxes, medical insurance, 401k, etc) and we spend on average around $5,500 per month. This gives us around $4,000 per month to save/invest, which greatly enhances the growth of our net worth.
What advice do you have for people wanting to grow their incomes?
I think it may be as simple (or difficult) as you want to make these steps;
1) Find a field of work (or industry) that makes you excited to be a part of
2) Work to become a top performer in your current company - this could likely mean putting in more hours than the standard 40hrs/week
3) If you "top out" at your current company (see comments earlier), look to switch to another company to gain more exposure to the industry. This will give you a trail of experience that you can bring along and hopefully jumpstart your "top performer" status at the new company
4) Get comfortable interacting with upper level management -- these are the people that ultimately decide your pay/bonuses/promotions/career paths
I check FMF frequently, so feel free to post questions and I'll do my best to answer them!