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Product Manager & Software Engineer | Our budget & planning for our future | Part 3 | Khan Academy - YouTube
Channel: Careers and Personal Finance by Khan Academy
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My name is Ram Kandasamy.
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I'm a senior software engineer,
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and I work at AppLovin.
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I make $160,000 a year.
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I am Bhavna Muthangi.
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I'm a senior product manager,
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and I make $160,000 a year.
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I feel financially secure now.
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I think I've felt that way for about a year and a half.
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The reason why I didn't feel secure before that
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is because I had $110,000 in student loans
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that I was still working on paying off.
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We also had a $250,000 mortgage.
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I think for me the biggest part
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of feeling financially secure was just knowing
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that we had paid off all of our debt.
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It's a great feeling, knowing that you don't
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really owe anyone anything, and I think it's very freeing.
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To tell you the truth, I only felt,
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I felt very financially secure very recently,
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only because Bhav and I did some calculations
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on,
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'cause we were basically trying to determine
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at what point we could be financially independent,
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and it turns out that
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we're well on our way to doing that.
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I come from a first generation immigrant family.
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We actually both do.
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While I think some people would argue
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that you should put that money towards,
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into the market, where you're getting a higher return
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than the interest that you are paying on your mortgage,
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from our mentality, our culture really values paying
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off debt, so that you feel secure,
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so I think that really, it was just a matter
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of feeling safe and knowing that this house belongs to us.
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I was very fortunate, my parents saved a lot of money
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so that they could pay for my college education,
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so I pretty much just had to focus on my studies,
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and I'm very grateful for that.
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For me, I was lucky enough to have my family
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be able to pay for part of college,
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but I also received some financial aid,
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and I was able to pay for about 25% of my tuition
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with a work study program, so I worked in our IT center
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when I was in college.
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When I went to business school,
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I actually earned a lot less than my peers at that time,
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so I was able to get a lot of financial aid
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for business school.
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In total, between college and business school,
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I still had about $110,000 in debt.
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I guess growing up, my parents, especially my mom,
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she kind of made it sound like having bad credit
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was a character flaw, so it was something that I desperately
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just wanted to avoid at all costs.
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I make sure every month,
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near the end of the month, to make sure I've paid off
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my credit card debt.
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I actually grew up in a household
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that was exactly the opposite of his.
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We had a ton of credit card debt when I was growing up,
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and I really saw how stressed my family was
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because of it, and we actually would sometimes
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move balances from credit card to credit card,
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and at one point, we were actually getting rejected
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for credit cards because our credit score was so low.
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I decided that when I became an adult
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I really did not want to live with that kind of stress.
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The Bay Area actually is a very expensive place to live,
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in terms of cost of living.
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The primary cost for most people though is housing.
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We actually have a big advantage on that front,
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just because we were able to buy property
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at a pretty low price.
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Basically, we had the whole housing crisis
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in 2008, 2009,
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and the housing market was pretty depressed
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for the next three years or so,
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and so we were able to buy this house
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when the prices were very low.
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This was also a foreclosed house,
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so it was much cheaper than other houses
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in the Bay Area at the time.
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I just looked for houses that met my parameters,
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two bedroom, two bath, and then I was just looking
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for the cheapest one I could find, really,
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because housing so expensive.
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I was just looking for something
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that would be a good value.
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I'm a pretty simple guy; I don't really need
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a really fancy house.
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I just want a place where I can live,
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and that could potentially also increase in value over time.
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I think we'll definitely live here for a while.
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We actually,
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for two years, we actually had roommates,
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and our roommate and his girlfriend were living
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in the second bedroom, so this house can fit
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up to four people, so I think we'll stay
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in this house for our whole life.
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We each earn $160,000 a year annually.
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Our combined monthly gross is 26,667.
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Now, federal and state taxes take out a good chunk of that.
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We pay about $10,198
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each month in just taxes.
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After that, we contribute pre-tax money
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to 401K retirement accounts,
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and also to something called
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an employee stock purchase plan.
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An employee stock purchase plan
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is offered by a lot of companies as a benefit
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to their employees.
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What it means is that employees can purchase
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company stock, usually at a 15% discount,
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and so basically when the employees sell the stock,
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they're automatically getting a 15% return.
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We contribute $4,267
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each month to our 401Ks
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and my employer's employee stock purchase plan.
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That leaves us with $12,202.
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Okay, so now moving to our monthly expenses,
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first we start off with the Homeowners Association bill
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and our annual property tax.
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When you become a property owner,
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you have to pay the Homeowners Association bill monthly,
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and basically what this
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is is it encompasses a bunch of improvements
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and fixtures for the whole community,
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'cause we live in a condo complex.
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For example, it covers our garbage,
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our water, and things like that.
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In terms of property tax,
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that's just 1% of our total property value,
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and if you calculate that monthly,
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it comes out to $756.
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Next on the list is gas and electric.
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That's $70 a month for us.
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Then, internet and streaming services.
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In terms of streaming, we pay for Netflix,
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and we pay for Hulu,
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so that comes out to $95 a month.
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For both of us combined for our phones,
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we pay $80 a month.
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The reason for why it's so low is because
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our family lives here, and so we're part
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of a big family plan, and so we're able to get
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a discount there.
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In terms of our cars,
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we pay insurance,
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for insurance, maintenance, and gas for our cars,
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and if you kind of calculate that annually
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and divide it by 12,
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it comes out to $650.
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In terms of student loans,
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we actually don't have any student loans,
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so we're happy about that.
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For food and groceries,
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we spend $450 a month.
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For our gym membership, we spend $120 a month.
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For restaurants and entertainment,
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we spend $377 a month.
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Another line item is just for miscellaneous expenses,
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like Amazon books and clothing.
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That comes up to about $300 a month.
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Although it could be a lot less
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if we just used our library subscription
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to get more books, rather than getting them from Amazon.
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That's probably true.
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I do buy a lot of books on Amazon.
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After you take out all of our expenses,
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we have 9,339
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left, and from that,
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we take $1,000, and we contribute it
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to our vacation fund each year.
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Normally, we take two international trips
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and one or two domestic trips each year.
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We try to travel pretty frugally.
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Traveling is one of our great passions.
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We've gone to Europe, we've gone to Asia,
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and we've gone to South America.
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After that,
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the vacation fund is taken out, we have
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$8,339
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left.
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Over the years, we've already built up
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an emergency fund of one year's worth of expenses.
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Now, all of this money is going
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into very low-cost investments.
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Investing was really something I had to learn on my own.
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I'm from a first generation immigrant family,
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and when I was a child, we were just trying
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to keep our heads above water.
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There really wasn't as much of a focus
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on investing and building wealth for the future.
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Once I went to business school,
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and I saw what a lot of my classmates were doing,
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I started reading a lot of literature on it.
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I think one of my biggest regrets
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is that I didn't invest for a very long time,
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so I feel like a lot of millennials think this way,
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because we had the recession in 2001,
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and then we also had another recession in 2007,
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so they came pretty quickly after one another,
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so I think a lot of my generation holds off
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on investing, and unfortunately, I did that as well.
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I really wish that
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I had maxed out my 401Ks
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to their annual limit in my early 20s
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so that I could've seen those gains
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compound over time.
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I wish I had participated in my employer's
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stock purchase plan and gotten these discounted stocks.
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I think those are the biggest things I learned.
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