Deb Haldar works as a development engineer at Microsoft. He also writes the blog "A Coder's Journey," sharing career, coding and personal finance advice. We talked to him about how he budgets.
What makes budgeting as a software engineer different?
Software engineers can start out earning a lot of money, often in the six figures, Haldar said. But their high salaries are offset by working in high-cost areas.
"So when they come out they have the expectation that 'I'm going to be able to do X and Y and Z with my money,' and then they start their job and realize they're not as flush because now their houses are in Seattle or San Francisco," Haldar said. "Budgeting and being careful with money becomes very important when you're a software engineer."
Haldar, who lives in Seattle with his family, didn't buy a house for a long time because forums he reads like Bogleheads.org view housing as a bad investment.
"But my rent kept on increasing and the house prices kept going up," Haldar said. "I missed an opportunity to buy in 2011 and then in 2013, and that cost me at least $200,000 when I finally did buy in 2016."
The 35-year-old said young software engineers should try to live on a student's budget until they can afford a down payment, or else rent will take up all their income.
"My rent started at $1,100 and it eventually crept up to $2,100 a month when I finally bought the house," Haldar said.
Haldar went from paying $2,100 on a 1,000-square-foot apartment to paying a $3,000 mortgage, plus homeowners association fees and taxes (some of which is tax-deductible), for a 2,300-square-foot house.
"So I effectively pay a few hundred dollars more for a place double the size," that also accumulates in value, Haldar said.
(Learn about the ups and downs of big-city renting.)
What tools do you use to budget?
Haldar tries to automate his budget as much as possible. He transfers spending money every week to an account linked to a debit card. He and his wife use that debit card for all their day-to-day expenses like groceries, transportation and entertainment.
"Because I'm using the debit card for variable expenses I am not susceptible to overspending," he said.
He pays his fixed expenses, like his utility bill, with a credit card. In this system, Haldar has a set budget for every week, not every month, and he's not tempted to overspend in search of credit card rewards. Before he came up with this system, he used a credit card for all his spending and tracked his budget on a spreadsheet.
"What invariably happens when you're using a credit card is that you're always overshooting," Haldar said. "So at the end of the month, I was not hitting my savings goals. I realized as long as I keep using my credit card, I cannot really budget."
How do you deal with debt?
Haldar had most of his education in Canada, so he didn't graduate with much student debt, but many of the young engineers joining his team at Microsoft come out of school with tens of thousands of dollars of student debt. (Could your employer help pay for student loans?)
"One of the things I tell the new guys joining my team is you should continue living like a student on whatever your budget was and just pay off the student loan debt," Haldar said.
A software engineer at a big company like Microsoft should earn enough to pay off their student loans within a few years, he said.
ICYMI, the doctor we spoke to for our "How I budget" series said something very similiar.
What kind of insurance do you have?
Haldar has life insurance and disability insurance that would cover 60% of his income. He also said anyone in a high-income field should have an umbrella policy on top of homeowners or auto insurance.
"The amount of the umbrella should take into account your current assets, but also give some considerations to your future income as well," Haldar said.
Some people consider canceling life insurance when they become financially independent, but Haldar intends to keep his.
"But that $150 or whatever it costs to have a good amount of insurance, that is a negligible amount," Haldar said. "Even if you're financially independent, that money never hurts."
Are you a spender or a saver?
"I would definitely say a saver," Haldar said. "I live on approximately 50% of my income."
And the 50% he spends is carefully budgeted.
"I maximize my 401(k); I maximize my Roth (individual retirement account); I maximize my (health savings account)," Haldar said.
When did you start saving for retirement?
Haldar started saving within the first two years of working at Microsoft.
"There was an older gentleman who used to work closely with me," Haldar said. "The guy was in his 40s and he had like, nothing saved for his retirement and I saw how stressed he was. He had a pretty high-paying job, but if he got laid off, he didn't have enough to cover three months of expenses."
The man worried he wouldn't be able to afford to retire, Haldar said.
"I was thinking, man, when I am 45, I don't want to be in that boat," Haldar said.
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