Financial Independence
It is never too late to start working towards FI. You will hear a lot about FI here and it stands for financial independence. I tried to do it in the most painless way possible. I’m going to repeat the same mantra many others have stated. Make automatic contributions. This way you don’t ever think about it and you forget about it. Start with the smallest amount you can think of and increase it 1% or more as each year goes by.
I went into panic mode around the time I was 38 years old and a mid level rank in the fire department. It was 2006. I am now at Station 7 and started looking into my investments with our work sponsored retirement provider. I was participating in the 457 and a 401(a). In addition to this, I created a Roth. I sooooooo wished I would have focused a bit more on the Roth.
4% egad!
I was a bit worried about how much I was contributing into my 457. A mere 4%. I don’t mean to offend anyone since this might seem like a lot to some people. At that time, I had the desperate need to raise my son and be a good provider and I did not want to rely on anyone else for the rest of my life. Experiences in my life has taught me the value of being self-sufficient with or without a person in your life.
Hustling
You see, after my 1st divorce, yes, I said 1st, I worked 3 jobs to make it. I was around 27. Thankfully I had the luxury of having my mother and stepdad living nearby so they were my child care providers essentially. Prior to the fire department, I worked at a Drs. Office M-F, and tended bar and DJ’ed on the weekends. Back in the day when DC was hoppin’ and Georgetown was the place to be, that’s where you’d find me on the weekends. That’s right, I had mad skills. Ok, maybe just a few skills. Serving up drinks at the Jury and spinning at the Rhino, Addy’s, Rumours, Polyesters and the like. Ok, enough about that.
Overwhelming
I digress, let’s get back to where I was. When you join the fire department, like many other paramilitary type organizations, you get hammered with a ton of information in the first week. You are trying hard to gulp as much information and coffee in as you can. You are physically exhausted, tested physically every morning and mentally all day long. So, for many of us, we don’t know crap about this stuff. You play it safe and select a small amount to put in and randomly pick some mutual funds. I didn’t know jack about any of that financial stuff.
Missing a teaching moment here
They really need to help new recruits with this. Hence, there I was, never having to deal with any of this, and decided on 4% of each paycheck to go into my 457. I also opted up to the max with the match on the 401(a). This was later to be suspended due to some shortage of funds. I’m not sure if the County or State jacked something up when the market crashed in 2008. Something like Virginia robbed Peter to pay Paul and our 401’s suffered for it. I can’t really remember to be honest, but it ended for a time period and many years later, was reinstated.
So, at the onset of my career in the year 2000, I was making $28,700 for an annual salary and I was a single mother. My son was 8 when I joined the fire department, I was sharing a 2-bedroom apartment in a high rise in Arlington with a friend. We cordoned off the dining room and made a make shift bedroom for my son. I commuted from Arlington to my place of employment out west 5 days a week for 6 months. Can you say exhausted? Holy cow. Thank the bejeezus it was a reverse commute against traffic. I think if I had to be in traffic, I would have just put up a tent in a field and slept there for 5 days. DC traffic sucks ass. This was way before the EZ-PASS and the hot lanes.
Educate yourself
Approximately 6 years went by with the measly 4% contributions. I must have started to read Money magazine, financial tips etc., and started teaching myself how to improve my investments. I read an article about how much I should have in savings by this time in my life. This led me to a freak out. I was 38 years old and 6 years into a 20 to 25 year career.
Earning an annual salary of $76,800 at the end of 2006. I only had $47,700 saved. According to the articles I should have saved at least $140K. Who does that? Why did I need to go into freak out mode? Seriously? Needless to say, I started researching the funds available in our providers retirement program and began to move things around. I chose better selections, different selections, and kept an eagle eye on the numbers. I also slowly started to increase my tax differed contributions into my 457. I’ve attached a link for you to see what the numbers are via Investopia.
https://www.investopedia.com/articles/personal-finance/010616/whats-average-401k-balance-age.asp
When I look back on it, I probably just got lucky with my selections. I did pretty well. I’m sure I was getting hi-jacked on expense ratios though because little did I learn about those until recently. Slap me a thousand times. UGH! Learn from me people, pay attention to those expense ratios.
Small increases
Years later I created that Roth IRA I mentioned above. I kick myself for not putting more into that Roth for several reasons. This would later come to be very beneficial in my early retirement years. More on that in a future posting. I immediately increased my contributions to 6% and slowly worked my way up and tried to max out the allowable contributions annually. Slow and steady as she goes to work towards retirement. Back then nobody really knew about the financial independence or the FIRE movement. Most either got rich, married rich, retired with a nest egg, or worked until your social security benefits kicked in like my poor mom did.
To recap, it is OK to start small and increase over time. Get involved with your retirement investments. Read and educate yourself. Learn about compounding interest and expense ratios. Until next time when we discuss bonuses and the pitfalls of the 2008 meltdown, keep living the dream.