By John Sonmez November 12, 2015

Will I Lower My Earnings Potential By Not Focusing On The Right Thing?

In this episode, I talk about earnings potential by focusing on the right thing.

 

Full transcript:

John:               Hey, John Sonmez from simpleprogrammer.com. I got a question here from Tyler and Tyler says, “Thanks for the follow on Twitter and again for publishing your book and answering some of my questions in the past. I totally missed that video from back in 2013. I didn’t know you followed Mr. Money Mustache. I’m a huge fan of his.” I think Tyler is referring to—I don’t know what video he’s referring to but I’ve mentioned a couple of times Mr. Money Mustache which is a pretty interesting guy who I follow. You can check it out. Do a google for Mr. Money Mustache and I’ll probably put a link down below but he’s a guy that retired like—I think it was 30 or something. He was just a regular dude who just decided he was going to live frugally. Lives on like—or he was living on $28,000 a year his whole family and he figured out he could make enough money to retire on that and he was way happier in life doing that than being a slave to a corporate job his whole life.

Anyway, so Tyler goes on to say, “My question, as a younger, 26, designer/dev when I first started out my career I love what I did. After ___[inaudible 00:01:19] and being inspired by you and Mr. Money Mustache I realized I no longer need to work. If I can get my monthly expenses lower than my passive cash flow (real estate and investing) now my focus has swung from being a better designer/developer to learning about real estate/investing instead of reading programming books like Clean Code I find myself reading books like Millionaire Real Estate Investor. Is this okay? Will I lower my earning potential because I’m not focusing on the right thing? Thanks, Tyler.”

So Tyler I think you’re focusing on the right thing, I mean in the long term understanding how to invest and understanding some of these other concepts in life is going to be more beneficial than learning the new version of C# or JavaScript. In the short term learning C# and JavaScript you’re going to need to know that for your career but, you know, and I’m going to give you a different advice than I would give someone else because you are—you clearly are someone who wants to retire early, who values their time more than just money itself.

In general, I think I would give young software developers advice of really investing heavily in their career, learning technologies, marketing themselves, etc. but that’s looking out like a 30-year career time span. But if you’re looking like how quickly can you get out of the rat race, what’s the quickest you can do that then I’ve got a little bit of a different advice for you.

I would say basically that you are in the right path but what you’re going to need to do is basically put more of your time and effort into what you’re already doing as far as learning real estate and other investment to be able to generate passive income. You’re on the right road for lowering your expenses as much as possible. This is something that I always stress to people and they don’t quite get it. When you lower your monthly expenses you double your effectiveness to reaching retirement because if you require less money to live off of then not only do you save more money which puts you quicker to buying the investments that will give you passive income to help you retire, but it also means that you need less income to retire. It’s on both sides here.

If your expenses were $10,000 a month and you reduce it $5000 a month not only are you saving $5000 more a month, but now instead of needing $10,000 a month to retire you only need $5000 so you need half as much and you’re saving it twice as fast, so good, do that, keep doing that.

The other thing I would say is that if you have a job as a software developer or designer and you’re making decent money you can invest in trying to make a lot more money but if your time span is like 5 to 10 years, if you’re actually trying to basically retire young and early then your time is going to be better spent on figuring out how to invest money in passive income because you’re never going to—that investment in your technical ability is not going to translate enough to a high enough pay.

Let’s do some concrete numbers here. Let’s say you’re making $80,000 a year salary. You might invest in your technical skills and over the next 5 years go up to $100,000 a year. It’s going to require a lot of time to do that. It would be better to invest that time into learning how to generate passive income which will be more towards your goal. If you’re cutting your expenses way down, if you’re trying to get out of the rat race as soon as possible, to me that makes more sense.

So I think you’re on the right track. You obviously have to keep your skills up. Like I said, I’m giving you totally different advice than I would give most young software developers because I would tell them to basically keep on increasing their abilities and their skills in the field so that they’ll become more valuable and that’s going to pay off in the long run, but instead, I would tell you just be on maintenance mode. Make sure that you have enough applicable skills to do your job and to continue to get paid and keep your job and then devote the rest of your time into developing the skills to be able to build passive income and to be able to retire early to invest because that’s going to be the thing that’s going to be much more valuable to you over the long run.

Good question. I like the path that you’re taking and I wish more people would take that path, but like I said, the number one thing is going to be what you’re already—sounds like you’re doing is reducing your expenses. If you’re following the Mr. Mustache route I think you’ll get there, but yeah, don’t worry too much about investing your time in education that’s going to help you to retire early. I would also say make sure you do take action. A lot of people read, read, read, they read all these books and then they never actually do anything and again, you could be the wisest investor in the world, but if you’ve never actually done anything it’s not going to matter.

Anyway, thanks for sending me this email. I hopefully—I hope that you’ve enjoyed the answer and if you liked this video definitely subscribe to my channel and I will talk to you next time, take care.

 

 

 

 

About the author

John Sonmez

John Sonmez is the founder of Simple Programmer and a life coach for software developers. He is the best selling author of the book "Soft Skills: The Software Developer's Life Manual."