What’s up, everyone. It has been a while since I last posted on The Cyber Union Blog. That is because I have been working in overdrive. Between my new role as a malware analyst at my primary job and back to back pen testing engagements, I have had 80-hour weeks. They don’t leave much time for anything else.
Yesterday, when I finally had some free time, I was doing my monthly budget review. It hit me. Budgeting would be a great topic to discuss.
I realized that not only has budgeting been an essential step in my path to financial independence, but it has also been one of the most challenging steps. In this blog, I will talk about financial independence and why budgeting is crucial to crafting a lifestyle free from the constraints of a typical job.
First, let me discuss what I mean by financial independence (FI). Most people can agree that being financially free means not having to rely on a job to make enough money to sustain your lifestyle. The key phrase is “your lifestyle.”
It is important to keep in mind that my vision of a FI lifestyle will be different than yours. Based on my budget, I can get by on $21,000 a year (a F.I.R.E number of $525,000). However, the average American family requires $61,224 per year (a F.I.R.E number of $1.5 million).
Those interested in what the fire number means, it is simply how much in retirement you will need to live on a 4% withdrawal rate. The number is calculated by multiplying your annual expenses by 25.
Regardless of your number, budgeting is a universal topic required if you want to retire. At some point, you will have to watch your spending so that you won't run out of money. The earlier you take this step, the better.
I know. The thought of looking over all your expenses and mentally chastising yourself for some unnecessary cost sounds absolutely awful. However, I believe once you start budgeting, the extra money you find in your pockets will be enough motivation to keep you going. Just about every month, I have found new ways to save. Don’t worry. I will be sharing my secrets along the way.
What is budgeting?
So, let’s start off with what a budget is. Budgets are categorizing expenses and allocating resources to those categories. This is typically done in a spreadsheet or a cloud-based application such as Mint or Personal Capital. Before getting fancy with the cloud, I recommend building a personal relationship with your money by using a spreadsheet.
Personally, I use both. My spreadsheet allows me to get creative with calculations. I can create sheets with formulas for handy things such as calculating my F.I.R.E number and figuring out how much I can set aside for retirement that month. Mint is my sanity check. I use it to keep track of my rolling budget categories, such as vacation and home improvement.
Be prepared! The first 6 months of your budgeting adventure will be filled with finding new expenses you missed each month. This will be frustrating for those of us with a little (or a lot) of OCD. For instance, early on, I missed expenses I pay on an annual basis such as car insurance and my HOA fee. Don’t get too upset when you miss something; just add it to your spreadsheet and move on.
To compensate for my flawed calculations, I keep a few extra thousand dollars in my bank account as a buffer and as part of an emergency fund.
To keep things in perspective, it’s been 2.5 years since beginning this FI (financial independence) journey and I am still finding stuff I missed in my budget.
A tip for setting dollar amounts to your categories is to be realistic with yourself. Don’t expect to drop your food budget from $800 a month to $200 in one month. Financial Independence is a lifestyle change, and it takes a while to get into the right frame of mind. I would suggest not setting a limit at first and just monitor what you spend. After you have an idea of what a comfortable budget amount is, then set and watch it.
Other things you want to track on your budget is your income. You won’t know how much you are saving if you don’t know how much you are making. Add a line for your income. In later blogs, we will dive into different categories and talk about ways to save.
Big money in cyber security
Budgeting will help get your expenses under control but let’s talk about why this is important. For those of us lucky enough to be in the exploding Cybersecurity Industry, we have the opportunity to make really really good money. Our salaries in some specialties are approaching the income of general practice doctors.
I know that assessment is going to be controversial, but it’s true. Don’t get me wrong. Our pay is obviously determined by various circumstances, such as your role, skillset, location, negotiation skills, and education. But, no matter where you start in the industry, you have a high salary upside.
Just so you don’t think I am blowing smoke, let’s take a short side road and look at some salaries in the U.S according to Glassdoor.
Glassdoor isn’t 100% accurate, but it is close enough to show that I’m not making stuff up. My point is that we have an opportunity to make good money if you continue to hone your craft. Honestly, I make more than I thought I could ever make as a child from a small-town working-class family.
Putting these two topics together, if you can become a good steward of all that money rolling in and learn a little personal finance, early retirement is possible.
There is a whole community out there called the Financial Independence Retire Early (F.I.R.E) who help each other reach independence. The share money-saving tips and other strategies designed to get to retirement as fast as possible. I’ll drop some blog and Reddit links below to get you started.
To wrap things up. You, as an information security professional, make good money. If you learn to manage it, you can find yourself with freedom, you may never have thought possible at an age that you can still enjoy.