Investing Early Was the BEST Decision I Ever Made for My Finances
Saving early can feel intimidating, especially when you’re starting your career, but building a habit of saving and investing early can lead to significant rewards over time. I want to share the strategies I used to get started, the advantages I discovered from saving young, and the lessons I’ve learned along the way.
The Power of Early Saving
Why Starting Early Makes a Difference
Starting to save and invest as soon as you start earning might not sound thrilling, but it’s one of the most powerful financial decisions you can make. By investing regularly, even with small amounts, you’re tapping into the power of compound interest, where your money earns interest on itself and grows faster over time. The earlier you start, the more time your money has to multiply.
Compounding Example: If you invest just $1,000 with an average 7% annual return, your money can double every 10 years. So over 40 years, that $1,000 can grow into over $15,000 without you adding anything extra.
Starting early doesn’t require huge amounts – even small contributions set the foundation for substantial growth over time.
Starting Right Out of College
My own journey started right after college. When I got my first job with Equitable at age 22, I set up my paycheck to automatically save a percentage each month.
Automation was key – it took the decision-making out of my hands, so I saved without even thinking about it. If you’re new to saving and investing, automating your savings can be an incredible tool to build consistency.
Embracing Lean Years
In the beginning, money was tight. Since my job was commission-based, my income fluctuated, and some months I only saved $10 or $20. Even though these amounts felt insignificant, every little bit added up. Those modest amounts accumulated over time and became the foundation for a larger savings fund, reinforcing how important it is to stay consistent – even when it feels small.
Tip: Start with any amount you can afford. Even small, regular contributions build over time.
Building Wealth on a Budget
Adopting a “Set and Forget” Mentality
One of the best things I did was keep my investments “out of sight and out of mind”. I would only check in on my investments about once a year, treating them like a regular bill that I paid every month. Keeping my savings untouchable helped me stay committed without the temptation to dip into it.
Long-Term Strategy: Treat your savings like a recurring bill. Set up an automatic transfer each month so your savings grow without you having to actively think about it.
Opportunity Cost of Withdrawing Early
There were definitely times I thought about withdrawing my savings. As life got busier – with rent, moving to a new home, and starting a family – it was tempting to take some of that money out. But every time, I reminded myself of the opportunity cost: the future value of that investment if I left it untouched.
Taking out savings early doesn’t just affect the amount you withdraw; it affects what that amount could have become. It’s not just the money you’re spending – it’s also the potential growth of that money. So, I chose to let it stay put, and that decision alone made a significant impact on my financial future.
Key Insight: Resisting the urge to dip into long-term investments preserves the savings and the power of compounding.
Using Investments to Reach Your Goals
Leveraging Savings to Launch a Business
After a few years of consistent saving, I’d accumulated around $30,000 in my retirement account. When I wanted to start my own business, I was able to use my retirement funds as startup capital without withdrawing them outright. By borrowing against my retirement account, I was able to use my savings to launch Scenic Financial while still keeping my investment intact.
This strategy isn’t for everyone, and it requires careful planning, but in my case, it allowed me to achieve my business goals while sticking to my long-term savings plan.
Tip: In some cases, borrowing against retirement funds can be a viable option to fund significant goals – as long as it’s structured to avoid early withdrawal penalties.
Making Investments Work for You
The stock market can be unpredictable, but my strategy focused on keeping investments in the market for the long term. By avoiding the temptation to frequently trade, I gave my investments the time they needed to grow. Alongside my main retirement account, I also set aside some funds in separate accounts to try different investment strategies, diversifying into stocks, bonds, and even a few alternative investment opportunities.
This balance allowed me to experiment without touching my core investments and gave me flexibility in how I managed my money.
Strategy: Set aside a separate account dedicated to exploring new investments. This “play” account lets you experiment and learn without impacting your primary savings.
Overcoming the Hurdles of Saving and Investing
Handling Financial Struggles and Temptations
Throughout my journey, there were tough times when financial obligations piled up. Paying down credit cards or taking on some debt felt like the easiest solution, but staying diligent with my savings allowed me to build a stronger financial base. Staying on course, even if it means cutting back temporarily on non-essentials, can be one of the best decisions you make.
Reminder: Commitment to saving, even during tight months, pays off over time. Each contribution brings you closer to long-term security.
Using Knowledge to Maximize Investments
One of the most valuable assets in investing is financial knowledge. Working in financial services gave me an edge – I understood how to leverage tax-advantaged accounts, insurance markets, and different investment options. Knowing which investments to prioritize helped me maximize growth and stay efficient with my money.
Pro Tip: Familiarize yourself with different investment types and tax-advantaged accounts like Roth IRAs or 401(k)s. These tools can help you accelerate your savings and achieve your goals faster.
Keeping Track of Progress Without Overreacting
As my portfolio grew, it was encouraging to see the numbers add up. Today, my combined savings and investments are nearing $300,000. This growth came from consistent contributions and a disciplined investing approach. Watching my progress reassured me that the time and effort I put in were well worth it.
Lessons Learned from a Decade of Saving
Compounding is Your Best Friend
One of the most valuable lessons was witnessing the power of compound interest over the years. A major portion of my returns came from reinvested earnings, emphasizing the importance of leaving money in the market. The longer you keep your funds invested, the harder they work for you.
Setbacks Are Part of the Process
Financial journeys aren’t linear – I’ve faced setbacks like family expenses and unexpected costs. But maintaining a steady saving habit, even in tough times, kept me on track. The aim was always to build my financial snowball big enough to sustain itself.
Mindset: Expect financial setbacks and build resilience to stay focused on long-term goals, even during challenging periods.
Consistency Over Time Beats Perfection
Perfect investing isn’t the goal; consistency is. I didn’t contribute huge amounts every month, but by making regular contributions over time, I created steady growth. Building savings gradually can lead to significant results.
Experimenting Can Open New Opportunities
Dedicating a portion of my portfolio for alternative investments allowed me to explore new ideas without risking my core investments. This approach helped me discover higher returns and expand my investment knowledge.
Final Thoughts on Starting Early and Staying Consistent
Starting young with my savings made a world of difference. It was challenging at first, but time and consistency allowed me to build a healthy investment portfolio. Now, I treat savings as a non-negotiable part of my budget and stay focused on long-term goals.
Remember: Your future depends on what you start doing today. By making saving a habit and leveraging investment knowledge, you can realize your financial goals.
FAQs
1. How much should I save if I’m just starting out?
It doesn’t have to be a large amount – even a small percentage of your income can build a strong foundation over time. Start with what you can afford and gradually increase.
2. Can I pause my savings if money is tight?
Yes, it’s okay to pause if needed, but try to resume as soon as possible. Even small contributions keep the habit alive and support long-term growth.
3. Should I take a loan from my retirement savings?
Using retirement funds for a business or emergency can work in specific cases. Just be sure to understand the terms and pay it back quickly to minimize losses.
4. How can I avoid touching my savings when unexpected costs arise?
Building an emergency fund in a separate account can help prevent you from using long-term savings. Aim for 3-6 months of expenses to cover unplanned costs.
5. Are alternative investments worth it?
Alternative investments can diversify your portfolio and offer higher returns but come with higher risks. It’s best to limit these to a small portion of your portfolio.
P.S. Join our free community and gain exclusive access to expert financial insights, personalized tools, and step-by-step guidance tailored for Washington State employees. Whether you’re just starting or nearing retirement, our community offers the resources you need to plan your financial future confidently. Connect with like-minded individuals, ask questions, and stay informed about the latest strategies to maximize your retirement benefits. Start your journey today and take control of your financial goals—it’s completely free!
Ready to start taking control of your future? Schedule a meeting with us here
Get Personalized Investment Advice on your TRS 3 & DCP Plans