AAR55 - 5 Years in Engineering: 5 Things I Learned About Building Wealth

0:00If I were to talk to my younger self before this whole process, what would I tell myself? First thing I would say is that sitting down for 20-30 minutes with your finances is worth 10 times more than spending every day worrying about what you spend and save. Worrying doesn't get you anywhere. Stressing about it doesn't get you anywhere. And I know that's easier said than done, but the fact is if you sit down for genuinely 20-30 minutes, then that is going to genuinely, in the long run, easily 10x your financial wealth.

0:40good afternoon everyone and welcome back to at any rate my name is evan ray and we are here to help you make sustainable financial changes without breaking a sweat and welcome back to another episode actually today featuring me myself and i tough guests to get tough crowd not very happy people you know that not everybody gets along very well but uh we're gonna do the best we can to have a good episode for you guys today. But as the title suggests today, I want to cover the experience that I've had working in the engineering industry. And of course, specifically what it's taught me about wealth.

1:11And this is not, as it never is, this is not going to be detailing my experience to, to, to either brag and say, you know, Hey, look, look how amazing, you know, everything has been or how easy everything has been or whatever. And it's also not to downplay it and say, oh, you know, I'm in a good situation, but I've struggled, you know, with this or this happened to me. It's none of that. I just want to, as honestly as possible, recount what my experience has been financially related to being in the engineering field. And of course, what it has taught me. So I want to go through the top five things that I've learned from having this lovely experience of life and just this lovely experience of my life specifically, and hopefully trying to find some things that can be applicable not only to you, the listener, and to those around you, but also to my future as well.

2:01I want to take these learnings forward and try to improve my financial future as much as possible by looking backward and looking inward and being honest with myself about that kind of stuff. And I've done some things right and I've done some things not right. And both of those are incredibly useful. And as always, my goal is to be as transparent as possible. of course everything's not going to be you know a dollar for dollar uh clear and transparent but um but i'm not trying to hold back or hide things either so we're going to strike that balance but starting off a little bit of background some of you may already know this if you've if you've listened to a lot of past episodes but just to kind of quickly detail what my history has been in the engineering field uh i graduated with my bachelor's in mechanical engineering five years ago.

2:46Very soon after that, or sorry, the reason that I was in engineering in the first place was really chosen primarily because of my enjoyment of math and physics, which I know sounds incredibly stupid, nerdy, and also building things like from a kid. I loved building things. I was never the kind of kid that liked to take things apart. And I know that seems to be pretty unusual to be in a field like this and not have done that kind of stuff. But I was more the person that liked putting things together than taking them apart. So take that at face value or judge me very deeply about what kind of person I am.

3:17But that's what kind of led me down that path. And very soon after graduation, I was lucky enough to be able to start working in the engineering field. Initially, I worked as a quality engineer and then transitioned to a design engineer where I currently am. And these were both at the same company that supplies to aerospace companies. We primarily produce things that are supplied to aerospace, some medical, nuclear, blah, blah, blah. And I've now been in that field for a total of five years. So again, same company, different positions, same field. Initially at the start of this process of graduating and starting a job, I think the same as pretty much everybody out there.

3:52I didn't have any structured financial goals. I wasn't a person who left school and said, hey, I'm going to start my own business and be retired by 37. And I also wasn't the kind of person who graduated and said, YOLO, I just want to live as good of a life as I possibly can and enjoy it while it lasts and I didn't really come out with a strong feeling either direction. I just wanted to, of course, live a happy, successful, sustainable life and everything, and be able to have things to look forward to, be able to enjoy things, be able to make people around me happy. But it was all just very kind of vague goals, and there was nothing really solidified under that.

4:33since then, my process has become a lot more structured, as some of you can probably guess, but pretty much every aspect of my finances is pretty dang structured. And I do have some general goals now, which primarily is to retire early. I don't have a specific number in mind. I feel like it's so far off that setting a number may not do that much for me, at least that's my current mindset, but I would like to retire early, at least maybe five, 10 or plus years early. However, I am the kind of person that when I retire, I would like to retire while still working to some degree. I want to have a job, have something to work towards that doesn't have to pay me a ton of money or anything, but still have something.

5:14I'm not the kind of person that would enjoy retiring to a beach 12 months out of the year and just sitting there not doing much. That's just not for me. So I'd like to have something to do when I achieve that. And honestly, also, there was the huge goal of getting a house. We knew that getting a house was something that we wanted to do. And thankfully, we've recently been able to achieve that. And then I've also talked about some of my financial whys in the past. And I've also developed those along the way as well. And one of the biggest financial whys for me is being able to have enough wealth, whether that's high income or whether that's wealth built up as in savings behind me that's growing or both, but enough wealth to be able to afford to do the things I want to do with the people I want to do it with.

5:58so I'd like to be in a financial position where if I want to you know go on a trip with some friends again we're not talking about flying first class or staying in five-star hotels but just go on a trip with some friends that I can afford to go on that trip myself and also make it possible for them and not you know always be you know if I want to do something with people I don't want it to necessarily be a burden on them if it doesn't have to or if it's not comfortable for them um i really like that idea of being able to live a fulfilled life with the people around me and be able to sustain that at least as much as possible and then since then at the end of the background here is i've been able to purchase a new car we've been able to purchase a new home and both of these are covered in a lot of detail in other past episodes so i'm not going to rehash those too too much here um but and then also the last thing last piece here is that i've been making, at least from my point of view, what I think is fantastic financial progress towards retirement and financial stability as a whole.

6:58So transitioning into what I've learned, number one is don't fall for a false sense of security, but instead build true security. And I know that's a bit of a catchy saying, but for me, it's very easy to say, okay, I have a solid income, steady paycheck. I've got work benefits. I've got retirement savings. I've got health care and all that sort of stuff and say, okay, I guess I'm set because I'm in a good place because of this. And for me, that's becoming complacent without actually knowing what's going on. And there is definitely a chance that falling into that false sense of security, that you're going to be okay.

7:32That definitely happens. You may not have any big financial emergencies come up. You may not have massive financial goals that you want to achieve, and you may continue to get by and never really run into any speed bumps and that is fantastic but for myself and for i think the vast majority of people out there we not only want to to aim higher but we also want to be safer about it because that person who's just chugging along assuming they're going to be okay even with solid income is one you know big trip and fall away from a basically financial ruin not permanently necessarily but at least temporary financial ruin that they're they're not very far away from that instead we want to build a true sense of security so there are actions that you can take and I've learned myself that there are actions that you can take to build yourself true financial security and then you can be in a place where you are confident that you are financially secure so what did I actually do to build that true feeling of security for myself number one obvious of course some of this is going to come across as obvious from previous episodes but budgeting to to understand what's coming in, what needs you need to cover, and then splitting up what's left.

8:41If you don't have that visibility for yourself, then you are going to be complacent to some degree. You're going to be assuming everything is okay and going to be okay and just kind of rolling with the punches no matter what. You need some kind of a budget, not a dollar-for-dollar budget. I'm not saying, you know, I can only spend$221.50 on food every month. I'm not saying that. I'm just saying If you spend$800 a month on food, okay, put that in your dang budget and then budget around it. That's fine. I don't give a crap what you spend where, but you need to know that it's happening. Second is automating these financial moves.

9:14And or if you're not somebody that wants to go through the process of automation or that just doesn't really work with your brain, with your financial mindset, give yourself consistent visibility basically to maintain accountability throughout this process. Any financial changes you're trying to make, progress you're trying to head towards, you need to, at the very least, be holding yourself accountable by keeping constant visibility of what's happening, what you're trying to do, and comparing that to what's actually happening. And then lastly is having some kind of an emergency fund. That's arguably the biggest, most obvious step that you can take to just have financial security or true financial security.

9:50Having an emergency fund, in addition, it's also great to have diverse savings accounts outside of that, have your wealth growing in the background. Really, just all the general financial topics that we talk about on this podcast are all incredibly powerful and important. But when you combine that with, again, the accountability and or automation and having a budget to know what the heck is all happening in the background, when you combine that, you have genuinely built actual financial security. You're not falling into a false sense of security, but you've built it for yourself. And as a reminder, just making a good income is not enough.

10:23I'm not making buku bucks in my job or anything, but I know that I'm making good, solid money, and I'm very happy and proud of the income that I'm making. But I know that that income by itself is not enough to give me financial security or give anybody financial security. It just isn't that easy. But thankfully, from following some of these general steps, I've gone from assuming that I'm secure or hoping I'm secure to sitting here and confidently telling you I am financially secure because of these steps. And you absolutely can be too. and number two for here is lifestyle creep is invisible initially and i and i have learned this i would say the hard way but i don't want to overstate it because i haven't thankfully you know done anything crazy i haven't bought a penthouse in manhattan because i got a raise or anything but i have definitely purchased things that i just not only didn't need to purchase but couldn't afford to purchase as easily as i thought i could simply because i was making good money and And then I've also gotten solid raises along the way.

11:21And I have definitely, again, purchased things or signed up for things I shouldn't have. They could have put me in bad situations if I didn't give myself more visibility to it later on. But all of these seemingly small changes are genuinely invisible initially. They're so insignificant or at least feel so insignificant compared to their ongoing effects that even potentially, even if you have a budget, it can be very easy to slide in a thing or two here or there. and not even realize how big of a deal it was. So for example, for myself, a very recent example, the last solo episode actually kind of covered this whole process.

11:56Spoiler alert, I'm planning to purchase a motorcycle soon, closer to the end of this year. And if I was purchasing that motorcycle and didn't budget around it, didn't understand where all my money was going, then currently I'm still finishing off paying my car, the new car that I mentioned before. And if I was just buying a motorcycle willy-nilly, then I could easily be tacking on insurance and loan payments if I was going to take out a loan for the motorcycle or something on top of my car payment that I already have. And again, while that may seem relatively insignificant because insurance for motorcycles tends to be very cheap and the payment on a motorcycle would likely be quite cheap, tacking that on to a car payment that you were already budgeting for, again, initially doesn't seem like a big deal.

12:38But in the long run, that is just suddenly I'm trying to stretch my money further than I initially planned for it to stretch. So unless I go into my budget and rebalance it and either reduce other expenses or reduce my savings, then I just can't afford it. And I'm going to be in the negative in the long run. Instead, my thought process was, OK, I want this motorcycle. Cool. Whether I can afford to buy it right now or not, I'm not going to until the car is paid off. what that does for me is I know that I'm clearing away one payment and, and I am replacing it to some degree, probably only maybe about a fifth or sixth of the payment of the car payment with motorcycle expenses.

13:19So I will be able to actually save more once the car is paid off than I can prior to that, or then I can, what I was trying to say is I will be able to save more with the car paid off and paying for motorcycle expenses than I even was able to before. So in the end, after the motorcycle purchase, I will be saving more on a monthly basis than I was beforehand. And so I know that I'm continuing to head in the right direction of not only keeping my savings up, but even increasing my savings rate. And because I did the math ahead of time and I'm aware of that, I know that it'll be okay. But again, it'll be very easy for me to say, hey, I make good money.

13:56I can probably afford this. These payments don't seem that high. It all seems very affordable. So why don't I just tack it on and I'm pretty sure I'll be okay. And while I probably might maybe be okay if I did that, I would not have, again, that true financial security like we talked about before. And that lifestyle creep would just have slipped into my life without me even necessarily realizing. So the way I see it kind of is that financial accountability and visibility is almost like a decoder ring for lifestyle creep, at least if you treat it properly and treat it seriously. If you have those things, then that will make lifestyle creep very obvious for you and you'll want to stray away from it.

14:35Unless the last thing there is really just don't lie to yourself. It's easy to lie to yourself. We all lie to ourselves all the time about something to some degree. But when it comes to finances, you really don't want to be lying to yourself. You want everything to be clear and transparent and honest. The third thing I've learned in engineering is earning does not equal building. And I know this is a financial trope, but thankfully I was able to start improving at this early and understanding this early. but for me the very beginning of the process of like right after graduation before i really learned much about finances and i've observed it in in many many people around me you know on social media there's there's plenty of examples of it is even if you don't spend a crazy amount if you're not really building your wealth in any meaningful way then you're not making near the progress that you think you are for me that that meant i wasn't saving nearly as much as i could because i again And I hadn't done the real detailed math to say, this is how much I'm bringing in.

15:33This is how much I actually need to get by. And so this is how much I have leftover that I'm able to save or have a little bit of discretionary spending or something. Things weren't that structured. And so I just wasn't saving as much as I could. And then anything I was saving was just being set to the side, you know, pretty much as cash and a savings account. Maybe I was putting a little bit, you know, in some investments or whatever, just to try it out at some point early on. But I wasn't really doing anything structured with anything. And so my savings were just piling up as fast as I could save it, but no faster whatsoever.

16:02And really every dollar I saved was getting devalued due to inflation in the long run. The reality of it is that my wealth would have grown to some degree, but at least based on my approximate math of what I would have been instead, I would probably be at genuinely less than a third of my current wealth if I hadn't been doing the right things. And that's just talking about putting the money in the right places, putting it in multiple diverse places, especially places that might be advantaged or leveraged in some ways, I would not have near the wealth that I have currently. And again, I'm not a millionaire.

16:35I don't have a pile of money or anything, but I still would have far less than I have now if I hadn't been doing the right things. Not to mention that we would have been nowhere near being able to afford to get a home for many, many more years in the future if we hadn't made these changes. And it's not just about spending less. It's just about what you're doing with the money that you do save while of course saving as much as you're able to. So for me, what that meant was maxing out my savings as much as sustainable. Sustainable is a key word here, not maxing it out to every single dollar because that's not going to be sustainable.

17:09I'm not going to keep up with it. But it also means I was pushing it as hard as I was realistically able to and not just holding back assuming whatever I'm doing is okay. Then much of that went in, again, advantage places like a 401k where I was also getting an employer match or continue to get an employer match, a Roth IRA, taxable investing accounts, health savings accounts, all these places that can grow very, very quickly and have a lot of power to them. And then anything, anything left over that I have that I'm saving for any length of time goes into a high-level savings account. And what this means for me is this is a great recipe for every single aspect of my wealth, wherever it is, is growing.

17:46And then now, you know, of course we have wealth saved in equity in the home, and that is also intended to grow and increase in value over the long run. So that means that pretty much every dollar that I have, except for money that's sitting in a checking account, you know, to pay bills and stuff like that, every other dollar that I have is sitting somewhere that it is growing as quickly as it's reasonably able to, depending on its use. Number four here that I've learned is to make the moves the matter and skip the ones that don't. One of the hardest things, at least for me, and I think a lot of people as well, is to make sustainable financial moves.

18:20Again, I kind of touched on this before, but if you don't push enough, you're not going to see much progress. If you push too hard, you're either going to give up or you're just going to hate your freaking life while you're pushing that hard. And whether you don't push enough or you push too much, it's not going to get you where you want to go. You need to find that balance for yourself and that's going to be unique for everybody. Some people out there are comfortable saving 80 % of their income and scraping by on nothing. And they just, they find joy in life from doing that, from pushing themselves.

18:48And there's some people out there that might need to save 10 % of their income because again, for them to find happiness in their life, or maybe their income is too low to be able to save much more. That's, that's what they need to live a sustainable, healthy life for themselves. So it's going to vary for everybody, but you need to find that for yourself. So the moves that mattered for me, things I would say are worth doing is again, like I mentioned before, 401k Roth, our high yield savings account, that sort of stuff, setting up a budget to push as much as you realistically can no more and no less than that.

19:19And then also a massive, massive change for me is taking the willpower out of everything. I've talked about it plenty of times before, but setting up financial automations to move your money around without you having to worry about it makes it so that, you know, you sit down, you budget things, you determine what is okay for you and what's sustainable for you and then you walk away from it and you only go back and touch it when you really, really need to. And other than that, it just sits there doing its thing. And then you look back at it six months later, a year later, two years later, and you're like, crap, I forgot this was even happening, but now I am in a fantastic financial position because of it.

19:53Now, the things to not do, strongly, strongly not to, first off, don't feel guilty about every dollar you spend. It can be easy to say, I want to grow financially. I want to save money over the long run. And so every single dollar that I spend somewhere is a dollar that I could have saved. And people talk about, I've seen stuff on social media where people will calculate the opportunity cost of every single purchase. So for example, a$5 coffee, if you let that grow for X number of years, it would be X dollars. Let's say that$5, if you let it grow for X number of years, it would be$25. okay well now that means every time you purchase a coffee it has to be worth it it has to be worth $25 to you and of course i understand where they're coming from with that kind of idea and and for people maybe who aren't familiar with compound interest or just growing their wealth over the long run it could be sort of a powerful visual but i think this leads to a very toxic cycle of seeing purchasing as, as basically like a sin, almost like doing something that you shouldn't be doing, doing something evil, doing something bad for your future self, doing something unhealthy.

21:03When in reality, I mean, we make money to spend it. That's the truth. Whether you may be saving it, but when you're in retirement, you're going to spend it. The goal is to spend it. You may want to save it for your kids, but when you give it to your kids, the goal is they spend it. money is there to be spent to be used for something and if every time you use that use money for something you feel guilty then now you're just linking you're pretty much linking saving to being to feeling guilty or bad as well because money is going to be spent in one way or another eventually and if you just link negativity to that whole process then it's not going to get you anywhere instead i think it's important to have a framework set up so that you know when you spend something you were okay to spend that money and you were safe to spend that money.

21:49And then that way, instead of seeing saving as a problem, you just see, or sorry, instead of seeing spending as a problem, you see spending as, as a natural aspect of your personal finances. It's going to happen. It's okay to happen. You've prepared for this. That was a huge shift for me, a very freeing, amazing shift for me. And I think it can be very freeing for a lot of people as well. another thing to avoid doing is just of course assuming things are going to be okay even if you don't look at them the looking away from stuff ignoring it pushing it down you know pushing under the bed so to speak it's easy to ignore things and think they're going to be okay but i'm telling you that if you if you ignore them they might not be okay if you don't ignore them i guarantee you they're going to be okay if you pay them attention they pay them the attention they deserve and take action on them i guarantee you're going to be okay in the end if you don't look at them, you might be okay, but you might not.

22:42And that's not worth it. Third thing to avoid is to assume that a good paying job will handle it for you. I won't touch on that too much because it's a little, it's pretty self-explanatory, but again, saying it out loud and really taking it in is worthwhile. But if you just assume that either you have a good paying job, assuming you're going to be okay, or assuming, hey, I got a raise. Hey, you know, I changed to another company and I'm making a lot more than I was before, I'm going to be okay. That assumption is not safe that you need to say, okay, hey, I'm making a lot more now. Let's figure out where I want to put that.

23:15You don't have to save all of it. I'm never going to say you have to save all of it, but save some of it and know how much you're going to save and set that up for yourself. And then last thing to avoid doing, and we've definitely been guilty of this before, is cheaping out on every purchase to save money. For me, I know there's a ton of sayings around this, but buying cheap means buying it twice. That's really how things work out. And again, if you treat every dollar that you spend as a problem and something to be avoided as much as possible, meaning you just go buy cheap things because you're just trying to save money, then that's not only going to lead you to a lot of frustration and disappointment and just not enjoying things you purchase, but it's also guaranteed going to mean that you're going to need to spend more money on that in the long run than you would have otherwise.

23:57Either it means that you're going to need to replace whatever that thing is sooner, or you're going to need to spend a lot more money to maintain it, put in a lot more effort, whatever it is, it's just not worth it to try and hold back on every single thing that you purchase just to try and cut back on money. And last but not least, number five, what I would say to my younger self, if I were to go back in time and talk to my younger self right before I, you know, entered the engineering workforce, right, right after I graduated college, or maybe right before graduation, whatever, that's, I'm focusing on the wrong points here.

24:25The point is, if I were to talk to my younger self before this whole process, what would I tell myself? First thing I would say is that sitting down for 30 minutes, 20, 30 minutes with your finances is worth 10 times more than spending every day worrying about what you spend and save. Worrying doesn't get you anywhere. Stressing about it doesn't get you anywhere. And I know that's easier said than done. But the fact is, if you sit down for genuinely 20, 30 minutes and work through things, see what you have, where it's going, where you want it to go, really flesh out some of your goals, why you're some of your financial whys why you really want to earn or save more money if you flesh all that stuff out for yourself and and lay out that that lay out those boundaries for yourself then that is going to genuinely in the long run easily 10x your your financial wealth more than than compared to just worrying about it every day stressing about money does not get you more money it doesn't save you more money it doesn't build your money more quickly it doesn't increase your income, it does not do anything.

25:28Having visibility to what's going on and what you want to do genuinely can 10x all of that. The second thing I'd say is that having a well-paying job genuinely makes everything easier, but it doesn't do anything for you that you don't set up for yourself. I don't want anybody to feel like I'm under the assumption that me earning more money doesn't help anything, doesn't make anything easier, or just say, my life is exactly the same as it would be if I was earning half my income. None of that is true. I will acknowledge that making more money makes things easier if you allow it to make it easier for yourself.

26:07It still takes attention. It still takes effort. And putting in that effort, again, less effort than you would need if you were making half your current income, but it still takes effort and a having a good paying job a good company that you work for they're not going to set anything up for you and except for the only thing they might is you know set up some basic 401k contribution by default anything past that is on you any purchases you make savings wealth building actions you take all of that is on you and that's okay that is stuff that you can work through that is stuff that you can figure out it doesn't take as much effort as you think it will but also it It takes some amount of effort.

26:47Zero effort is not going to get you there guaranteed. The kind of way that I like to look at it is, again, earning more money. It's the wealth that can come alongside that is not a given. It is so far from a given. But what it is is an opportunity. And as with every opportunity, it could be career opportunity. It could be personal fitness opportunity. It could be whatever. Opportunities need to be handled properly. Just because it's there, just because it can exist, doesn't mean that it's going to come to fruition or do anything for you. You need to handle them and treat them properly to kind of water them and grow them into what you want them to become.