From 23K in debt to 10x that in investments
Updated: Feb 9, 2021
We all start from somewhere. For me, it was in debt. Even though I was fortunate enough to receive a full-ride scholarship to attend university, the scholarship did not cover summer school expenses or any out-of-pocket expense deemed by the university as falling under the parental support category. My parents, who are extremely supportive of me, had financial insecurity of their own and were unable to provide financial support at the time. I worked part-time off-campus at a restaurant an average of 20-30 hours/week during college to support myself, and in my final year of college stepped away from restaurant work to focus time more aggressively on graduate-level coursework.
Even at my entry-level salary, I tracked my expenses, analyzed where I could improve or reduce, and slowly made my way towards paying off debt.
My net worth when I graduated from college in 2008 was around -$23K. This consisted of about $10K in a private student loan I took out months before graduating to have cash at hand to pay for my first couple months of rent and security deposit in a new city, federal student loans for summer study programs, and a few thousand in credit card debt. My first job out of college was with the government in a HCOL (High Cost of Living) area, was more money than I could ever imagine making at the time, and paid a salary of about $50K/year. For reference, other college grads living in the same city with my degree typically started off at a low six-figure salary. It did not take me more than a month or two before I realized how closely I needed to budget in order to meet rent, living expenses, and pay off my student loans!
While that all sounds picture perfect, I still made my share of financial mistakes on the journey to where I am today.
Even at my entry-level salary, I tracked my expenses, analyzed where I could improve or reduce, and slowly made my way towards paying off debt. Here's a snapshot of my budget from my first year out of college. I remember dilligently watching the Suze Orman Show on iTunes and reading the only personal finance blogs I could find at the time -- Get Rich Slowly and Blonde on a Budget -- and even considered starting a personal finance blog of my own, which lasted about 3 posts.
Looking back, my college debt was small relative to the average college graduate. At the time, however, relative to my peers at work -- the majority of whom graduated from elite universities debt-free and had a strong financial support system and safety net -- I felt very much alone in my stress and anxiety of how I would both pay off my debt and save towards an emergency fund that would last me through 5 years of a PhD program. (Oh yeah, and there was the stress of how to get accepted into a PhD program, too!)
Low Self Worth Spending
Fast forward over a decade, I somehow managed to pay off all my student debt, save up a $20K emergency cash fund for graduate school, gain acceptance into and completed (just barely!) a PhD program and, after a couple of turns, found a career path that I enjoy, one in which my specialized and broad skill set come together as accomplishments, am challenged to learn and grow on a daily basis, pays well, and is likely to be in demand for at least a few years into the future. While that all sounds picture perfect, I still made my share of financial mistakes on the journey to where I am today. After half a decade of pent up self-denial during the PhD program, I responsibly put a down payment towards a starter home, and then proceeded to recklessly spend my newfound income because I was making more money than I ever had before, believed my income would grow in the future, and wanted to treat myself, dammit! Well damn, I could have been richer today had I sought out a good therapist instead.
Eight years later, those retirement savings left untouched and invested in a broad stock market index fund have doubled and comprises roughly half my total retirement savings.
Tracking Net Worth and Income
While I have always been adamant about tracking my expenses and budgeting, I was never someone who tracked my net worth. I mistakenly thought that was something only "rich people" did, and I knew I was not rich. I am still not rich, but I am more financially aware these days and understand that the difference between your net worth and income lies in how much you save and invest. I spent my New Year's Day vacation weekend downloading as many historical financial statements as I could to piece together a historical picture of my net worth, and pulled my taxable Medicare earnings from the Social Security Administration. I was honestly a bit scared of what would surface.
My net worth over the years have been humble and track my income fairly closely. Today, my net worth consists of investments (retirement accounts, taxable brokerage account, RSUs, cash), a primary home and mortgage, a second getaway (non-investment) property and mortgage, and a car. By the time I left my job to pursue a doctorate degree in 2012, I had just shy of $40K in my workplace retirement account. Eight years later, those retirement savings left untouched and invested in a broad stock market index fund have doubled and comprises roughly half my total retirement savings. The general rule that money invested in the stock market doubles every 7-10 years certainly was true for me!
It was oddly therapeutic to get it all out there in the open, and I learned a lot about what has worked and where I can improve going forward.
This Time is Different
Emotionally, compiling and reviewing my historical net worth and income have stirred some serious dormant feelings and unearthed past relationships, good habits, and poor financial decisions. It was oddly therapeutic to get it all out there in the open, and I learned a lot about what has worked and where I can improve going forward.
As the graph shows, today I am making more money than I ever have before. Alright, alright, we've heard that line before! So, was this time around different? I would argue that yes, it is! Even though I am making more money than I ever have before, I brought back my budgeting and expense tracking habits to empower myself to make financial decisions that support my goals.
One of these goals is developing the second property my boyfriend and I purchased (somewhat on a whim!) last year. As we have learned over these last few months, developing raw land is a slow process that has (surprisingly) large and uneven upfront costs, even when you do a lot of it yourself. It also brings pure joy, and is a whole lot of fun! The getaway property has given us purpose and puzzles that we can best solve together as a team with our combined skills, learning a little from each other along the way. Having this getaway space has been a true gift, and I am looking forward to the day when we can reach a level of financial independence that enables us to spend even more time there. But more on that in another post!