GROW ASSETS NOT LIABILITIES

To be financially independent and absolutely debt free, we the average consumer, should be focused on accumulating "Assets" and avoid "Liabilities".  What is considered an "Asset"?  Anything that can be owned and has value would be considered an Asset.  If you own a home, you've acquired an asset.  The value of this asset is the amount that you can sell it for.  A liability is the amount that you owe (i.e. mortgage).  Thus, if you have financed a car, it is considered a liability since you owe X amount of dollars on that car, hence it is a liability.

Your home is an asset as long as it hasn't been burned to the ground or so bug-infested that you can't sell it at any price.  The "equity" in a home is equal to the following, Equity = Asset - Liability.  Your home mortgage is considered "underwater" if the value of your home is less than your liability (i.e. if the equity is less than zero).  This occurs if you spent too much on your home, yet the house is still considered an asset.

If you own a house that is worth $200,000 and you have a $190,000 mortgage on it, your assets are $200,000, your liabilities are $190,000 and your equity is $10,000.

So what have we learned from all of this?

Asset = Good
Liability = Bad  

HOW TO SAVE IN THIS ECONOMY

With bills and more bills piling up, most Americans are living from paycheck to paycheck. For most of us, mostly college graduates, we have accumulated tons of debt from various sources (i.e. college, cars, credit cards, shopping, etc). The opportunity to save or even the thought to save money should always be in the back of our minds. No matter the amount of money that you, the average American, is taking in from each paycheck; we should pay a set amount of our net salary towards a new bill called "Pay Yourself First".

This strategy takes a monumental amount of will power and discipline to continually perform from paycheck to paycheck as we are bombarded with temptations to spend our fruits of labor on things we do not need. We are living in a society where we would rather spend our money on materialistic things to keep up with the Jones'. What I've discovered over the years, through trial and error, is that it's best to setup with your employer a way of depositing a set amount of monies to a separate savings account each time you are paid. The key to this is that it's done automatically without you having to do any work with transferring monies.

 Now some of you may say, well I will still be able to access the money and withdraw it if I am tempted. A strategy that I've used is after open a savings account with a bank and upon receiving the debit card, I will cut it up to prevent myself from withdrawing the money. You basically want to implore a "set it and forget it" situation with this account. You will be surprised after you have "forgotten" all about this account, how much money you will accumulate over time.

The trick to all of this is to NEVER withdraw the money WHATSOEVER!  I don't care if your Momma with no health insurance needs a new hip.  Alright, maybe we can make exceptions BUT for no other reasons will you withdraw that money to spend.  After you've accumulated a few thousand (i.e. $5,000 ), I would create a Certificate of Deposit (CD) account and tie up the money for a long period of time (60 month CD) to grow some interest.  The higher the amount in that CD account, the higher the payout in interest you will gain.

INTRODUCTION

Hi, I am starting a series of blog posts about finances from a software engineer's view point.

This is also going to assume that the software engineer is at the age of 35, have nothing saved up, and have no equity in real estate. I want to cover the average software engineer and where they should be in life at different ages, starting at ground zero at the age of 35.

A typical software engineer starts their career earlier, and so I'm going to make a couple of assumptions: - Standard debt @35 and will have debt cleared by the age of 40-42. - Average software engineer salary is 70K - Employer doesn't give a 401k match

I believe this will bring us into a realistic situation, and what to expect for a software engineer in their mid 30s. Also, the said software engineer is not able to max out their 401k, or buy any property until they reach the age of 40. Let's assume the software engineer has an anticipated retirement "phasing" date of 67; whereby, the software engineer will start to do part-time work until they reach 72.

In any event, here's a table depicting what we think the 401k contributions will look like: This assumes no raises, no promotions, no employer 401k match, and just a steady 401k increase over the years. By age 50, it will start to max out the 401k @22K (or 32% of 70K).

Age | 401k Percentage| Total
35 5% $3500
36 5% $7000
37 5% $10,500
38 5% $14,000
39 5% $17,500
40 10% $24,500
45 15% $63,000
48 20% $99,000
50 32% $135,000
60 32% $355,000
67 32% $509,000