Welcome to 2017! I hope you had an awesome New Year, like me and many of my fellow PF bloggers did. Given that we’re starting a new year, after taking time to reflect on my annual report and I thought I’d kick it off by talking about my 20 year journey toward Financial Independence, or FI. I’m not there yet, but am planning to be in the next five years or so.
Unlike many of my fellow awesome PF bloggers, I’m not a millennial who’s been investing only since after 2008. I’m a very late Gen Xer who has three kids-my first was born when I was only 23 years old. I also didn’t start my career by graduating from a fancy school or making 50-60k per year. Instead I put myself through school starting in community college, and started out my first job making 22k per year. My journey has been a long and difficult one, involving years of saving and investing during the so-called “lost decade” of 2000-2010, where the market ended back where it started. I’ve been through the tech crash and the 2008 crash as an investor. I’ve owned my home through the real estate crash. Mine is a tale of job loss at the worst possible time, getting rid of debt, and my husbands near death from septic shock when he was only 37. And yet I’ve never given up on my ultimate goal of reaching financial independence.
So for those that may be even later Gen Xers or millennials, what does investing and saving for 20 years look like? What kinds of things can happen over such a long period of time? Here’s a bit about my history:
- 1996: The start of my saving and investing journey, back when I was 16 years old. My father offered me a match from my part-time job into an IRA. So if I put in $100, he would match it with another $100. Unfortunately this offer was only good until I turned 18. So I opened up a shiny new traditional IRA (not knowing that the ROTH would have been much better for me at the time) into a fund called Janus 20. Honestly I can’t even remember anymore where I found out about it. It performed very, very well for a while-and then crashed to earth in the tech crash to come in the year 2000.
- 1996-up 27%
- 1997-up 29%
- 1998-up 73% (!!!)
- 1999-up 64%
- 2000-down 32%
- 2001-down 29%
- 2002-down 24%
- 1996-1998: Continued working part-time at the grocery store. Graduated high school, and started saving in a regular savings account.
- 1999: Got my first “real” job in a call center to work my way through college. Started contributing to my very first 401k. I put aside 10% because all my reading at the time indicated that would be the ideal amount. I only made 22k per year so 10% was only $2k. I also Note the year here-investments had been going crazy in the last 90’s and were about to come way down
- 2000: Bought a condo for $90k with 10% down. That condo had been purchased by the prior owner for $130k only a few years before. Real estate had not been doing well, but that was about to change (although I didn’t know it). Why did I buy a condo at 20? I figured I would be in the area at least until I finished school, and if I could just break even then it would be better than renting. The condos were relatively new and wouldn’t need maintenance. My interest rate? 8.375%, plus PMI. Ouch! Continued contributing 10% to my 401k, which was going down, down, down with the market. But I believed in the power of long-term investing
- 2001: Got married, transferred from community college to a four-year school. 9/11 happened four days before my wedding and honeymoon-overseas to Japan. Flying at that time was not ideal. Continued to invest in the 401k. Discovered Vanguard and index fund investing, and put that Janus 20 fund over there.
- 2002: Continued investing. Refinanced the mortgage and was able to get rid of PMI because values were going up. Was also able to secure a lower rate (I think in the high 4’s or the 5’s?), and the monthly payment was cut in half. Kept reading about and researching investing. Was finally able to get out of the call center by getting a job in IT. My degree was in accounting but the IT job met all my requirements – that it not be a call center. So over to IT I went, temporarily until I finished my Accounting degree (that didn’t work out – I’m still in IT today)
- 2003: Gave the speech to my college public speaking class about the power of investing and compound interest for the long haul. Graduated from college in June with my accounting degree, and had my oldest son that October. Continued to work in IT and transferred to a bigger, better project. My boss later told me she hired me because I had worked full time and gone to school full time-even though I lacked experience, she assumed that meant I had a strong work ethic
- 2004-2005: Worked in IT and learned A LOT. Continued to set aside 10% into that 401k. Started a college fund for the baby, and a vacation fund to take a big trip in the future. Watched as real estate continued to go up, up, up, and started thinking about buying a house
- 2006: Sold the condo – with a profit of $70k – and used that money to put 20% down on the house we still live in today. Interest rates had gone up slightly and sat around 6.5% at the time. We got a 30 year mortgage and dreamed of one day being able to pay it off. Note the year again – the real estate crash was coming, but no one knew
- 2007: Middle son was born. Opened his college account and continued to save and invest in retirement, the vacation fund, and college accounts. Was enjoying seeing investments making money….until…
- 2008: Stock market crash. The company I was working for had a share price of over $100 per share before the crash and was down to $4 (literally) at the low. Watched years and years of savings evaporate overnight. Started to get nervous, and my husband reminded me of that guy I always quoted to him, Warren Buffet – “Be greedy when others are fearful, and fearful when others are greedy.” So I held on and kept investing even as everything went down the tubes. Watched the value of the house and my net worth go down by 40%, and stopped calculating it for a while. Started to research MBA programs
- 2009: An eventful year. I bought my first ever new car-with 30% down, but I still got a loan for $12k. I had thought about paying in cash but decided to keep some money liquid. Started my MBA in September and got a text message in October that my husbands factory was closing. Yes, that’s right-in three months I got a car loan, started an MBA, and my husband lost his job. When it rains it pours.
- 2010-2011: Continued the MBA, saving and investing. In 2011 I got a new job with a new company that came with a bump in pay, so I bumped the 401k up to 12%, hoping one day I would get to the federal maximum. My husband couldn’t find work and stayed home caring for the boys. Luckily unemployment was extended due to the financial crisis. Kept investing but things were tight. I was using savings combined with reimbursement to pay for school, but it was hard. Our emergency fund kept bouncing up and down as expenses came and we no longer had the income to take care of them without tapping savings
- 2012: The year everything went to hell. In March my husband went into the hospital to have a surgery that went horribly wrong. He went into septic shock and was on a ventilator in the ICU for a week. He was away from home for a month in the hospital and rehabilitation-missing Easter with the kids. In one fell swoop we lost his unemployment, gained a ton of medical expenses, and a bunch of new child care expenses. I cut all savings and investment to the bare bones-only up to the company match in the 401k. No college, no vacation fund. I had to get a loan for school to pay for class expenses on top of what my company reimbursed because the emergency fund was depleted. I let all the investments ride. Once his health condition stabilized some months later, we were able to drop the child care. I became determined to get rid of all the debt and started saving like crazy. As soon as I could I put the 401k back up to 12%.
- 2013: Got rid of that stupid car loan. Graduated with the MBA, and paid off all the loans two months after graduating (before the interest even had a chance to capitalize). We were completely debt-free and able to quickly build back up the emergency fund. I refinanced the mortgage to a 15 year at 2.75% – an amazing rate considering what I originally had when I first bought the condo. I was able to start saving for the kids college again. How was it possible to do this so quickly? All those years of saving and investing, living with job loss, and generally living below our means left plenty of room to save. I made a strict budget and tracked all expenses-every last penny. My husband still couldn’t work this year, but the medical expenses calmed down. I started reading PF blogs this year and added the knowledge from those sites to my years of reading books about investing.
- 2014: My husband had recovered enough to get a part-time early morning job loading trucks. He continued to care for the kids during the day while I worked. We were able to seriously ratchet up savings and investment-all his pay was saved because I would never count on it again. And that would turn out to be a good decision because…
- 2015: He couldn’t work. He had to have a serious, difficult surgery to repair damage originally caused by the sepsis and aggravated by the job. It tore his abdominal wall apart, and it had to be totally reconstructed-a risky, 7-hour long surgery. But the job loss was no big deal financially. We were able to continue saving and investing, and our emergency fund was very healthy. Our youngest son was born this year, and he brought us a lot of joy and happiness in the long, difficult recovery period. I opened his college fund right after I got his social security number in the mail
- 2016: Finally able to contribute the federal maximum to the 401k-reaching a long time goal. Set aside money to bump up all three kids college funds, and continued to save toward the mortgage pay-off goal. My husband continued to be a stay at home dad to our now three boys
So there it is – 20 long years of life’s dramatic financial twists and turns. Through it all, I’ve remained obsessed with personal finance and index investing, and remained committed to one day achieving financial freedom. I’ve devoured every book in the library on the topic over the years, and read more blogs than I can count. I’ve steadily increased my salary and kept my expenses level for years, increasing the gap between my pay and my spending. The only reason we were able to survive-and thrive-through such chaos was always living below our means.
If you’re going through a difficult time, in life or financially, don’t give up. Keep on going and striving toward your goals. Even if the path to your ultimate goal has tons of ups and downs, twists and turns, and goes backward sometimes-it’s worth it. And you can do it, even when you think you can’t.