In The Beginning
Every future millionaire started somewhere, for me that somewhere was back in 1999 when my grandfather died.
In 1999 my grandfather passed away and left me and my brother ~$2,000. My dad introduced us to the stock market and told us to each pick a company and we could invest the money in it. My brother picked Home Depot, I picked Yahoo. We both made a little bit of money in the ~18 months the money was invested. But we eventually used the money to cover the braces we both got. That was my first exposure to stocks and the market in general.
I stuck to saving my allowance and lunch money in an envelope in my underwear drawer until I got a bank account, a debit card and a job. [My mother confessed that she went through the envelope (labeled “Stay Out”) when she found it one day putting away my clothes and was happy that it was just a wad of small bills]. When I was 17, my dad re-introduced me to the stock market, this time by way of mutual funds. Since I actually had an income, he matched my $1,000 and used it to start a Roth IRA. [He also showed me a compounding interest calculator, which I played with for HOURS.] He put the money in a 2045 target-date retirement fund. It was up to me to give him money to deposit, and he would even match it dollar for dollar. Looking back, I wish I had put more in (I missed all of that free money!). Even if I give myself some grace for not making many contributions while I was in college (2006-2010) I definitely could have put more in after college and ESPECIALLY once I got my first job.
My Work History
My first job was working for a medium-sized small business earning $14/hr on the 3rd shift. I was free to work overtime and probably averaged 58 hours per week during my time there. After my first 3 months I successfully negotiated for a $1/hr raise. The company did offer a 401k and a company match that vested over 2 years, but I (stubbornly) did not enroll. After another 7 months of working 55+ hours every week with a one hour (each way) commute, I searched for and found a new job.
My new job (with a Fortune 500 company) was a standard 40 hour work week with a salary and a small annual bonus (~$48,000). My commute went from 1 hour to 20 minutes each way. More importantly, the company auto-enrolled me into the 401k with the contribution to earn the full company match (3.5% total match when I contribute 6%). I celebrated the new job by adding $2000 to my Roth IRA and promising myself that I would max it next year and every year after.
I worked very hard in my new position and had a bit of luck when a re-structuring opened up a new opportunity for me. After 8 total months with the new company, I received my first promotion and sweet benefits to go along with my new $76,000 pay. I had to travel 90% of the time, but all travel was relatively local (nothing further than 3 hours away) and I was given a company car and gas card. We could have really supercharged our savings while I was in this role.. but we spent our money as quickly as it came in. 6 years later we probably don’t have anything substantial to show for our spending during that time.
After 18 months in this role, and a nice raise, I applied for a stretch position within the company. Even though I had interviewed well for the job, I was still very young and people at that level were often twice my age (or more). I was surprised and happy to be offered the position at the corporate office, just 10 miles from my home. The pay was also surprising – $113,000. I could have and should have better funded my Roth IRA or my 401k.. it wasn’t until last year, 2017 that I contributed another dime to my IRA or increased the 401k contribution.
Finally Getting Serious About Saving
Last year I finally took the “Minor” designation off of my Roth IRA and took a more active role in managing my account. The sad contribution story of my Roth IRA is as follows:
When I type it all out, it really highlights just how many years passed without a single dollar contributed..
2005 – Opened with $2,000
2006 – No Contributions
2007 – $400 total contributions
2008 – $400 total contributions
2009 – $1000 total contributions
2010 – No Contributions
2011 – $2000 total contributions
2012 – No Contributions
2013 – No Contributions
2014 – No Contributions
2015 – No Contributions
2016 – No Contributions
2017 – $11,420 value when transferred out of target retirement fund; $5,500 contribution
I should have maximized the contributions from 2011-2016 when my wife and I were both working, didn’t have kids, and very little expenses. If I did the math, I would probably be pretty bummed [I did the math and we’re ~$200,000 behind where we could be, and now I am pretty bummed]. That disappointment is a main driver to taking a more active role with my retirement planning and saving. Budgeting is going to be key to get as much as we can out of the money we’re earning today. I don’t want to look back 10 years from now and think “I wish I could have saved more”.
Today the Roth IRA stands at ~$30,000, and my wife’s is at ~$8,000. It hurts to think about what those IRAs could be at today if we were serious about saving from the start. We would be just a few years away from Millionaire status.. instead of the 12 years we are reaching for.
Fortunately, there is a small positive in all of this: my 401k. Because my company auto-enrolled me in their 401k, I left it alone. I had just enough sense to not pass up free money, so I stayed at 6% for several years.
Last year I started increasing my contribution (and our company bumped their match to 5% match on 5% contribution!!). Right now, my contribution rate puts me at the 401k contribution limit ($18,500). Today the 401k stands at ~$110,000.
We have a couple other accounts that are just for emergency savings and our MONSTER Vacation Fund.
I feel fortunate that we have accumulated this much at this point without the focus that retirement planning deserves. I am hoping that we really see our accounts take off over the next few years.
Using an investment calculator, I calculated that we could have at least $350,000 more saved at this point if we had started contributing at the rate we are right now, back in 2010. We will forever miss out on the extra years of compounding interest. We can’t do a single thing about the time that we’ve lost, we can only look forward and make changes now to impact our future, and the clock is ticking – 4,372 days to go.
Do any of you have any finance mistakes (from a saving point of view) that you look back and think… if only I had done that differently then, I would be much better off now. What are you doing to not repeat the same mistake?