Learn about personal finance

Dear new developer,

If you have a job, you’re probably making pretty good money. I know when I started I was making a lot more money than I ever had before (it was $42,000 per year, but this was in 1999). Man, it felt good to just buy what I wanted to buy and not worry about it.

But one thing that I did was set up my 401k and contribute to it. It’s better to save to a 401k from age 25 to 35 than from age 35 to 65, thanks to the magic of compound interest. There’s a whole lot of assumptions, but if you contribute $5000/year for each of those years and the rate of return remains the same (BIG assumption) the person who started saving at 25 will have $60,000 more at age 65. So, take advantage of time and put money away.

I am not a finance professional, but you will be well served by getting smart about personal finance. Books I like:

• A Random Walk Down Wall Street: this book convinced me that index funds were the best way to buy stocks and bonds.
• Are You a Stock or a Bond?: this book taught me that you should save differently based on the kind of job you have.
• Your Money or Your Life: this book taught me to think about money as life energy and thus not to waste it. The advice on investing is a bit conservative for me, however.
• Personal Finance for Dummies: Nuts and bolts discussion of the various types of investments. Personal finance basics.

There’s of course a lot of options to read about personal finance online as well. As a good overview, this post talks about ten personal finance lessons for software developers. My favorite point:

[C]onsciously make choices about where time is spent and one of the best things that’ll help you do that is to have a goal.

Personally, I saved as much as I could when I was a new developer, but you may make a different choice. I have a friend who invested in solar companies because it was in line with his values. I have other colleagues who didn’t start investing until they were in their thirties. There are many paths. All I’m recommending is that you make an informed choice.

Sincerely,

Dan