The Engineer's Guide to Building Wealth
After landing a new AI role in New York, something shifted in how I think about money. It's not just that NYC is expensive—though breathing here basically requires a subscription. It's that a real salary forced me to confront a question I'd been avoiding: what happens next?
I started thinking about my family, my future, what I want to build beyond code. And I realized my income is just the input. What I do with it—that's the system.
So I did what any engineer would do. I researched. I modeled. I built a framework. Here's what I learned.
The Math That Changed Everything
Before we talk strategy, you need to see something. This chart shows three scenarios—all assuming a 7% annual return (the S&P 500's historical average, adjusted for inflation):
The 10-Year Gap
Starting at 25 vs 35 costs you $633K in potential gains—even with identical monthly contributions. The person who starts at 35 would need to invest $1,000/month (double) just to come close. Time is the only asset you can't buy back.
Assumes 7% average annual return (S&P 500 historical average, inflation-adjusted). This is illustrative, not financial advice.
Look at that gap. The person who starts at 25 ends up with $1.2 million. The person who starts at 35 with the same contribution? $567K. That 10-year delay costs you over $600,000.
The person who tries to "catch up" by doubling their contribution at 35? They get close—but they had to sacrifice twice as much of their monthly income to do it.
Time is the only asset you can't buy back.
The Psychology of Money
The numbers are simple. Human behavior is not.
Morgan Housel's The Psychology of Money changed how I think about wealth. A few principles that stuck:
Wealth is what you don't see. The car not bought. The apartment not upgraded. Wealth isn't displays—it's optionality. The freedom to walk away from a bad job, to take a risk on a startup, to weather an emergency without panic.
Reasonable beats rational. The mathematically optimal strategy you won't stick to loses to the "good enough" strategy you will. If checking your portfolio daily causes you to panic-sell during dips, a slightly suboptimal but hands-off approach wins.
Room for error. Nassim Taleb's barbell strategy: be conservative with most of your money, aggressive with a small portion. Never bet the farm. The market will crash—multiple times in your investing lifetime. Your job is to still be in the game when it recovers.
How the S&P 500 Actually Works
People say "just invest in index funds" without explaining why they work. Here's the mechanism:
The S&P 500 isn't a static list. It's a self-cleaning index:
| What happens | Why it matters |
|---|---|
| Quarterly committee reviews | Underperformers get removed |
| Market cap requirements | Only successful companies stay |
| Automatic rebalancing | You're always holding the winners |
Kodak, Sears, GE—all were S&P 500 companies. They got removed as they declined. Tesla, Meta—they got added as they grew. Survivorship bias works in your favor.
This is why beating the index is so hard. You're not competing against a static benchmark—you're competing against an algorithm that automatically culls losers and adds winners.
The Three-Fund Portfolio
Simple, diversified, low-cost:
| Fund | Conservative | Aggressive (my preference) |
|---|---|---|
| US Total Stock Market (VTI) | 60% | 70-80% |
| International Stock Market (VXUS) | 20% | 15-20% |
| US Bonds (BND) | 20% | 5-10% |
Total expense ratio: ~0.05%. A financial advisor charging 1% would cost you hundreds of thousands over a career—for what is often just this same strategy with a human attached.
A note on bonds: The "conservative" allocation above is standard Bogleheads advice. But if you're a 25-year-old engineer with 40 years until retirement, high earning potential, and job security in a growing field—20% bonds is probably too conservative. You have decades to ride out volatility, and every dollar in bonds is a dollar not compounding at equity rates. I keep 5-10% bonds, mostly as dry powder to buy dips. Adjust based on your risk tolerance and sleep quality.
NYC-Specific Tactics
Living in New York means your tax situation is brutal. Federal + State + City = pain. But it also means tax-advantaged accounts are even more valuable:
Max your 401(k). The $23,000 pre-tax contribution saves you ~35% immediately in combined taxes. That's an instant 35% return before any investment gains.
Roth IRA—and the Backdoor when you earn too much. Direct Roth contributions phase out at $161K (single). But here's what most people don't know: the "Backdoor Roth" lets high earners bypass this completely. Contribute to a traditional IRA (no income limit), then immediately convert to Roth. It's legal, IRS-approved, and standard practice for tech workers. If you're an AI engineer in NYC, you'll likely need this within a few years—learn the mechanics now.
HSA if available. Triple tax-advantaged: tax-free in, tax-free growth, tax-free out (for medical expenses). It's the best retirement account most people ignore. Max it if your employer offers a high-deductible health plan.
Easy Habits to Start Today
You don't need to optimize everything at once. Start with these:
1. Automate on payday. Set up transfers the day after you get paid. Emergency fund, retirement, brokerage—all automatic. You adapt to whatever's left. This is the "reverse budget."
2. Increase savings with raises. Got a 10% raise? Increase your savings rate by 5%. You still feel the raise, but you're not inflating your lifestyle proportionally.
3. The 24-hour rule. For any purchase over $100, wait 24 hours. Most impulse spending evaporates.
4. Track one number. Your savings rate (savings / income). This single metric matters more than returns when you're young. Aim for 20%+.
5. Rebalance annually. Once a year, sell what's grown too large and buy what's lagged. This forces you to buy low and sell high systematically.
The Meta-Lesson
Building wealth is a systems problem, not a willpower problem.
The engineers I know who are building real wealth aren't the ones with the highest salaries. They're the ones who:
- ◆Automated good decisions
- ◆Avoided lifestyle inflation
- ◆Started early (or started now)
- ◆Stayed boring
The exciting investments—crypto, options, meme stocks—are entertainment, not strategy. Your edge is patience, not information.
What I'm Actually Doing
I'm not going to pretend I have this figured out. But here's my current allocation:
| Account | Monthly | Strategy |
|---|---|---|
| 401(k) | Max to match + more | Target date fund (lazy, works) |
| Roth IRA | $583 (maxing) | VTI + VXUS |
| Emergency fund | Until 6 months | High-yield savings (5%+) |
| Taxable brokerage | Whatever's left | VTI, hold forever |
Nothing fancy. Nothing exciting. That's the point.
The real wealth-building move for someone my age? Invest in earning power. Skills, certifications, relationships. My AI security expertise has a higher ROI than any stock pick. The best investment I can make is becoming harder to replace.
None of this is financial advice. I'm an engineer who reads too much, not a financial advisor. Do your own research, understand your own risk tolerance, and consider talking to a professional for your specific situation.