I’m aiming this quick article at young people. Ages 16–21, or so. I wish someone had told me this at that age — but, I’d have ignored it all anyway! So, eh.
I used to have a negative outlook on money. I thought money was not important. I thought it was evil. I thought all the problems in the world came from money and the misuse of it and greed for it.
With hindsight, I think this perspective is very wrong! This article is about how to become financially independent (freedom!) in under 10 years as a programmer! It’s not sexy. But it is effective and safe. If that’s what you want — keep reading!
Coasting to financial freedom
Do you want to be financially free, answering to nobody? The freedom to go where-ever and do whatever you want (more or less), before you turn 28?
In today’s world it is possible. In fact it’s even pretty straight forward. Programmers are in high demand. Programmers get paid a lot. There are no entry barriers to becoming a programmer. You don’t need anyone’s permission. You don’t need any certificates. You don’t need any degrees (they can help though).
The following content is an outline of the practical steps that you COULD follow. The outline may need adjusting to fit your specific situation.
All you really need is a basic education, an interest in technology (ideally some computer literacy already) and a motivating force to help you stick at it!
It’s actually quite simple. You’ll have to go against the mainstream a little though, so it can be difficult.
Here’s the premise: save 50% or more of your income.
Huh? Is that it? Yup. Everything revolves around that. It’s actually quite magical!
For example, let’s say you earn £20,000 per year (don’t worry, if you’re living in the western world you’ll soon be earning much more than that).
If you can pay all of your bills, rent, food, taxes and other costs with half that sum, £10,000, you will have a remaining £10,000. What will you do with it? SAVE IT ALL!
SAVE IT ALL!
By saving that sum, you have 1 year of living expenses saved.
You could in theory now quit your job and do whatever you please for 1 whole year. (excluding extravagant spending on material things, but we’ll get to that later)
If you do the above for 10 years, you’ll have £100,000 saved. This is the same as 10 years of living expenses saved up.
Wow, ok. Now it would be possible to quit your job and do whatever you want for 10 years, answering to no-one!
But wait, when all that money is spent I’ll be old and poor. This plan sucks.
A better plan is needed…
The master plan
Hmm, what if instead of spending the principal amount of £100,000, we instead invested it?
You’d need to earn 10% per year on your £100,000 in order to cover your yearly expenses of £10,000 per year.
OK, now we’re getting somewhere! But where the heck can I earn 10%…?
10% is probably a bit of a challenge. However the above illustrates a simple concept. The interest on your savings can make you indefinitely financially independent.
All we need to do now is to adjust the numbers slightly to get to a more realistic place.
For example, let’s say you were to work for 20 years instead of 10, and thus save £200,000. Now you’d only need to earn 5% per year on your savings to earn your living expense of £10,000 per year.
The same applies if you were to earn £30,000 per year for 10 years, instead of £20,000. This assumes your living expenses stayed the same at £10,000 per year — so you’re able to save £20,000 per year!
It’s also very important to note that the actual amount that you earn is not all that important. It’s all about the % amount that you can save and the % of interest that you can earn.
The basic concept is: learn to code asap, look for work while you learn to code, once you find work, always continue learning and improving your skill-set, save 50%+ of your income.
Once you are a solid developer (no longer junior) you’ll also have the option of going freelancer and potentially earning more money (I think this depends on your country).
The basic career path is as follows (UK specific but the pattern should be similar for most of the western world):
You’ll be living on the cheap. Ideally you’re starting this journey while still under 18 and living with your parents to save money.
You’ll be working hard, learning everything you can about programming. You’ll be working long hours and hacking away on personal programming projects.
It may be difficult to find work while you’re still under 18, so just keep hacking away at projects and learning. See if you can earn some money by finding freelancer work over the internet.
Anything to get some cash flowing in and keep learning the skills of the trade. Try to avoid any sort of minimum wage work (non-programming) as it just eat your time where you could be learning to new skills!.
Keep looking for work, and don’t be too picky at first. Any sort of professional junior developer role will do! It’s only for a year or two.
Watch youtube videos, read documentation and tutorials, participate in open source, go to programmer meetups and meet other devs! Keep busy and keep learning.
If you’re over 18 one option would be to get out of town and experience something new. You’d need roughly £5000, a passport and a laptop:
Option 1: Grab a ticket to a cheap part of the world. Think Eastern Europe, Asia, Latin America, etc. There a plenty of cheap countries with large “digital nomad” and expat communities. This can be useful so you don’t get lonely and can meet like minded people to share ideas with.
Option 2: If you learn more easily in a formal setting, you could spend the £5000 on a programming course. I’ve never taken one so I can’t recommend anything — but there are plenty out there.
Yearly income pessimistic: -£5,000
Yearly income optimistic: +£5,000 (from various freelancer projects)
Net worth pessimistic: -£5,000
Net worth optimistic: +£5,000
By this point you will have a solid year of experience learning the skills of the trade both on your personal projects and ideally via some freelance jobs. You may already have a full time job. Keep at it.
You should still be working on side projects and learning new stuff both at work and on the side. If you can, try and spend a good chunk of time learning while at work — basically getting paid to learn!
Keep your eye out for new job opportunities which are more senior and pay more and if you can land one, great! You want to get out of your junior role asap.
You’ll have a basic salary at this point and ideally some side projects/freelance work bringing in a bit of extra cash.
Yearly income pessimistic: +£20,000 (from salary)
Yearly income optimistic: +£25,0000 (from salary and various freelance/side projects)
Net worth pessimistic: +£5,000 (yearly expenses 10k, yearly savings 5k, paid off 5k debt)
Net worth optimistic: +£20,000 (yearly expenses 10k, yearly savings 15k)
By now, if all has gone well, you should have at least 2 years of professional work experience and a year of hacking away on your own. You’re a decent developer now and you will be more and more in demand in the job market.
Keep at it: keep working on side projects. Keep going to meetups. Keep learning.
Be sure to stay on the lookout for better jobs and every 6 months or so be sure to ask for a pay raise.
Notice, in the optimistic scenario your yearly expenses have gone up a lot — this means your standard of living has improved a lot! You’ve hopefully moved out of your parents basement by now.
Yearly income pessimistic: +£25,000 (from salary)
Yearly income optimistic: +£40,0000 (from salary and various freelance/side projects)
Net worth pessimistic: +£17,500 (yearly expenses 12.5k, yearly savings 12.5k)
Net worth optimistic: +£40,000 (yearly expenses 20k, yearly savings 20k)
If you haven’t already, you could consider going freelancer. A mid weight freelancer developer can charge between £200 and £400 per day. so earning up to around 100k per year before tax (assuming only working 9–5).
Keep at it, you’re earning power should be really snowballing now.
Yearly income pessimistic: +£35,000 (from salary)
Yearly income optimistic: +£50,0000 (from salary and various freelance/side projects)
Net worth pessimistic: +£35,000 (yearly expenses 17.5k, yearly savings 17.5k)
Net worth optimistic: +£70,000 (yearly expenses 20k, yearly savings 30k)
Yearly income pessimistic: +£40,000 (from salary)
Yearly income optimistic: +£60,0000 (from salary and various freelance/side projects)
Net worth pessimistic: +£55,000 (yearly expenses 20k, yearly savings 20k)
Net worth optimistic: +£110,000 (yearly expenses 20k, yearly savings 40k)
Yearly income pessimistic: +£45,000 (from salary)
Yearly income optimistic: +£70,000 (from salary and various freelance/side projects)
Net worth pessimistic: +£80,000 (yearly expenses 20k, yearly savings 25k)
Net worth optimistic: +£160,000 (yearly expenses 20k, yearly savings 50k)
Yearly income pessimistic: +£50,000 (from salary)
Yearly income optimistic: +£80,000 (from salary and various freelance/side projects)
Net worth pessimistic: +£110,000 (yearly expenses 20k, yearly savings 30k)
Net worth optimistic: +£220,000 (yearly expenses 20k, yearly savings 60k)
Yearly income pessimistic: +£55,000 (from salary)
Yearly income optimistic: +£90,000 (from salary and various freelance/side projects)
Net worth pessimistic: +£145,000 (yearly expenses 20k, yearly savings 35k)
Net worth optimistic: +£290,000 (yearly expenses 20k, yearly savings 70k)
Yearly income pessimistic: +£60,000 (from salary)
Yearly income optimistic: +£100,000 (from salary and various freelance/side projects)
Net worth pessimistic: +£185,000 (yearly expenses 20k, yearly savings 40k)
Net worth optimistic: +£370,000 (yearly expenses 20k, yearly savings 80k)
Yearly income pessimistic: +£65,000 (from salary)
Yearly income optimistic: +£110,000 (from salary and various freelance/side projects)
Net worth pessimistic: +£230,000 (yearly expenses 20k, yearly savings 45k)
Net worth optimistic: +£460,000 (yearly expenses 20k, yearly savings 90k)
After 10 years of work:
Financial freedom trajectory
Net worth pessimistic: £230,000
At a 5% rate of interest this will give you £10,500 per year. Maybe better to keep working for a few years.
Net worth optimistic: £460,000
At a 5% rate of interest this will give you £23,000 per year. Now all your living expenses are covered. You can spend your time how ever you like.
Important note: for simplicity’s sake I’ve not covered various subjects such as inflation, compounding interest, details on investment strategies etc. I think you can just google these subjects if you’re serious about becoming financially free.
A note on further education:
Since this article is about programming I’d suggest that you only do a degree if it’s in a “hard” category. E.g. that real nerd shit that’s hard to get your head around.
I’m talking about things like Computer Science, Math and Physics.
However, if such things are beyond your school qualifications or interest, just don’t bother. I didn’t. There are other ways to learn.
A note on youth
When you are young, you have more energy and can learn more easily. Don’t waste it. Start early and finish early. Enjoy the process and enjoy the result: financial freedom.
A note on health
Don’t work so hard that your body falls apart. Stay fit.
A note on side projects
My aim is always to have a side project on the go for learning and potentially for extra income! If one of my side projects started earning serious money I’d definitely consider quitting my job and focusing solely on it.
A note on retirement
Mainstream retirement advice says you should save 10% and retire at 65. This is rubbish, save 50% + and “retire” young — then do whatever you want! Work if you like, learn, help people — whatever.
A note on tax
For simplicity in this article I’ve used post-tax (take home) wages — which are quite rough estimates — but not unrealistic (U.K. in 2020)
A note on cost of living
You’ll see in my examples that my cost of living estimates don’t increase much. Initially they are quite low at around £10k per year. This is really just to make the demo maths more simple. You shouldn’t need much more than this though — since ideally you’ll be living with your parents still and generally being a stingy poor young person.
Eitherway, once you get a few years into your career you’ll be able to easily afford £20k per year — which will afford you a good (but simple) life. You will have enough money to spend on food, activities and rent. You’ll be living well, but quite minimalistic and frugal.
A note on contacts
From my experience, building up my network of contacts has lead to lots of great opportunities. I’d recommend it.
A note on materialism
I avoid buying stuff I don’t need. I try to only buy things which improve my day-to-day life, health or happiness in a meaningful way. Or, things that save me time. And I avoid big ticket items such as cars, watches, fancy holidays. To me financial freedom is more important than these things.
A note on inflation
Inflation is an insidious force that steals the purchasing power of your hard earned savings from right under your nose. Be sure to divest out of fiat money and into more suitable long term investments.
A note on compounding (Income)
Things will start slowly. But, once your career picks up speed — things will quickly start snowballing. For example, you may save an equal amount of money in all of the first 5 years as you save in your final year!
A note on compounding (Savings)
I have not included compounding of your money (accruing interest) because it makes the math more complicated. But it’s not to be ignored. It’s a powerful thing!
Compounding interest is the 8th wonder of the world.
A note on changing pursuit
This is probably one of the most important points in the article: the really nice thing about this strategy is that it gives you a general plan to move forward, but at any stage if you find something that is more important to you you can drop everything and change pursuit.
Eitherway, you’ll have useful, in demand programming skills and a bunch of savings.