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 –Â 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.
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Wow quite a journey! No path toward FIRE is ever straight or easy. Amazing the challenges you were able to overcome. Persistence will pay off shortly!
Thanks so much for sharing, very inspirational!
Thanks! I hope it can help inspire others whose journey to financial freedom isn’t straightforward. I’m the tortoise, not the hare (as Miss Mazuma would say) and I’m planning to eventually win the race! 🙂
Amazing journey! I can’t wait to see what comes next this year in your journey to FIRE. I’m journeying to FI, but my husband doesn’t ever plan to retire, so we’re in a slightly different path. It’s so important to be prepared for the bumps and detours though!
You just never know what life will throw at you, but the important part is to not give up! Best of luck in your journey as well
Wow you are a trooper that is an incredible 20 years that you have lived. I am incredibly impressed with your resilience, I can only imagine what a wonderful asset you are at your company.
I hope 2017 turns out to be the best year yet for you!!!
Thanks, and same to you! If this year is just “uneventful” we’ll make great progress. And if not-that’s life! Have to take the downs with the ups. 🙂
This is inspirational, I wish you and your family the very best going forward. I do envy the millenials, having to start their journey during this bull market with low interest rates
Just want to say that you are not alone in going through the ups and downs, this post made me think about mine
1998 – Graduated from college, good entry level salary in Y2K consulting. My mother also decided to match my Roth, I invested in risky stocks.
1999 – Started my masters by taking out student loans
2000 – Bubble burst, lost all of Roth, 401K tanked due to tech allocation
2001 – Took a year off
2002 – Tough job market, start over at entry level, got married, started life as DINKs
2006 – Bought a new construction condo, too much house, 10% down
2008 – Lost have of our investments
2010 – Wife wanted separation, moved out, had to pay rent on top of the mortgage
2011 – Divorce, lost half of net worth, forced to short sell the condo
2012 – 2015 – Starting dating a long time friend, 6 months into the relationship she was diagnosed with stage 4 colon cancer. She gave me an out but I wasn’t going to let her go through it alone. We got married. Negative savings rate, raided all the Roth contributions to pursue bucket list items. Lived a consumerist lifestyle to help escape all shit that came with cancer. She passed away in the fall of 2015.
2016 – Life was a complete mess the first half. Started to downsize, declutter and simply the 2nd half. Decided to pursue FI with a target date of 3.5 years whether I meet the financial goals or not.
As time passes, I remember more of the ups than the downs and perspective is an amazing gift.
So sorry for your loss Taemoo. I agree that the perspective we gain from going through all these ups and downs is a gift. Yes, it would be great if life was a smooth ride, but it’s just not for many of us. We know that each day is meant to be treasured and FI, although an important goal, doesn’t come before living life. Best of luck to you in your FI journey.
This is an incredible post, and really makes clear that:
1/ no-one can tell what is coming and
2/ there absolutely will be some bad along with the good.
It’s one thing to look at the exciting parts of FIRE, but we need to be aware that there are times we will have to hunker down and just be consistent. I’m also super impressed with your memory and record-keeping!
Yes the consistency is the important part. Two steps forward, one step back (and sometimes one leap back)-the important part to achieving your goal is to never give up!
Heck of a journey. My timeline is a few years shorter but we both learned our lesson about the uncertainty of health and how catastrophically that can impact your life fairly early on.
Yes, once you’ve experienced an event involving serious health problems, you never take it for granted again
Agree on the health event perspective. Once you have gone through that ones entire thinking changes .Thanks for sharing this story!
Thanks for sharing this in-depth review, and the ups and downs of your families path. It is a great reminder to not take anything for granted and you should be prepared for anything (also that an emergency fund is a very use-full tool to have at your disposal)
Heres to a happy and healthy 2017!
Heck yes on the emergency fund! It’s such an important tool to have.
Your post was a path down memory lane for me. Mrs. Need2Save and I graduated college back in 1994 (Go Gen Xers!) and have always been able to contribute something to our retirement funds. Some years more than others, but always something.
It sounds like 2012 was an especially challenging year for your family. I can only imagine how you dealt with seeing your husband in the ICU.
Keep rolling with the punches and you’ll be FI before you know it.
Thanks! As Dory (the fish from Finding Nemo) would say, “just keep swimming, just keep swimming…”
Incredible journey. So important to save and invest as early as possible, you just never know what life will throw at you.
That’s for sure!
Fantastic post. I just love the lessons for others that are right there embedded within so many of your actions year over year. It’s certainly been a challenging journey for you but I love the grit and determination and your making the best of all the difficult situations put in front of you. Bravo.
Thanks! It’s been a heck of a journey but that’s life for you. The important part is to not give up and keep on striving!
Thanks for sharing your journey to FI! You toughed it out through some really rough times – being financially savvy certainly helped, I’m sure!
Though we haven’t always had a goal of FI and took on more debt than we should have, we did start investing in our 20s (we’re in our early 40s). Our investments tanked in 2008 but, like you, we just stopped watching it and didn’t touch it. We were more inspired than ever when it started to recover. We started aiming for FI around 5 years ago and have been increasing the savings as we can. We’ve lived on one income for the past 16 years, so we have taken the slow route too! I’m definitely a tortoise.
Sounds like you’re on a great track! Good to know that “stop watching” is a strategy others have used during a downturn as well. I felt a bit like an ostrich but I just couldn’t watch it keep going down. Just doing nothing ended up being the best strategy we could have had!
Great post. Brought back a lot of specific memories for me. I was so excited about the 25.9k salary for my first teaching job in 1995. People told me I was so lucky to get a 7.5% mortgage rate on my first house. Late 90’s I had no money and the stock market was rallying. By the time I had saved a little, nothing from the stock market for a decade.
That “lost decade” sure was a rough one, wasn’t it? The market ended right where it started 10 years earlier. That’s where being a true long term investor pays off 🙂
What an amazing story, thanks for sharing! Such an inspiration for our family!
Thanks! The important part is to never give up
What an incredible journey – thank you for sharing!
And thank you for this encouragement: “If you’re going through a difficult time, in life or financially, don’t give up. Keep on going and striving toward your goals.” This is a great example of how perseverance in our Pursuits end up paying off.