The Blueprint: How I Saved Over $100,000 by 23
I can still remember returning from a vacation and looking to find that I had $13,000 across all my accounts (and even more in debt). Today, I can celebrate not only having $100,000 saved, but I have also achieved a net worth of over $100,000.
How It Started
I grew up middle-class in Edmonds, Washington where I lived with my mom, dad, twin brother, and my older sister. My dad worked as a Solid Waste Engineer for King County, while my mom worked as a Rehabilitation Nurse for the University of Washington. As a child, I never gave much thought to money. I always had clothing, food and my parents never openly talked about their finances when I was young. It wasn’t until high school, that my dad began to talk to me about the importance of generational wealth.
My Introduction to Saving
In middle school, I started receiving a $20 monthly allowance from my parents. The allowance was contingent on the completion of my chores: laundry, vacuuming, taking out recycling, etc. This money was used to buy fruit snacks, candy, chips, and other essential items for the average 13-year old. Through saving my allowance, I learned that I was able buy snacks and fast food more frequently without running out of funds. More importantly, I could pay my siblings to do my chores for me (something I occasionally do to this day when they visit).
When I was 18-years old, I got my first job working at Big 5 Sporting Goods.
My salary at the time was $9.74/hr and while that seems low, I was excited to be making money that was truly my own. I opened up a separate bank account aside from the checking account I shared with my parents and continued on my savings journey. I was not making a ton of money, but at the time, I was 18 and my parents were paying for all my expenses so I was able to save a majority of my income. It was also around this time that I started investing in the stock market.
But that’s enough background, let’s get into the story of how I saved $100k by 23.
1. I Started Investing When I Was 18
I started investing with $150. Today, six years later, my investment portfolio is worth roughly $95,530.
When I started, I had no idea my portfolio would become what it is today. At first, the goal was to gain some experience in the market before I graduated college and entered a career in wealth management. Over the years, my interest in the stock market grew and I began to use it not only as a method to increase my personal wealth, but as a financial tool that my friends and family could use to achieve their goals.
My Junior year of college, I had an internship at Merrill Lynch and while I was there, I learned about investment strategy and risk management. The lessons I learned during my year there continue to guide my investment strategy to this day. One of these lessons, was to look at market corrections as the opportunity to purchase stocks at a discount!
Last year, when Coronavirus hit and the stock market dropped almost 30%, I began investing a majority of my income into the market and contributed over $30,000 to my various brokerage accounts over the course of a couple months.
I started by researching stocks that had lost at least 10% of their value and googled “stocks to buy during a pandemic”. The result? I invested in companies such as Docusign, Twilio, Microsoft, QQQ, Jetblue and many others, doubling my investments in several companies.
After I started my post-grad job in consulting, I ramped up my investment efforts. I contribute 11% of my income to my 401k, always max out my Roth IRA, and contribute regularly to my self-managed investment accounts. Every time I think about spending a large amount of money on something, I think about how I could grow it by investing.
Rather than purchase nice clothing, jewelry, or frequently buy food, I learned to delay gratification. I learned that by putting off a lot of the material items I had dreamed of purchasing, and learning to say no to drinks, outings, vacations, I was able to save a ton of money. By investing, I have been able to grow my net worth at a rate that far exceeded my expectations.
2. I Learned How to Delay Gratification
One of the greatest lessons you can learn about money is how NOT to spend it.
According to Britannica, delayed gratification is the “act of resisting an impulse to take an immediately available reward in the hope of obtaining a more valued reward in the future”. Throughout college, I saw siblings and friends spend money frivolously on food, vacations, and impulse purchases with little thought about how it may impact their finances in the future. Had they waited before making many of these decisions, they would undoubtedly be in a better financial position today.
Now, I am not going to pretend as though I have always had everything figured out. I used to spend a lot of money on clothing and fast food; one of the worst decisions I ever made was to purchase a luxury car while in college. You can learn more about that story here! The combination of these decisions prevented me from being able to invest and save and I was constantly spending more money than I was making. So, what changed?
It wasn’t until my final years in college that I began to think seriously about investing for the long-term, avoiding impulse purchases, and I stopped purchasing things to impress other people. There were several months where I didn’t save a dime because it was spent on my car, food, or clothing. I wasn’t investing consistently and my bank accounts were slowly decreasing.
Then, I made myself a promise: I was going to do everything in my power to make sure that I would never have to check my bank account before purchasing something. Whether it was lunch, gas, car repairs, or anything in-between, I was going to save and invest so that when I needed to do something, I would not need to dig into my savings.
I set strict financial goals for myself and I tracked my spending - this helps inform me when I go overboard on my spending in certain categories. More so, I have grown to dislike spending money because I see it as something that takes me AWAY from my goals and instead view it as a tool that can provide me with freedom and piece of mind.
4. I Prioritized my Income
Compensation has always been important to me.
In my senior year, after completing a year-long internship at a wealth management firm, I had begun to think about what career path made the most sense for me. One of the major considerations for me was compensation.
As you may know, wealth management can be a very lucrative career and it is not abnormal for top private wealth advisors to make up to $1 million dollars a year.
That aside, when you start out in the industry, the compensation is less and the industry is highly competitive (the returns can be huge) with very long hours. Nevertheless, it is an amazing career path that not only allows you to help others, but to learn a lot as well.
Before graduating, I wanted to do my due diligence before diving into a lifelong commitment and began to research careers in consulting as I knew I would be able to leverage some of my knowledge and skills I learned from work in the finance and retail industry.
I quickly found that the salary for a consulting analyst straight out of college was significantly greater than that of a new wealth associate, with seemingly less rigor (I have found this is not entirely true).
After speaking to numerous wealth management firms and one consulting firm, I compared my various offers and thought about the long term pros and cons of each.
One thing on my mind was a friend who had landed a job in tech and was due to make over six figures as soon as they graduated.
In the end, I decided to start a career in consulting because it would allow me the opportunity to challenge myself in an area I had limited to no experience, network, grow my tech skills, and earn a high income.
I started off making $82,500 a year at age 23.
3. I Decided to Live With My Parents
Yeah, yeah, you’re probably not surprised.
I am one of three children in my family and the only one who is still living at home. Now, I have seen several similar articles draw criticism for highlighting stories from various individuals who were able to save large sums of money or purchase homes receiving inheritances, or having parents “gift” them money. This is not one of those stories!
I recognize that everyone does not have the opportunity to live with their parents and save money on rent and food and I have been extremely fortunate to have parents that have allowed me to live with them rent-free (if they had asked me to pay rent, I would have moved out).
Two years ago, I made the decision to live with my parents until I had paid off my car loan and my student loans were all taken care off. I felt it was unnecessary to move out when I still had debt and wanted to ensure that when I left home, I could afford to be financially independent from my parents.
As explained previously, when I graduated from college in 2019, I landed a job in consulting that paid $82,500/year. One of the first things I did was calculate how much money I could save over the course of two years vs. how much money would be saved if I stayed at home. In doing this, I realized that if I stayed at home for 2 years, by the time I hit 24, I would have over $100,000 saved.
I started riding the bus to work to save money on gas and maintenance, learned to cook to avoid dining out, set a budget to limit how much money I was spending on clothing, and invested my residual income.
Thanks to this strategy, I was able to continuously save over 80% of my income and hit my goal almost exactly 1 month before my 24th birthday in December of 2020.
Now it is your turn!
That is the story of how I saved $100,000 in 2 years, all by the age of 23.
There are two things that must happen to build wealth: First, you must cut your expenses; second, increase your income.
It doesn’t matter if you make $80,000 a year, or $30,000. Maybe you’re overwhelmed with student loans, have medical debt, have kids. or maybe you’re earning minimum wage. No matter! It is possible to save money and pay down debt without earning a massive income.
While you might not save $100,000 this year or next, it is important to start by setting realistic goals and tracking your spending. The path to financial independence starts with you understanding your current financial state, identifying areas for improvement, setting goals, and creating an action plan.
You have to change the way you look at money in order to change the way you manage it.
Start by saving a few extra dollars every month, or automating your investing. Remember to always think long-term; wealth is not built in one night. It takes years, sometimes decades.
