This story is part of CNBC Make It's Millennial Money series, which profiles people across the U.S. and details how they earn, spend and give away their money.
Andrew Zhao understands the importance of setting aside money — he saves about $1,000 a month — but it's not his main priority.
"Right now, I'm mostly focused on earning — and a bit less on saving," the 27-year-old based in San Diego tells CNBC Make It.
Between his full-time job in sales and the e-commerce business that he runs on the side, Zhao makes about $80,000 a year. It's enough to live comfortably, he says, adding: "I could probably make less money and still be comfortable."
But he's always had a desire to earn more: "I used to watch 'Gossip Girl,' and I was like: These guys have so much money, it's so cool. And I wanted to make money. So I was always looking at ways I could make money. "
Zhao didn't attend college and entered the workforce at 18. He started his career in sales and then spent a few years working at a start-up in the Bay Area before returning to San Diego, where he currently works as a sales professional at Cogent Communications.
Between his base salary, bonuses and commissions, he made about $67,000 from his day job last year.
Zhao is passionate about "gloving," which is "an underground art form that centers around the rave culture," he explains. "Essentially, you put on gloves with lights in each fingertip and you give light shows." In 2016, he turned that passion into a side hustle: Zhao sells gloving products on his e-commerce site Throwlights, and last year he earned $13,000.
His long-term goal is to work on Throwlights full-time, but he's less concerned about the company's profits right now. "I'm really focused on excelling in my sales career and in growing as an artist in gloving," he says.
Over the next year, he wants to triple his income from sales: "I'm looking to earn in the arena of $200,000 to $300,000 … which is entirely possible in the world of sales." The majority of that would come from commissions. "The industry I'm in is very much based on your book of business. It comes down to who you know and how well you know them. ... I think by virtue of persistence and working smart I'll build my book of business and gain enough momentum to earn a top producer's income over the next 12 months," he says. "That's why I love this industry so much: There's really no earning cap."
Here's a breakdown of everything Zhao spends in a typical month.
Zhao pays $1,710 a month for a studio apartment in downtown San Diego. Included in his rent is a parking spot and access to a gym.
His girlfriend recently moved in with him, and they share the space along with their two cats and dog. "It is a bit tight right now," says Zhao, but they plan to move to a bigger place this summer.
Zhao still pays the full $1,710, but he and his girlfriend rent out her apartment on Airbnb and split the profits, which ends up being about $2,000 a month, or $1,000 each. He also brings in an extra $200 a month by renting out his parking space.
He can't bank on this passive income when he moves out, but it helps offset the cost of rent right now.
"I think food is one of the great joys in life," says Zhao, who doesn't mind splurging in this category. "We definitely like to eat good."
He spends about $200 a month on groceries and $350 a month on restaurants, plus another $120 on coffee, which he buys daily.
Zhao buys all of his household items, like paper towels and toothpaste, on Amazon. Plus, he'll splurge on non-essentials. "I have a sous vide," he says, "and I recently bought this torch called the Searzall. It was like $150. It's to sear meat, or any kind of food, after it's been done in the sous vide."
"I recently got into eating truffles — the mushroom kind of truffles — so I will buy those on Amazon," he adds.
The ease of ordering online makes it easy to overspend, admits Zhao, who spends about $400 a month on Amazon products. But he appreciates the speed and convenience of the service: "It makes my life so easy."
Health, dental and vision insurance come straight out of Zhao's paycheck. Combined, it costs about $225 a month. His insurance came in handy last year when he got in a motorcycle accident and broke his back.
He was air-lifted out of the crash by helicopter, which cost about $50,000, and the two-day hospital stay cost over $100,000. "Insurance paid for most of that stuff, and I got left with some small bills," he says. His personal responsibility was "a couple thousand dollars," he adds, which he had in savings at the time, "but there are other long-term costs as well, like increased insurance rates."
Zhao also pays $15 a month for renters insurance.
"If I could buy more art, I would do that in a heartbeat," says Zhao. He buys about one piece every few months and estimates he spends $1,200 a year total, which comes out to about $100 a month.
Since Zhao doesn't have a car and lives walking distance from work, he's able to keep his transportation costs low. He spends about $20 a month on Uber and $15 a month on Bird, an electric scooter company that provides dockless scooters throughout San Diego.
He also pitches in about $50 a month for gas for his girlfriend's car, which they use for weekend trips or any longer distances that they can't cover on an electric scooter.
Zhao is on an unlimited-data family plan and pays his mom $100 a month. He's able to expense half of that through work, which cuts his phone bill to $50.
Zhao has four credit cards. Two have no annual fee, while the others, the Chase Sapphire Preferred and Venture from Capital One, cost $95 each per year, $190 total, or roughly $15 per month.
"I feel like it's important to give back," says Zhao, who donates about $10 a month to the zoo.
It's his only consistent donation, but "every once in a while, when I see a charity that I want to give money to, like ASPCA [American Society for the Prevention of Cruelty to Animals], I'll do it," he says.
"When you give back to people, it will come back to you," he adds. "I honestly believe that. Eventually, you'll be rewarded for the times that you've given back. And even if you're not, it will make you feel good."
When it comes to spending money, "I honestly just buy what I want at the time that I want," says Zhao. But he hasn't always spent guilt-free: "For a long time, I was very frugal and didn't buy anything, but now I've kind of changed my philosophy a bit. I feel that it makes sense to have the things that you desire."
He doesn't track his expenses, but he has enough awareness of how much he's bringing in versus how much he's spending to stay out of the red: "I don't have any debt or any loans at all. It feels good."
Zhao says he has an earnings-first mindset and is less concerned with reducing expenses. Finding ways to cut back on things like restaurants and groceries is "thinking small," he says. He'd rather focus that energy on figuring out how to generate more income.
Still, "I think that saving is very important," he says. He's found that the easiest way to set aside money for the future is to automate his savings: Every month, $400 goes straight to his 401(k) plan, $500 goes to his Roth IRA and $150 goes to his health savings account (HSA), putting his total savings at $1,050.
Currently, he doesn't have an emergency fund, "which is a little bit concerning," he admits.
"Automation is certainly your friend," says Westlin, especially for someone like Zhao who is focused on his career. By putting his financial life on autopilot, "he can spend less time worrying about his finances and more time towards his job and his side business."
Anyone can benefit by transferring money directly from their paycheck or checking account to a savings, retirement or investment account. You'll never even see the money you're setting aside and will learn to live without it. Besides helping you build wealth, as Westlin points out, it will save you time and mental energy.
Zhao has the right saving mentality, says Westlin: Between his contributions to his 401(k), Roth IRA and HSA, "he's saving a little over 15% of his income, which is awesome."
Westlin says Zhao is also saving in the right places. The three accounts he's using all offer tax benefits, especially the HSA: "The contributions are tax deductible, the funds grow tax deferred — so you're not taxed on the money while it's in the account — and then, as long as the funds are used for qualified medical expenses, all of the withdrawals are tax free."
Zhao is also smart to save in a Roth IRA. The main difference between a traditional IRA and a Roth IRA is when you pay taxes on your money. In a traditional account, you contribute pre-tax dollars and then pay taxes on the funds when you withdraw them in retirement. With a Roth, the process is reversed: You pay taxes upfront, but you can withdraw your contributions and earnings tax-free in retirement.
A Roth is a particularly good option for Zhao, and anyone early in their career, because as a younger worker, you're likely earning less today than you will be in the future. That means you're in a lower tax bracket and paying less in taxes than you would later on.
One thing Zhao should be mindful of, though, is the income cap. "If his income does increase as he expects it to, saving in a Roth IRA may no longer be an option," says Westlin.
Each year, the IRS sets an income cap on the Roth IRA based on modified adjusted gross income (MAGI): In 2019, a single person with a MAGI of $137,000 or more and a married couple making more than $203,000 cannot directly contribute to a Roth IRA.
It's crucial for everybody to have a rainy day fund. Life, after all, doesn't usually go as planned: There could be another recession, you could lose your job, have a medical emergency or have to deal with a car breaking down.
It's especially important for Zhao to have emergency money, says Westlin, since his income is dependent on commissions: "As he starts increasing his income, more of that might start coming from those commissions, so we want to make sure that he has this back-up fund."
Ideally, "he should save about three to six months worth of his fixed expenses," he adds. Zhao spends about $2,500 on fixed costs like rent and food, meaning he should aim to have $7,500 to $15,000 in emergency savings.
To get there, he could temporarily cut back on buying art or eliminate one nice dinner a month, suggests Westlin. He could also consider re-directing some of his savings: "If he has a match with his 401(k), we definitely don't want to cut back there, so maybe he cuts back on the Roth IRA contribution for a period of time."
Zhao should continue saving in the HSA, Westlin notes, in case a medical emergency does arise and he has to pay for out of pocket expenses. In that case, he could use his HSA funds.
The important thing is to start building his emergency fund today: It's not going to happen overnight, but consistently dedicating a small percentage of his income to a safety net can add up over time, says Westlin.
Anyone expecting to earn more, like Zhao is, should be aware of a phenomenon called lifestyle inflation, which is when your spending tends to increase as your income grows.
"Just because your income goes up doesn't mean that you can just increase your expenses by the same amount," says Westlin.
To avoid lifestyle creep, when your earnings increase, don't boost your spending — instead, put that extra money directly to savings.
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