In 2016, I graduated from university with honors and hoped to feel a sense of joy and accomplishment. But as I stepped out into the real world, I felt terrified. At the time, I had no job offers and my only source of income was from sporadic gigs as a waitress.
It was frightening to see how much I needed to learn, even though I had spent the last four years focusing on an education that was supposed to prepare me for a prosperous future.
I spent much of that first year out of school learning everything I could to better hone my approach to money, starting with build my first budget. I officially started investing in January 2017. Then, in October 2019, I woke up one day to see that my portfolio balance had passed the $100,000 mark.
There are countless resources on personal finance and investing. And when I started to do research, I felt very overwhelmed. But one day I came across the Financial independence, early retirement movement on Reddit’s personal finance forum, and it clicked for me.
The FIRE framework seemed like it could be broken down into specific action steps, and blogs like Frugalwoods and Millennial Revolution helped me cut through the noise.
Thus, for several months, I reviewed the basics of FIRE and I proposed my FIRE number of $1 million. With my new budget, I looked at my income, subtracted my expenses and calculated how much I had left to put in my IRA or other taxable accounts.
Then I focused on learning the different types of investments. I decided to start investing my money in index funds which followed the entire stock market. A few things stood out about index funds for me. Since they seek to replicate the performance of a market index, your returns should be in line with market returns, which 80% active investment managers fail to beat.
Plus, with index funds, there’s no need to look at what you own every day and make new trades, because you already own a bit of everything. If I can get a better ROI than most seasoned pros without doing anything after clicking “buy”, then I’m all for it.
Right out of school, my career started with a temp job where I made $15 an hour. Six months later, I was offered a permanent position at $20 an hour. I then started to invest, but this job did not offer retirement account benefits, so I opened a Roth IRA and another taxable account on my own.
Although I was grateful to have this full-time position, I knew it wasn’t going to help me much in achieving my investment goals. So alongside my training in personal finance, I started looking for ways to network to get into higher paying roles.
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Even something as simple as optimizing my LinkedIn profile with keywords from job postings I was interested in started putting me and my work ahead of recruiters on the platform, rather than simply relying on sending applications into the digital vacuum. Networking that’s how I landed my next role in February 2018, where I earned a salary of $60,000. A year and a half later, in 2019, I was offered a job with a salary of $86,000.
Earning more meant I had more to add to my investments and grow my wealth. My role where I earned $60,000 allowed me to invest tens of thousands of dollars in a single year, which was the first time I could manage this. My current job was the first to offer me a 401(k) and a HSAwhich I have managed to maximize over the past two years.
With investing, it is normal for the value of the stocks you own to go up and down at some point. There will always be risks involved. But I’ve found that one of the most important things to remember is to stick to your investment strategy during periods of volatility.
I learned early in this process that the stock market historically rebounds from declines. Knowing this, I was sure to hold on. But that philosophy was definitely put to the test when the pandemic hit in March 2020.
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Almost overnight, my investments dropped by $40,000 and I apparently lost my $100,000 cap.
Because I didn’t withdraw my money in an effort to protect what I had left, I saw my investments go up to $100,000 and then grow even more. This wouldn’t have happened if I had been nervous about buying during a bull run or if I had been spooked when the going got tough.
Life can always knock you down when you least expect it. When this happens, the last thing you want to do is take money out of your growing investments.
To ensure that you won’t need to dip into your 401(k) or IRA accounts, it’s essential to have some money set aside for emergencies. For me, investing is one of my main financial goals, but I still make sure to keep about $3,000 in the bank because my emergency fund.
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For the past few years, my biggest emergency has been an expensive car repair this month of January. If I hadn’t already put some money aside in an emergency fund, which I started in 2016 before investing, I would have had to take some of it out of my investment plan. Instead, I took on the towing and repair costs without breaking a sweat.
Unforeseen and urgent expenses can arise at any time. This can include sudden repairs, helping a loved one or new medical expense. Without savings, dealing with them could snowball at best into losing investment gains or into debt at worst. Neither outcome is of concern when your budget and investment plan includes how you will handle emergency expenses.
Before creating my budget, I was actually struggling to spend. I had a kind of scarcity mindset, because I felt like I had so little in the first place, and I didn’t want to get rid of it.
Once I set a budget for myself, it gave me permission to spend on what I want to prioritize most, while putting hundreds of dollars into savings and investments.
I discovered that any stress involved in setting up a budgeting system was offset by the power and control I gained over my finances. By exposing all of this, it was easier for me to see where I could change my habits to be more in line with my goals.
Tracking my expenses helped me reduce some small expenses, and I started to used shopping. For example, instead of spending thousands of dollars furnishing my apartment with expensive new items, I took my time collecting what I needed from sites like Freecycle, NextDoor, and Craigslist. I ended up getting some quality pieces for free, including a flat screen TV, kitchen stools, and a full dining set.
Everything I saved from this experience I invested in my investments.
Reaching $100,000 in investments was a big milestone for me, especially reaching that number at age 25. Today, at age 27, my net worth is currently $275,000. Using these steps has helped me feel confident in my finances and able to grow my wealth in the future.
Darcy is a Boston-based writer and marketing executive. She is the founder of We want guac, a site aimed at helping Gen Z get rich. She won a Plutus Award for Best Generational Financial Literacy Content and has been featured in several publications and podcasts including MarketWatch and ChooseFI. You can reach her at Twitter or instagram.
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The views expressed are general and may not be suitable for all investors. There is no guarantee that past performance will recur or result in a positive outcome. Carefully consider your financial situation, including investment objective, time horizon, risk tolerance and fees before making any investment decision. No amount of diversification or asset allocation can assure profits or guarantee against losses.