I decided to write a few blog posts about how to manage personal finance and why managing personal finance is important for a programmer (well, and why not for anyone in any profession).
The most important reason for managing personal finance is to achieve financial independence. I don’t mean that kind of financial independence in which you can buy an island in the Bahamas and live there as a billionaire for the rest of your life. I mean relative financial independence which gives you more freedom to decide what you want to do with your life.
When you are young and full of life and you get your first salary you might think that now you can buy all sorts of things that you couldn’t afford before. But be wise. Later on, you need money for much more costly things when you have children, a big mortgage, and so on. Thinking about personal finance is important to start right away, the very day of your first salary. Start investing.
How to Invest?
Investing is rather simple. Study the basics using the internet: physical low-cost ETFs (i.e. low expense ratios). What is more important is to make this a monthly habit: on your payday put aside some amount of money and buy a few different low-cost ETFs. Prefer accumulating ETFs — they reinvest the income they earn back into the fund. Learn two important things:
- Why you must prefer low-cost ETFs? (In the long run a huge difference, but why?)
- What is compound interest and why it is so important in the long run — and also the very reason why you must start investing as young as possible? (Albert Einstein said: “Compound interest is the 8th wonder of the world. He who understands it, earns it; he who doesn’t, pays it.”)
Back to the Financial Independence
As a programmer financial independence is really important. If you are financially independent you don’t have to accept a job with the highest paycheck but a job that provides the best possibilities for learning new and interesting technologies. If these two goals are combined in a good job offer — you are lucky, go get it. But if you realize at some point in your career that you are not happy in a job that pays well — you have a choice since money does not determine your options.
Don’t Play It Too Safe
I played it too safe for far too long. I worked as a software architect in a big IT corporation. Life was good, I had lots of possibilities to study new programming languages, cloud certifications, etc. The paycheck was really good. With a good paycheck, I could provide the kind of financially privileged life for my children that my parents couldn’t afford for me. I paid off my mortgage quite soon. I liked the company and all the good things it provided for me but the only thing that I didn’t like that much was the fact that as a big corporation the company also played safe and got mostly big enterprise systems with “safe” technologies (like Java). I studied Clojure in my free time and was really astonished by how productive the language was once mastered. After spending a few more years after paying my mortgage and after my kids were already adults I realized: I already have enough savings even if I don’t work at all for the rest of my life. I realized that there was basically no financial reasons for me to stay in the big corporation doing big projects with safe technologies if I wanted to find that enthusiasm again doing interesting cloud projects with an exciting and productive programming language — Clojure. So, one year ago I decided that I don’t have any more excuses but I need to leave the corporation after working there for 22 years. I contacted a few well-established Clojure shops or companies with a strong Clojure culture — and chose one of them (Metosin). I have now worked at Metosin for some 6 months and I have again found the spark towards programming inside me — the very reason why I fell in love with programming in the first place many years ago.
Well, this blog post turned out to be rather personal. But I guess men at my age tend to think of their life and past choices. If someone finds some good ideas regarding his or her own life in this blog post I’m happy. And if not, I’m happy anyway. It’s a beautiful summer day in Finland and I’m writing this text in my garden in a hammock listening to good music and drinking good wine. I like writing and nowadays — thanks to financial independence — I can mostly do whatever I like — therefore I write.
The writer has double majors: Master of Arts (Psychology) and Master of Science (Software Engineering). The writer has managed his finance so that he is now free to spend the rest of his career as he wishes (and even write blog posts for no reason).
Kari Marttila’s Home Page in LinkedIn: https://www.linkedin.com/in/karimarttila/