TLDR: What should you do?

Here's a TLDR plan for reaching Financial Independence:

1. Get multiple job offers & negotiate compensation
2. Max out tax advantaged accounts (especially any with employer match): 401k, HSA, IRA
3. Participate in discounted ESPP (and always divest immediately)
4. Have a savings rate goal and invest leftover savings in a taxable investment account
5. Automate your investments and use index funds
6. Keep the big expenses as low as possible: housing, transportation, food

Maxing out tax advantaged accounts is no small feat — you'll be saving roughly $29k per year. If you're able to participate in an ESPP and contribute even more to a taxable investment account, you'll be well on your way to financial independence.

In More Details

1. Get multiple job offers & negotiate compensation — whenever you interview for a new job, interview at multiple companies and negotiate your compensation (base, equity, bonus, and/or benefits)! A small increase, early in your career will have drastic effects on savings due to compound interest. Learn More →

2. Max out tax advantaged accounts Maxing out a 401k is a good idea to get employer match and tax benefits. Some employers also offer a match for an HSA, which you can contribute pre-tax dollars. In addition, you can open up your own Roth IRA for even more savings on taxes.

3. Participate in ESPP (and have a plan to divest immediately) — Employee Stock Purchasing Plans are usually offered with a discount to buy company stock. A common strategy is to purchase as much as you comfortably can, and when those stocks become available to sell — sell them and diversify the sale into index funds immediately. Not all ESPPs offer discounts though, so it may not be worth it to participate in yours. Learn more →

4. Have a savings rate goal and invest leftover in a taxable investment account — any leftover savings can be invested in a regular, taxable investment account. If your employer doesn't offer a 401k or HSA, you can invest in your taxable account instead. Learn More →

5. Automate your investments and use index funds — diversify your investment accounts by using index funds! Index funds are funds that mimic a financial index. For example, instead of buying a single company stock, get VTSAX to have exposure to all US companies. These funds are low cost, low risk, and low maintenance. Consider using two or more funds to form a lazy portfolio. Learn More →

6. Keep big expenses low: housing, transportation, food — keep your expenses low so you can contribute more to your savings. Do the math to decide if you should rent or buy a home. Don't buy or rent a luxury home, find an affordable one. Don't buy a luxury car, get a used one. Don't eat out daily, consider cooking at home. Learn More →

Assumptions and Modifications

This plan makes a lot of assumptions.

• You're not living paycheck-to-paycheck. If you are, please focus on building an emergency savings.
• You don't have high-interest debt. If you do, you'll want to focus on paying those off first.
• At the beginning of your career, you won't be able to max out all benefits. That's ok! Save what you can and increase your savings rate overtime.
• If your employer doesn't offer a benefit (eg 401k, HSA, or ESPP) -- that's ok! Leftover savings can go into a taxable investment account.

This plan will not apply to your circumstances. While it's relatively broad, you may prefer to adapt it to your own preferences. For example:

• instead of maxing out your ESPP, use that money for a down payment on an affordable home
• instead of maxing out on index funds, use that money to buy your first rental property
• instead of getting a high deductible health plan with an HSA, get an insurance plan that meets your specific needs that may not come with an HSA
• instead of working for a company that offers an HSA and ESPP, work at a smaller startup where you can make major contributions and grow quickly as an engineer

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Related Tips

• Negotiate Your Salary Negotiate your base, equity, bonus, and benefits earn
• Max Out Your 401k Take advantage of employer match and tax savings save invest
• Max Out Your Roth IRA Save additional money in an IRA (via a backdoor) save invest
• Participate in ESPP Buy discounted stock purchase and divest immediately earn save
• Max Out Your HSA Invest money in a pre-tax (and post-tax!) free account save invest
• Use a Taxable Investment Account Don't lose your money to inflation save invest
• Use Low Cost Index Funds Save on fees and diversify your nest egg save invest
• Budget Expenses Save on the big expenses and keep track of your net worth save