- I started investing a couple years ago with Acorns, tucking away my spare change whenever possible.
- This helped me develop an investing habit. When I started earning more, I invested more.
- Now, I invest in four types of accounts and am on track to put away over $25,000 this year.
I come from a very low-income background and know that as much as I love my career, I don’t want to work forever. So I’ve been focusing on investing to build my nest egg.
Since I started working as a teacher, I’ve been steadily increasing the amount I invest year after year and, in 2022, will be investing the most I ever have: over $25,000 total for this calendar year.
I haven’t always been able to invest this much — in fact, a few years ago I was earning less than $25,000 per year — and I had less than $7,000 invested at the beginning of 2020. I’ve had several job changes and income increases since then, which has allowed me to grow my investments exponentially.
One caveat is that the $25,000 does include an employer match that is not yet vested. These contributions will fully vest (or become mine) after I teach in Alaska for three more years — there are few circumstances I can imagine that would prevent me from seeing this through, but it is a possibility. If employer contributions are removed, my total investments will be around $20,000 for 2022.
I’m investing in 4 main ways
Alaska’s Teacher Retirement System
The $25,000 is being invested in four primary areas. First, I invest in Alaska’s Teacher Retirement System, which is a flat rate of 8% of your income for all public school educators. Coupled with the 7% employer match, this ends up being an average of $1,000 each month (though it varies, as I often take on extra assignments in addition to my regular job). This will end up being about $12,000 by the end of the year.
Health Savings Account
I’m also on track to max out my Health Savings Account, which has a contribution limit of $3,650 for 2022. Everything above $2,500 is invested and I don’t plan to use this money until retirement. Both of these contributions are taken out of my paycheck pre-tax.
When I receive my paycheck, the first thing I do is put $500 in my Roth IRA and I’m on track to max that out as well, which will total $6,000 for the year.
All told, this equates to at least $21,650. I also have a goal to invest $500 monthly into non-retirement accounts, bringing me to a total of $27,650.
How I’ve increased my investing rate
Part of the reason I’ve been able to drastically increase my investments is through salary increases and avoiding lifestyle inflation. Prior to 2020, I was living abroad and earning just enough to cover my expenses.
In 2020 — due to the COVID-19 pandemic — I was forced to move back to the US and, considering I didn’t know when I would be able to go abroad again, I took my first full-time job in over three years. This position came with a salary that was about three times what I was making abroad, which allowed me to immediately increase my savings and investing rates. I also avoided lifestyle inflation, meaning that, while I upgraded some parts of my life, overall I continued living the way I had been before.
Another advantage has been consistency. Even when I was barely making enough to cover my expenses, I was using Acorns and investing my spare change. Though this didn’t add up to much, it helped me develop an investing habit and taught me to make investing a priority, regardless of my income.
This habit snowballed as my earnings increased and I’m now investing over $2,000 each month. This figure has increased from less than $100 a month two years ago — I’m now investing an amount that seemed unimaginable to me at that time.
Many people think investing is only for high earners, but this isn’t the case. Using an app like Acorns, Stash, or Ellevest, you can start with just a dollar at a time. That may not sound like much, but take it from someone who did just that: What starts as $20 a month could become $2,000 two years from now. The most important thing is just to start at the level that works for you.