Don’t Get Discouraged by Slow Initial Progress // A Blast from My Financial Past

I was cleaning out some old files yesterday when I came across this archaeological artifact:

See that number at the bottom? As of almost exactly 10 years ago — 10 years before retiring early — the net worth I could access came to a whopping $2,147.

At the time I was 28 years old, about to be promoted to vice president at work. I was still earning five figures but was well beyond entry level wages. Mark and I would be engaged within two months after I printed out these numbers. And a year beyond that, we’d buy our first place, a condo in LA.

And yet, despite having already paid off $21,000 in debt by that point, at age 28 I still didn’t have a real emergency fund. And I still owed almost as much on my student loans and car loan as I’d managed to save in mutual funds with my incremental autoinvestments of $250 per paycheck.

My grand total net worth was every so slightly higher, if you counted my just-starting-to-sprout 401(k):

So my net worth after almost seven years of working was less than $30,000. Less than 1X, to put it in early retirement annual expense parlance. I’d never maxed out my 401(k) — you can see right there that my annual contribution at that point was $7,800, which was higher than prior years — and I had not a penny saved in an IRA or Roth.

But based on the retirement advice I got from USAA a few months prior, I was doing just fine:

I was still assuming I’d retire at 65 at that point, because it had not yet occurred to me that there was any other option (despite the fact that my dad retired early), and based on that, USAA told me I only needed to save $8000 a year to be on track. I was exceeding that by almost 50 percent when counting my employer match, and also saving $6000 a year in non-retirement accounts. So I was doing pretty well, right?!

If I was aiming for conventional retirement, then yes! Other than the missing emergency fund, of course. But it’s almost unfathomable looking back that this was the state of my finances a mere 10 years ago. Ten years before retiring early with a level of savings that is not bare bones, that is not (in the words of frequent commenter Phil) “sheltering in place” and that has plenty of contingencies built in.

I’ve come a long way, baby. 

Of course only a few months after committing these numbers to paper, I combined finances with Mark, who is three years older and was thus a bit farther ahead. But making our money joint only changed things a little, not by an order of magnitude. And our engagement and marriage happened to coincide with the financial crisis (we got engaged in March 2008, days after the Fed got involved to try to stabilize the housing market, and got married in August, weeks before Lehman Brothers declared bankruptcy and kicked off the global market collapse), which did us a lot of favors in terms of making housing in Los Angeles slightly more affordable for a short time and searing into our minds the importance of buying less home than we could technically afford. The financial crisis had the immediate effect of making us kick our savings in higher gear, and the longer term effect of letting us ride the wave of this crazy long bull market (now nine years and counting) through our entire accumulation phase for early retirement.

But none of that is the point. And how I got from a barely positive net worth to early retirement in 10 years isn’t even really the point either. The point is:

I’d been paying off debt and saving for years to get to a barely positive net worth, and to save less than one year’s worth of living expenses in my retirement account. And it felt for years like I was barely making any progress.

But then, not all that long after this snapshot from the wayback machine, I hit the tipping point when saving faster became easier, and when compounding started to work in my favor — in our favor at that point — and just like that, the progress began to feel palpable.

All of which is a long way of saying: Don’t get discouraged if it feels like the going is slow at first, maybe even for the first several years! 

Thanks to the 2008 financial crisis scaring the crap out of us (while also creating our first-ever opportunity to consider buying property in LA, something that was out of reach throughout the 2000s despite us earning a decent living), that’s really the year we got serious about saving. So finding that rundown of my finances at the start of the year is cool to see. That was my starting point on the financial independence journey in a sense. A few months after that, the debt was gone and I increased how much I was saving each month, as did Mark, and we have good records of our financial progress together post-marriage.

You might recognize this chart from our full financial rundown as of retirement:

What’s crazy is that, despite putting a real emphasis on saving from 2008 onward, the line from 2008 to 2010 still looks pretty flat. It’s not until 2010-2011 that you start to see real year-over-year growth. But from then on, it keeps getting steeper and steeper, and the year-over-year progress is huge.

There are a bunch of reasons for all of that:

It took a while to see real effects of compounding, but after compounding kicked in, its effect was more dramatic each year.

Our earnings went up more or less consistently, so we were able to save a bit more each year than we had the year before, magnifying the effect.

In our peak earning years at the end, we were each earning six figures and could afford to save a lot by any measure.

The fact that we were saving as a couple instead of single people magnified the growth in later years for sure.

But if we could zoom all the way out to look at my money from the day I graduated from college in 2001 until I retired in 2017, you’d see a negative or negligible net worth for more than half of that time. 

Which means…

Don’t Get Discouraged By What Might Feel Like Slow Progress, Even for Years!

I spent almost seven years paying off my student, car and credit card debt, all the while feeling like I was treading water at best financially, so I get it. If I’d known about early retirement then, I don’t even know if I’d have let myself dream about it, because at the time it would have felt like setting myself up for failure and disappointment. Surely I could never save that much if I can’t even get rid of this debt faster, I’m sure I’d have thought.

And then for several years beyond that, we saved diligently and watched our numbers get bigger, but not by the leaps and bounds that can feel necessary to achieve early retirement. I didn’t dare to dream about early retirement then either.

But here we are, barely a decade later, and we did it!

Because:

Compounding is magic.

Compounding works on both your investments and your income.

Success begets success, and the more we saved, the more we wanted to save.

And because it takes a while for the locomotive to gather up steam, but once it does, there’s no stopping it. 

So if you’re in a place in your journey where you feel like you’ll never get where you want to be, or like the going is too slow, I hope seeing all of this helps.

Stay focused on your goal, let the magic of time do its thing and you’ll get there!

Let’s Share the Pep Talk!

If you’re farther along in your savings journey and seeing the numbers climb now, what helped you get through those slow-going years? What encouragement can you offer to others here who might need it? For those in the slow-going phase, what other encouragement would be helpful to have from folks? And of course if you know someone who might need this level of encouragement, I’d be delighted if you’d share the post with them! Please share your thoughts in the comments!