No one talked to me about money growing up. But, when I was in college, I had to take a Risk Management class. I attribute my interest to start learning to this one adjunct professor; a man who worked at Arby’s corporate in actuarial sciences by day and taught this one class for fun at night.

By walking us through basic things like our car insurance policies and what a 401(k) is, I never wanted to miss a class because I knew I was learning the keys to adulting.

This professor mentioned one thing that got me to start a 401(k). The power of compound annual growth rates (CAGR).

Let’s take a look at some CAGR examples and how I realized I could make my money work smarter with investing.

Here are the steps I took to get started:

Step 1: Start early

I know how expensive it is to be poor. I also learned how starting to save early in life allowed me to get more bang for my buck.

I started an incredibly modest 401(k) with Fidelity at 25 years old. My employer matched 3% of my contributions at the time. This means that if I was contributing $10 a month, my employer was also putting in $3 to my investment portfolio. FREE MONEY, Y’ALL! This is basically the company giving you a raise for the rest of your life if you just invest in yourself!

Step 2: Increase it!

The Pay Bump Rule: I made a rule after my 2nd pay raise: every time I get a pay raise, I increase my 401(k) contributions by 1%. I never allowed myself to get “used” to a new paycheck! Since it’s before-tax contributions, by putting an extra 1% into my Fidelity account, I deferred a lot of increased taxable income over the years! By the end of my tenure at my employer, I was investing 15% of my salary into my retirement.

The Bonus Rule: We would get emails in advance from corporate saying that this next payroll would include our bonuses and to shut off our 401(k) investments for the week if we didn’t want our bonuses going in.

I did the opposite. Every bonus I bought myself a little gift and then I made a one-time contribution to my 401(k) with the rest of my bonus. The first time I did this my bonus was $600. I purchased a patio table and chairs set at Home Depot for $250 and then invested the rest.

Step 3: Know your fund

At first, I just put money in and figured, “Hey, there are people smarter in this than me looking out for my money”. And that worked for a while...and then the 2008 recession hit. And my 401(k) took a nose dive like so many others.

So, I started learning more. I would...get this...call the Fidelity helpline.😲I know. I picked up the phone and asked customer service to walk me through my account. I told them my age and they would help me understand the portfolio I had. Is it too volatile for me? Is it too safe since I am young and can be a little riskier with my investments right now?

Ultimately, I found a pie graph of investments where I felt comfortable. I would check on it once a quarter to see how the ROI (return on investment) was doing and recalibrate the % of each pie slice if needed.

Step 4: Check in!

At 35 years old, I called Fidelity and asked for a QC on my portfolio. “I know you can’t give me a green light/red light, but...can you just give me a clue? Am I on track or under average?”

This is when I heard the words that validated every Starbucks run I skipped, every meal out with friends I missed, and every pair of shoes I did not purchase.

“I cannot advise you on specifics but I will say that, for your age, this is one of the most impressive portfolios I have seen.”

I will never forget that feeling. The weight lifted was so immeasurable. I did it. I was doing it. I was making sure I could have financial security for the rest of my life.

Now in my 40s, I can see some things I wish I had done differently. Here are some things I would change if I could go back:

Start an IRA. I never started one and when I looked into it, it was too late. I made too much money to qualify to start one.
Put more of each pay raise into my 401(k) or an IRA. If I was getting a 7% increase, putting in 1% to my retirement was great. But, I could have afforded to put more.
At the beginning of Q4, look at my investment account and see if I want to make a one-time lump contribution before I holiday shop. Knowing how I am, I would have preferred this vs. buying another button-down shirt for work during Black Friday sales.
Start sooner. I was working in corporate at the age of 20 but I waited five years to open a 401(k). Those five years really cost me in the long run.

*This is my personal experience and is not meant to be construed as financial advice.*

Lessons Learned while Building my 401(k)