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Posts like these is where I realize that the average HN crowd is just way too rich. $500k in liquid savings? $1M nest egg before starting? That's an exit event

Posts like these is where I realize that the average HN crowd is just way too rich. $500k in liquid savings? $1M nest egg before starting? That's an exit event for me. So many of the entrepreneurs I know just started with whatever money they had and just made things work somehow.

dahart 8y ago
What evidence is there that this 1 sample is average? I don’t think it is.
DVassallo 8y ago
Yet, many don't start anything, despite wanting to. Financial "success" brings with it a problem. Suddenly there's more to lose than to gain. Once you realize you've "won the lottery" and you find yourself with a nice nest egg, you start worrying more about losing it, than about using it to gain some benefit. It took me quite a bit of mental effort to break out of that myself. My approach was to mentally write off everything that wasn't super important to me. This helped me to stop worrying about losing my nest egg (and my career), and start taking speculative risks with it.
- movedx 8y ago
  > Yet, many don't start anything, despite wanting to. That's a pretty tone deaf response. Many people don't start something, anything, because they don't have $1.5m in liquid assets sitting around, mate. I have my own business. I'm writing this from the office we hire. I have tens of thousands in business bank account, not $500k. I have tens of thousands in personal savings, not $500k. You don't need a lot to start, in my opinion, but when you have $500k it's really not a hard decision to start at all. With $500k you can start, then start, then start, and keep starting and failing over and over, easily, for 5-10 years with that kind of cash. > Suddenly there's more to lose than to gain. Once you realize you've "won the lottery" and you find yourself with a nice nest egg, you start worrying more about losing it, than about using it to gain some benefit. I believe this is a sign of a deeper problem, Daniel. If you can maintain a happy lifestyle on (for example) $50k per year, there's no reason you shouldn't be able to maintain the same lifestyle should you "win the lottery" and find your self with $1.5m in the bank... you simply keep living off of $50k. The lottery winnings are just a bonus you can grow on the side. Worrying about losing it is, essentially, worrying about being poor. And that's a valid concern for some, but it's not a valid concern for you, sorry.
  - DVassallo 8y ago
    I think you have misunderstood me. I see it the same way as you do. I’m ready to spend it all while trying, trying, trying... But people in a similar situation as mine keep telling me that I’m bold for taking such a big risk, that they admire my courage, and that they don’t have the same risk appetite as I have. What I’m trying to communicate though is that what I’m doing is not risky or bold. I’m not risking anything consequential, even if I lose 90% of my wealth. From my own anecdotal observations, people with little to lose (no wealth, early career) are much more willing to start their own business than someone with a successful career and $1M in the bank. This was the point of that paragraph you quoted.
    - movedx 8y ago
      Then I've misunderstood. My apologies. I think you're right. A lot of people are afraid of being poor. Of losing everything and being on the street. They forget that they can just get a job and start again, really. They're lowest point is a $100k+ job, right? I really do hope young people are taking bigger risks and starting something for themselves. I'm 34 but my brother-in-law is 24. I'm bringing him into my business because I need him to understand that selling his time for money is a bad investment, among other things. Thanks for clarifying.
patio11 8y ago
HN has a wide distribution of folks at different career stages, employers, career tracks in the tech industry (and a substantial contingent outside), geographies, etc. Well-compensated engineers at AppAmaGooBookSoft do quite well for themselves. I hope we can temper “This is not a situation everyone has” without swinging over to the common “... they must be lying about that then” because knowing true market conditions is instrumentally useful to many, many HNers. Many here started businesses with substantially less; I think I had maybe $2k to my name when I went full time.
- cm2012 8y ago
  I was at a tech company that went through a round of layoffs 2 years ago - I took my 3 month severance ($24k) and started my consulting business with that. Getting fired actually worked out really well for me.
- standardUser 8y ago
  I doubt people jump to "they must be lying", but rather wonder why they would listen to the person in the first place? The decision-making process of a person with $1 million is relevant to a very tiny number of people.
ipnon 8y ago
It's a wonderful thing in a way. There's this industry, which anyone with decent intelligence in an industrialized country with access to free time or a university can enter that will catapult beyond the global 1% in income. Half a million in savings after a decade of aggressive savings in the tech industry is not unrealistic.
- eli 8y ago
  People lucky enough to be born in the right place to the right family have always had options.
  - deleted 8y ago
    [deleted]
  - kevinventullo 8y ago
    And with the right skillsets. I was born "good at math" and that makes me feel just as lucky as someone born to a rich family.
    - eli 8y ago
      That matters much less than most people think. Smart poor kids have worse outcomes on average than mediocre rich kids.
    - sidlls 8y ago
      I was "born good at math," too, yet I've seen peers who are far, far less capable achieve much better financial and career success simply due to their head start. I'ma doing quite well. I often wonder how much better I'd be doing if I hadn't been on the verge of homelessness and hunger more or less constantly from kindergarten through undergrad. This isn't just an anecdote: plenty of studies have shown a correlation between starting socioeconomic position and success. Having skill and natural talent helps. I don't think it helps nearly as much as having the luck to be born in the right place to the right people.
- amelius 8y ago
jurassic 8y ago
Depending on age $500k savings isn't THAT unreasonable. For example, if you worked at FAANG-level companies for a decade and held your lifestyle to a reasonable level this should be doable without hardship. These people are privileged to earn at such a high level, but not shockingly so considering the high cost of living. Even at the "rich person" $300k+/yr income level (common Bay Area BigCo wage for experienced engineers), considering that taxes take about half your gross and rents are high, it still requires discipline to accumulate that magnitude of savings; saving 1/3 of take-home pay over a decade is well-above the average savings rate. If $500k in savings sounds like a lot to you, I would suggest you have a personal check-in on your retirement planning. I was pretty shocked when I first figured out how much I would actually need in retirement and it helped me really get serious about saving in a way that I hadn't before. To support a $100k income in retirement with 0.04 withdrawal rate I will need a nest-egg of $2.5M. I nearly fainted the first time I heard that. I had been feeling good about myself since I was maxing my 401k, but hitting targets for real financial security requires saving far beyond that. Somebody bootstrapping is taking a large fraction of their savings and making a big bet on themselves that it will get them to their financial targets faster. I don't have the stomach for that risk but admire those who do.
- izacus 8y ago
  A small percent (<1 %) of even IT population works at FAANG companies, so I'm not quite sure if your argument shows what you want it to prove.
  - jurassic 8y ago
    I was trying to show that while this is not a common scenario it is attainable and probably has been achieved by thousands if not tens of thousands of engineers over the last decade (many of whom read this website). It does not require inherited wealth or participation in past startup liquidity events.
- keiferski 8y ago
  Average lifetime income for Americans: - High school graduates (88% of the population, per 2015 Census numbers): $900,000 - Associate’s degree (42.3%): $1.1 million - Bachelor’s degree or higher (32.5% with bachelor’s, 12% with advanced degrees): $1.8 million https://www.cheatsheet.com/money-career/how-much-average-american-earn-their-lifetime.html/ https://www.cheatsheet.com/money-career/how-much-average-ame...
lettergram 8y ago
To be honest, a $500k to $1m nest egg is a 28 - 35 year old who is making an average average nation wide salary in tech. They would likely not have kids and doesn’t buy the shiny new objects (like a Tesla), but invest in a 401k with a company match. As long as you keep expenses low, and you don’t have too much debt starting, it’s fairly easy to build that if you’re patient. For reference, many of my friends in their late 20’s already have a nest egg of similar size. (No kids, low expenses, high end tech jobs)
- cm2012 8y ago
  You're in a tremendous bubble. The average software developer makes around 100k (https://money.usnews.com/careers/best-jobs/software-developer/salary https://money.usnews.com/careers/best-jobs/software-develope...). This average includes fresh college grads as well as 40 year veterans. So let's say the average 22-30 year old makes 90k a year. Take out fed, state, sales and property taxes and that's 60k a year. Even if you save 20% of your after tax income (vastly, vastly higher than the normal savings rate), you're going to have a hair over $130k saved by age 30 assuming you invested all of it and the stock market did it's usual 7% thing. (And this doesn't count first paying off the average college debt of $30k...) The average software developer salary is not $200k or $300k - that's top 10% salary. Even in SF, the average household income (including all earners) is around 100k. This isn't sour grapes, by the way - I make in the top 10% myself. But we can't fool ourselves into thinking that's the average.
  - lettergram 8y ago
    90k typically doesn’t include benefits (often ranging from $10k - $25k a year, 401k marching, etc.) Typical income loss to taxes is around 20% as well (effective tax rate). So if you graduate at 23 years and average around $90k that gives you ~8 years of saving (31 years old) and at $30k savings a year (expenses around $2k/month), plus the growth of investments, it’s reasonable to assume that they can save $500k. Again it really depends. However, I know people who started right around $100k at 22 and are now late 20’s who had that much saved. The trick is to be frugal, which many people are not. Also id argue $90k in Chicago goes a lot further than $150k in the bay (having lived in both). It’s actually easier to save and live frugal elsewhere.
badfrog 8y ago
> the average HN crowd is just way too rich What does too rich mean?
- onion2k 8y ago
  I don't think this is what the person you're replying to meant, but for me it means not having the financial drive to succeed. Plenty of startups never get to revenue because the founders don't need money coming in. That leads to distractions, arguments, and ultimately failure. "I'm going to starve if I don't start making money immediately" is a strong motivator. It's something to remember if you have a long runway available (from savings, investment money, or just a low burn). You might be able to live for years before making any money, but it's likely that your startup can't.
Justin_K 8y ago
If all you want is to bank 1M and get out, get a job at Oracle or somewhere high paying for a decade. They have jobs across the country that pay 200k.

dahart 8y ago

What evidence is there that this 1 sample is average? I don’t think it is.

DVassallo 8y ago

Yet, many don't start anything, despite wanting to. Financial "success" brings with it a problem. Suddenly there's more to lose than to gain. Once you realize you've "won the lottery" and you find yourself with a nice nest egg, you start worrying more about losing it, than about using it to gain some benefit. It took me quite a bit of mental effort to break out of that myself. My approach was to mentally write off everything that wasn't super important to me. This helped me to stop worrying about losing my nest egg (and my career), and start taking speculative risks with it.

movedx 8y ago
> Yet, many don't start anything, despite wanting to. That's a pretty tone deaf response. Many people don't start something, anything, because they don't have $1.5m in liquid assets sitting around, mate. I have my own business. I'm writing this from the office we hire. I have tens of thousands in business bank account, not $500k. I have tens of thousands in personal savings, not $500k. You don't need a lot to start, in my opinion, but when you have $500k it's really not a hard decision to start at all. With $500k you can start, then start, then start, and keep starting and failing over and over, easily, for 5-10 years with that kind of cash. > Suddenly there's more to lose than to gain. Once you realize you've "won the lottery" and you find yourself with a nice nest egg, you start worrying more about losing it, than about using it to gain some benefit. I believe this is a sign of a deeper problem, Daniel. If you can maintain a happy lifestyle on (for example) $50k per year, there's no reason you shouldn't be able to maintain the same lifestyle should you "win the lottery" and find your self with $1.5m in the bank... you simply keep living off of $50k. The lottery winnings are just a bonus you can grow on the side. Worrying about losing it is, essentially, worrying about being poor. And that's a valid concern for some, but it's not a valid concern for you, sorry.
- DVassallo 8y ago
  I think you have misunderstood me. I see it the same way as you do. I’m ready to spend it all while trying, trying, trying... But people in a similar situation as mine keep telling me that I’m bold for taking such a big risk, that they admire my courage, and that they don’t have the same risk appetite as I have. What I’m trying to communicate though is that what I’m doing is not risky or bold. I’m not risking anything consequential, even if I lose 90% of my wealth. From my own anecdotal observations, people with little to lose (no wealth, early career) are much more willing to start their own business than someone with a successful career and $1M in the bank. This was the point of that paragraph you quoted.
  - movedx 8y ago
    Then I've misunderstood. My apologies. I think you're right. A lot of people are afraid of being poor. Of losing everything and being on the street. They forget that they can just get a job and start again, really. They're lowest point is a $100k+ job, right? I really do hope young people are taking bigger risks and starting something for themselves. I'm 34 but my brother-in-law is 24. I'm bringing him into my business because I need him to understand that selling his time for money is a bad investment, among other things. Thanks for clarifying.

patio11 8y ago

HN has a wide distribution of folks at different career stages, employers, career tracks in the tech industry (and a substantial contingent outside), geographies, etc. Well-compensated engineers at AppAmaGooBookSoft do quite well for themselves. I hope we can temper “This is not a situation everyone has” without swinging over to the common “... they must be lying about that then” because knowing true market conditions is instrumentally useful to many, many HNers. Many here started businesses with substantially less; I think I had maybe $2k to my name when I went full time.

cm2012 8y ago
I was at a tech company that went through a round of layoffs 2 years ago - I took my 3 month severance ($24k) and started my consulting business with that. Getting fired actually worked out really well for me.
standardUser 8y ago
I doubt people jump to "they must be lying", but rather wonder why they would listen to the person in the first place? The decision-making process of a person with $1 million is relevant to a very tiny number of people.

ipnon 8y ago

It's a wonderful thing in a way. There's this industry, which anyone with decent intelligence in an industrialized country with access to free time or a university can enter that will catapult beyond the global 1% in income. Half a million in savings after a decade of aggressive savings in the tech industry is not unrealistic.

eli 8y ago
People lucky enough to be born in the right place to the right family have always had options.
- deleted 8y ago
  [deleted]
- kevinventullo 8y ago
  And with the right skillsets. I was born "good at math" and that makes me feel just as lucky as someone born to a rich family.
  - eli 8y ago
    That matters much less than most people think. Smart poor kids have worse outcomes on average than mediocre rich kids.
  - sidlls 8y ago
    I was "born good at math," too, yet I've seen peers who are far, far less capable achieve much better financial and career success simply due to their head start. I'ma doing quite well. I often wonder how much better I'd be doing if I hadn't been on the verge of homelessness and hunger more or less constantly from kindergarten through undergrad. This isn't just an anecdote: plenty of studies have shown a correlation between starting socioeconomic position and success. Having skill and natural talent helps. I don't think it helps nearly as much as having the luck to be born in the right place to the right people.
amelius 8y ago

jurassic 8y ago

Depending on age $500k savings isn't THAT unreasonable. For example, if you worked at FAANG-level companies for a decade and held your lifestyle to a reasonable level this should be doable without hardship. These people are privileged to earn at such a high level, but not shockingly so considering the high cost of living. Even at the "rich person" $300k+/yr income level (common Bay Area BigCo wage for experienced engineers), considering that taxes take about half your gross and rents are high, it still requires discipline to accumulate that magnitude of savings; saving 1/3 of take-home pay over a decade is well-above the average savings rate. If $500k in savings sounds like a lot to you, I would suggest you have a personal check-in on your retirement planning. I was pretty shocked when I first figured out how much I would actually need in retirement and it helped me really get serious about saving in a way that I hadn't before. To support a $100k income in retirement with 0.04 withdrawal rate I will need a nest-egg of $2.5M. I nearly fainted the first time I heard that. I had been feeling good about myself since I was maxing my 401k, but hitting targets for real financial security requires saving far beyond that. Somebody bootstrapping is taking a large fraction of their savings and making a big bet on themselves that it will get them to their financial targets faster. I don't have the stomach for that risk but admire those who do.

izacus 8y ago
A small percent (<1 %) of even IT population works at FAANG companies, so I'm not quite sure if your argument shows what you want it to prove.
- jurassic 8y ago
  I was trying to show that while this is not a common scenario it is attainable and probably has been achieved by thousands if not tens of thousands of engineers over the last decade (many of whom read this website). It does not require inherited wealth or participation in past startup liquidity events.
keiferski 8y ago
Average lifetime income for Americans: - High school graduates (88% of the population, per 2015 Census numbers): $900,000 - Associate’s degree (42.3%): $1.1 million - Bachelor’s degree or higher (32.5% with bachelor’s, 12% with advanced degrees): $1.8 million https://www.cheatsheet.com/money-career/how-much-average-american-earn-their-lifetime.html/ https://www.cheatsheet.com/money-career/how-much-average-ame...

lettergram 8y ago

To be honest, a $500k to $1m nest egg is a 28 - 35 year old who is making an average average nation wide salary in tech. They would likely not have kids and doesn’t buy the shiny new objects (like a Tesla), but invest in a 401k with a company match. As long as you keep expenses low, and you don’t have too much debt starting, it’s fairly easy to build that if you’re patient. For reference, many of my friends in their late 20’s already have a nest egg of similar size. (No kids, low expenses, high end tech jobs)

cm2012 8y ago
You're in a tremendous bubble. The average software developer makes around 100k (https://money.usnews.com/careers/best-jobs/software-developer/salary https://money.usnews.com/careers/best-jobs/software-develope...). This average includes fresh college grads as well as 40 year veterans. So let's say the average 22-30 year old makes 90k a year. Take out fed, state, sales and property taxes and that's 60k a year. Even if you save 20% of your after tax income (vastly, vastly higher than the normal savings rate), you're going to have a hair over $130k saved by age 30 assuming you invested all of it and the stock market did it's usual 7% thing. (And this doesn't count first paying off the average college debt of $30k...) The average software developer salary is not $200k or $300k - that's top 10% salary. Even in SF, the average household income (including all earners) is around 100k. This isn't sour grapes, by the way - I make in the top 10% myself. But we can't fool ourselves into thinking that's the average.
- lettergram 8y ago
  90k typically doesn’t include benefits (often ranging from $10k - $25k a year, 401k marching, etc.) Typical income loss to taxes is around 20% as well (effective tax rate). So if you graduate at 23 years and average around $90k that gives you ~8 years of saving (31 years old) and at $30k savings a year (expenses around $2k/month), plus the growth of investments, it’s reasonable to assume that they can save $500k. Again it really depends. However, I know people who started right around $100k at 22 and are now late 20’s who had that much saved. The trick is to be frugal, which many people are not. Also id argue $90k in Chicago goes a lot further than $150k in the bay (having lived in both). It’s actually easier to save and live frugal elsewhere.

badfrog 8y ago

> the average HN crowd is just way too rich What does too rich mean?

onion2k 8y ago
I don't think this is what the person you're replying to meant, but for me it means not having the financial drive to succeed. Plenty of startups never get to revenue because the founders don't need money coming in. That leads to distractions, arguments, and ultimately failure. "I'm going to starve if I don't start making money immediately" is a strong motivator. It's something to remember if you have a long runway available (from savings, investment money, or just a low burn). You might be able to live for years before making any money, but it's likely that your startup can't.

Justin_K 8y ago

If all you want is to bank 1M and get out, get a job at Oracle or somewhere high paying for a decade. They have jobs across the country that pay 200k.