Kim from The Frugal Engineers shares her journey and the importance of determining your real hourly wage.
Kim's story starts as a 15-year-old in Myrtle Beach, South Carolina. While growing up in South Carolina, she realized the employment opportunities in that tourist town were limited, especially for young women. With limited employment opportunities, the emphasis on education in public schools was not really there.
You could see the results of this lack of emphasis through the building sizes for their high school grades. Each grade level had its own building, but the senior's building was half the size of the freshmen's building. So, you weren't expected to graduate from high school. And Kim witnessed this first hand as her friends battled teen pregnancy and drug addictions.
She knew that if she stayed in Myrtle Beach, it was going to be difficult to make a better life for herself. Since she had a high PSAT score, she decided to apply to a boarding school at her mother's encouragement.
She learned about the boarding school in tenth grade. It was the South Carolina Governor's Boarding School for Science and Mathematics. The school covered full tuition and free room and board if you were accepted. Kim was one of the 60 students accepted for her year. Once she was accepted, she decided at age 15 that she would be able to do something different than what was expected of her.
In South Carolina, Kim's boarding school was not the only option. There was also an arts and humanities version of the boarding school in a different city. Eleven other states offer these fully-funded residential high schools.
The best thing about these schools is you basically start living like a college student for your junior and senior year of high school.
You are living on campus with highly educated professors. In the summer, you do a research project on campus. Overall, the opportunity was life-changing. However, Kim didn't want to go at first because she only liked math and hated science. But her mom encouraged her to apply anyway.
Since the application process was similar to applying for college, Kim would give the same advice as someone applying for college. When you write the essay, talk about what your future plans are and how this school is going to fit into that future. And you'll need recommendation letters.
I used to journal a lot when I was a kid; and that's really good practice for writing college admission's essays. Being able to eloquently talk about yourself in a way that doesn't come off as boasting. If you are keeping a daily journal where you write about the things that you are proud of, and the things you had challenges with, that’s material for an essay down the line.
Knowing yourself can lead to an excellent essay.
She knew that she was on her own to pay for college since she left her house at 15. She landed the Coca Cola Scholarship which paid for her to go to Clemson. With the scholarship, she was able to get through college with only $3,000 of student loans. After undergrad, she went to Stanford to earn a graduate degree in civil and environmental engineering.
The career path she chose was largely guided through mentorship. A professor saw her math abilities and advised her to switch from geology to environmental engineering. Plus, she grew up with two older sisters to watch that allowed her to avoid her own mistakes.
I’ve always known from a young age that I don’t have to actually make the mistake myself. I can borrow somebody else’s experience and use them as a surrogate to learn from it faster for myself.
A lot of the career advice she received was by sitting outside of professors' offices during their office hours. She would meet these professors and have a chat, taking notes to apply to her own life. She learned about the importance of getting a professional engineering license and it would play a big part in her future. Kim advises being open to opportunities to meet other professors and mentors however they show up.
Real Hourly Wage
Kim first encountered the idea of a real hourly wage in Vicki Robin's Your Money or Your Life . The idea is that you think about your actual hourly wage after expenses, not what the job pays. You consider the cost of things like driving to work, going to lunch, childcare, animal boarding, and any other required maintenance for your full-time job.
For Kim, she was earning $60,000 at an engineering firm after college. But she calculated her real hourly wage to be around $12.
She felt somewhat insulted based on the education she spent years acquiring. She realized after being promoted to project manager with access to the budget that clients paid around $100/hour not $30/hour. At a large firm, the difference in this money is used to pay for things like taxes, admin staff, IT staff, and the boss's salary.
She realized that she could sell her brain by the hour to her clients and keep more of what she was worth. So, she worked for exactly four years to satisfy the requirements of a professional engineering license. She found out that she passed the exam and that she was pregnant on the same Friday, so she quit her job the next Monday.
Quitting Her Day Job
Quitting a job with a plan is one thing, but you still have to find clients. From the beginning, she experienced how jobs can come and go, even losing 10% of her salary soon after starting her new job to stave off lay-offs. After starting her career soon after the 2008 economy crash, she doesn't believe that a W-2 is safer than freelancing.
I've never believed in the idea of job security when you put your earning ability in someone else's hands. The risk of being a freelancer is that you eat what you kill. Right, and we definitely have seasons where it's really really good in the, say, winter and not so good in the summer. Right, so, we have to budget for that within our business and our personal life, to kind of even out those dips.
Although it can be feast or famine, freelancing gives you more control over your real hourly wage.
Building A Business
Quitting her day job was not an overnight decision. She started freelancing two years before quitting her day job. So for two years, she worked two jobs. It started by putting her name out in the engineering and sustainability communities.
Kim found her first client at a green building conference at a random happy hour. She was just in the right place at the right time. A lot of success is telling people that you are qualified and available.
The more niche you can be, the easier it is to get your name out there. Because when there's only 100 people in the world that have the set of credentials that I have, people know who you are when they're looking for that.
If you want to stand out, then you have to specialize in something. Make sure to learn your business, the nuts and bolts, before freelancing.
Currently, Kim lives in Wyoming but she has lived in 35 places over the last 35 years. After diving into the real hourly wage and building remote businesses, Kim and her husband started looking at places to move.
They decided to move from Orlando, FL to Oregon to inflate their lifestyle to match their higher wages. However, it felt terrible. With a higher state income tax, it felt like someone was sitting on their chest. Since they started freelancing to keep more of their money, it felt wrong that it was still going to someone else. So, they went to find a new place to live.
After exploring Alaska, Tennessee, Nevada, and Wyoming, they decided on Wyoming as their place to retire. With the move, they were able to scale back on work. They no longer have to kill themselves to keep up with the tax bill.
How To Relocate
Kim is a pro at finding the right place to live. She recommends starting by writing down the top 10 things that make you happy. For her family, they came up with exercise classes and the library as two of their must-haves.
So as they went exploring, they made sure to check out the gyms and the local libraries. They also toured elementary schools. Plus, they made sure that Kim felt comfortable going to Walmart by herself after dark.
Although they have not retired in the traditional sense, Kim and her husband have scaled back their workloads to a few hours a week. Since they enjoy working that part of their brains, they have decided to rewire their life instead of retiring completely.
They do not use their engineering skills to earn a full-time income anymore. But they can use those skills however they see fit. For example, her husband has taught a robotics program at the elementary school and she volunteers to help kids with their college applications.
The time freedom they have is based on rewiring their lives. With low expenses, they only need to work one day a week to cover them.
Favorite Financial Win
With their newfound freedom and financial savvy, Kim and her husband were able to help her mother-in-law. She was traditionally retired in her 60s with a nest egg at an actively managed firm. The firm was charging 2% for assets under management.
They helped her do the math. It was costing around $10,000 a year to leave the money with this firm. Plus, the company was hiring salesmen, not financial professionals. So, they convinced her to manage the portfolio herself.
It has made a noticeable difference in her life. Since she is in the drawdown phase, that money allows her to visit more often and enjoy life more. It was a big win for Kim to be able to give back like this!
How To Connect
You can find more of Kim's content on her site, The Frugal Engineers. Head to her contact page to find her email and social media. She answers every reader question and sometimes even Skypes with her readers!
The Hot Seat
An Inflection Point: When she came back from a year off from college. Took a gap year to work at Disney World and came back with over $30,000 in debt. $20,000 of that was a car. $10,000 of that was a credit card from trying to live a life she couldn’t afford. A friend told her about Dave Ramsey and helped her make her first budget spreadsheet.
Favorite Life Hack: Saving for college using an HSA. HSA is triple taxed advantaged but it is double FASFA blind. We pay cash for all of our medical expenses and keep the receipts. When her daughter goes to college, she already has $12,000 of pay for college vouchers.
Biggest Financial Mistake: When she took her job at Disney World, the hope was that it would open doors in the future. She didn’t put any limits on her spending. So she started dating a guy with a full-time job and she had to spend more to keep up. Being more realistic about her expenses could have helped her avoid this mistake.
The advice you would give your younger self: Goes back to comparing yourself to other people, especially in college. It’s okay to be different. Your standard of living doesn’t have to match the standard of living for the people around you. It is hard to not compare yourself to the people around you. But they might have help from benefactors or be in debt themselves. It is okay to be different.
Don’t be in a rush to keep up with everyone around you because they may have a different funding situation.
Bonus! What purchase have you made over the past 12 months has brought the most value to your life? A robotic vacuum.
- FI After College: Best Money Moves After Graduation
- Podcast Episode: FI Lifestyle Before FI Number with Nick True
New to FI? Be sure to check out Episode 100: Welcome To The FI Community!