How I Spend My $360,000 Software Engineer Income
Do all software engineers have an extravagant lifestyle? I share how I spend my income in this video. Remember, wealth isn't defined by how much you make but by how much you spend.
“Wealth isn’t defined by how much you make but by how much you spend.”
My Income & Expenses
Software engineers make a decent income in the US. About three months ago, I bragged about rejecting Google's $360k offer in favor of a better opportunity. It was controversial, creating noise, loads of hate comments... and views 🙄. In this video, I'll talk about how I spend my $360k-plus annual or $30k monthly software engineer income. In the end, I'll also share my three tips on how to build wealth, so stay until the end if you are interested.
Again, the $360k is an offer I didn't accept. I won't disclose my current salary, but I'll use $360k as an estimate. Also, let me remind you again that I don't receive the entire amount in cash. A part of it is a one-time signing bonus, and a significant portion is equities in the form of RSUs or stocks. If you don't know what RSU means, check out this video. In short, my income fluctuates depending on how the company stock performs. It can go up or down, and I can make more or less. But again, for the sake of simplicity, let's assume that I make $360k a year.
Here's the complete list of my expenses in the past three months (June - August). I use Personal Capital’s free app to get an overview of my net worth and track my expenses. I downloaded the transactions on a spreadsheet. And I tried to categorize them into groups, like meals, auto, groceries, utilities, rent, etc. Then I used Excel's Pivot Table to create a summary of my expenses. I spent a total of about $14,400 in the past three months. That's about $4,800 per month, including rent. So what do you think? Is that a lot? 🤷
Oh, one more thing. It's how much we spend, not what I spend. Many thought I was single without friends or a girlfriend after watching my A Day in the Life video, but guess what? I'm married. So these expenses are how much my wife and I spend together, not how much I spend alone.
The Full Breakdown
Let's take a look at the details. The most significant expense, of course, is rent. I used to pay about $2,100, including parking. Now, I pay $2,180 per month due to a recent lease renewal. So, is that a lot? I live in a 2016-built two-bedroom two-baths apartment in downtown Redmond which is about 10 minutes from Microsoft Headquarters by car. Still not feeling it? Let's use Zillow to see how much similar places cost in my neighborhood. Everything starts at $3,000 😳. What about downtown Seattle? The average rent seems to be around $4,000 monthly. My wife and I moved into this apartment four years ago when the rent was $1,999. We're very fortunate because if we were to move into the same unit today, we'd probably have to pay around $3,500 due to rent shortage. Also, the landlord didn't raise it much (Thank you!) I hope this clears up any misunderstandings made in this video because it's hypothetical; I don't live in a $3,000 one-bedroom apartment in downtown Seattle alone. I still believe the setting isn't far from reality, but the point is I made that video for fun 😌.
The next biggest expense is auto or car. I'm on a three-year lease for a 2020 Lexus NX, and I plan to buy it early next year. The lease is $476 monthly. Combining that with the insurance, maintenance, and gas, I'm paying around $690 monthly for car-related expenses. Some people might think that's a lot of money spent on a car, and I agree. But, again, I live with my wife. I got a luxury-brand SUV because, one, I want her to be safe while driving. Two, we wanted a more spacious car this time. Besides, I'll pay it off soon, so the loan expense will be gone.
The next in line is YouTube expenses. It's the cost of running my YouTube channel. For example, online subscriptions like Grammarly and online services like hosting my website. Just an FYI, I recently started blogging. Go to piratekingdom.com, click blogs, and you can see the entire scripts of my videos there. I use Grammarly to write high-quality mistake-free scripts. If you'd like to try it for free, click on my link in the descriptions and comments below. Other YouTube expenses include marketing and filming equipment slash peripherals. I think investing $370 back into it per month for my channel is alright. What do you think? Should I spend more? 🙄
I spent about $340 per month on meals. This expense is separate from groceries; meals are what my wife and I spend eating outside. We are honestly surprised because we thought we spent less than that. For example, my favorite outside food is Costco pizza. We order one slice each and share a hotdog, which is like ten bucks. Anyways, we ate out more often than usual because we had a lot of church meetings recently. But we anticipate this expense to go down in the following months.
$316 on groceries. My wife and I are both extreme introverts; we love staying at home. A huge shoutout to Amazon Fresh for delivering groceries. I mean, that's one less reason to go outside, right? If you haven't tried it, you must.
$280 on utilities. This expense is for electricity, internet, gas, water, and sewage - the basic home-related expenses. I pay $50 monthly for Comcast internet and $15 per month per phone line with Mint Mobile. That's it. I don't need expensive unlimited mobile plans because Comcast virtually has free Xfinity WiFi hotspots everywhere. You should check out Mint Mobile too. My phone plan is $180 annually or $15 monthly for 4GB of 5G data per month with unlimited talk & text, and I've been using it for nearly three years. Its unlimited plan is cheaper than others, too. The only difference with the traditional provider is that you must pay the annual amount upfront instead of monthly. But you're still paying less in the long run. Service quality? It runs on the T-Mobile 5G network, meaning you're essentially getting the T-Mobile experience for less. Check out my links in the description and comments to learn more.
$250 for fitness. I recently started rock climbing with my wife. It's actually $60 monthly per person, but the $250 includes the initiation fee plus the equipment cost. My company benefit also covers my portion of physical wellness, so I'm essentially not paying my portion out of pocket.
$190 for clothing and shoes. Believe it or not, $190 a month for shopping is a lot for us; we don't go shopping much. We usually buy a bunch when they're on sale once or twice a year. But that's about it. 🙄
$60 on daily essentials like shampoo, toilet paper, toothpaste, etc.
$27 on entertainment like Netflix.
Finally, I spent $145 on other stuff like haircuts, dry cleaning, gifts, and covid testing.
So that's the full breakdown of my, sorry, our $4,800 monthly expenses. Nearly half of it is rent (45%). Rest? I save and invest.
My Monthly Expenses
Breakdown of Pirate King's expenses
from June to August 2022
Rent: $2,137.04 (44%)
Car: $689.81 (14%)
YouTube: $372.09 (8%)
Meals: $339.44 (7%)
Groceries: $316.74 (7%)
Utilities: $280.76 (6%)
Fitness: $249.67 (5%)
Clothing/Shoes: $190.60 (4%)
Daily Essentials: $59.88 (1%)
Entertainment: $27.54 (0.5%)
Others: $144.19 (3%)
Grand Total: $4,807.76
What does that mean, though? If I make $360k a year or $30,000 a month, does that mean I save $25,200 monthly? Remember, I told you that a good portion of my income is through RSUs or stocks. And I only receive the paper money once every three months. But we forget something here. Something big and important. The most considerable and inevitable expense you must pay throughout your life: taxes! If I make $360k a year, how much do I pay for income tax? In 2022, I have to pay a hefty 32% marginal income tax. That's $7,000 a month. I repeat, $7,000 a month! That's right. Nearly a quarter of my income is gone straight to the government! Take a look at this graph.
Pirate King’s Monthly Expenses including Tax
Tax: $7,000.00 (59%)
Rent: $2,137.04 (18%)
Expenses - Rent: $2,670.72 (23%)
Grand Total: $11,807.76
Nearly 60% of my total expenses are taxes, and almost 80% are rent and taxes combined. Don't forget that it took me years to reach this income level. Entry-level software engineers don't make half of mine. And as I demonstrated in this video, if you save $1,000 a month, the math says it'll take over 40 years to buy a $500k home without a mortgage. 😲
“Nearly 60% of my total expenses are taxes, and almost 80% are rent and taxes combined.”
Three tips for building wealth
My point is that you need to prepare and be ready if you want to build wealth; earning a six-figure salary alone won't do. So, here are my three tips on how to build wealth.
Tip number one. Grow the habit of saving. Not saving in banks but by cutting costs and spending on essential things. Remember how my phone bill is $180 a year or $15 a month? What about you? How much do you pay for yours?
Tip number two. Learn to distinguish the needs and wants. In my example, less than 20% of my spending is wants, and my goal is to bring it down to 15%.
Tip number three. Learn to invest early. I don't save excess money in banks but invest it in the stock market; it's an effective way to grow wealth if you know what you're doing. I created a video on Stock Market for Beginners, explaining why you should invest. It also has a step-by-step walkthrough on how to invest in the stock market using a free platform like Webull. There's a special promotion now where you can get 12 free stocks if you sign up and deposit at least a penny. Again, the link is in the descriptions and comments below.
Summary
Some people argue that I should move to areas with lower living costs. But you need to know that companies adjust your salary according to the area's cost of living. So if you relocate, for example, to places like Kentucky, you'll be compensated much lower. And regardless of how much you make, don't forget. Even if you make millions of dollars, if you spend as much, you're never going to build wealth. Learn to save, invest, and grow wealth.
Today, I shared my spending habits and three tips for building wealth. What do you think about my personal finance? If you came here anticipating how I extravagantly wasted my $360k income, I'm sorry to disappoint you. Because as you see, I don't; I'm not a heavy spender. Put more accurately, we aren't heavy spenders. I'm very grateful that my wife and I share similar economic values; we prefer to save and invest in our future. And I sincerely believe you should too. Remember, you build wealth upon good spending habits. Learn to be frugal. Explore ways to reduce costs and invest early.
That's it, pirates. Let me know what you think in the comments below. Make sure to like and subscribe if you find this helpful. Until next time. Peace ✌️
In the video, PIRATE KING made a mistake in the tax calculation. The US has a progressive tax system meaning you pay income tax in steps working up to your total income and NOT everything at the highest bracket. This website calculates the correct tax amount for $360,000 income which is $83,886 or $7,000/month and NOT $9,600/month. PIRATE KING admitted his fault and promised to be more responsible in the future by creating more reliable and accurate content.
Keywords
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