How a Non-Rich Person Started Investing, and Why You Should Start, Too

How a Lazy, Non-Rich Person Started Investing

When I was young, everything I knew about investing I learned from TV. This was how you invested: You call guys in suits to buy a stock, and then they go to the trading floor and yell that order as loud as they can, and somehow the money lands in your account and you become a millionaire.

Then you also had to be the “type” of person to invest: the rich person type. I knew all about rich people because I watched The Fresh Prince of Bel-Air all the time. One of the characters, Uncle Phil, went to Princeton, then Harvard Law, and now he’s a lawyer with a full-time butler in tow. Uncle Phil was definitely the type who invested his money.

Investing was not for people like my mom, who worked at a factory inspecting car parts. No, she wanted to keep her money exactly where she could see it. At that drab local bank down the street, earning 1% interest.

As much as I loved and admired my mom, I didn’t want to be like her financially. She had saving down to a science, but she didn’t have the know-how for making that money grow.

Can any of you relate? Like when you call your parents all proud that you opened a 401k and Roth IRA, and then they respond like this:

“Why did you do that? You can just use Social Security! Don’t save for retirement, that’s silly.”

I dug up that gem from my Gchat history. This is something that my friend’s dad actually told her!

So when it came to figuring out how to be wealthy, I didn’t want to be like my mom. I wanted to be like Uncle Phil.

But if school doesn’t teach you this stuff…and you don’t have financially literate parents to help you…then what?

We can fumble our way through it, and still end up OK. Yes, even something as scary and seemingly complex as investing.

The Path to “Rich Mofo” Status

When you don’t have knowledge, sometimes all it takes is a vague goal and the persistence to see it through.

I didn’t think to read any investing books. Or to ask HR to help me understand my options. Or to hand over money for an Uncle Phil type to invest for me.

But here’s what I did think about: my investing goals.

Although I’ll admit, my goals were pretty lazy: I wanted to do better than earning 1% in a savings account, I didn’t want to do a ton of research, and I didn’t want to spend more than a few hours per year actually dealing with my accounts. Oh yeah, and one other small detail–I wanted a million dollars by the time I was 60.

Aside from my uninspired goals, the other thing I had going for me was wanting to do Future Me a solid.

It’s kind of embarrassing, but here’s what I emailed to a friend right before I contributed to my first 401k:

Haha, I naively thought I was going to max out my 401k on a $33k salary. That would have taken half of my paycheck!

Maybe the laser-sharp strategy wasn’t there yet, but the vision was. Even then I had designs on how I wanted to be with money: living frugally in the present to be a “rich mofo” later. It’s like stepping over a penny because you know you’ll come across a dollar later.

All I had to do was take that first step. For me, that first step was contributing to my company’s 401k plan. I knew a 401k was for “retirement savings” because I’d seen my mom’s paperwork lying around at home, and I had heard from a coworker that you could get “free money” with it. The first day I was eligible, I printed out all the investment options and brought the packet home to study like I knew what I was doing. That was eight years ago, and now I’ve gotten greedy and own every type of investment account imaginable.

After years in the market, I’ve learned a couple things along the way:

  • Investing is so much easier than you think. I spend a couple hours per year managing my investments, and that’s it.
  • Investing is the ultimate source of passive income. It can feel like printing dollar bills. I make money when I’m sleeping, when I’m hanging out with my friends, when I’m brushing my teeth.
  • You don’t need to be an Uncle Phil in order to do it. You can start with $100. Although you do need to annihilate credit card debt and have some sort of emergency fund savings set aside first.

But my favorite lesson was this:
Investing is how ordinary people like you and me can become wealthy. If you’ve ever wondered how someone has a baller net worth, it’s probably because they invest. Wealthy people don’t save their way to riches. They put their money to work.

But still, how exactly does one get over how intimidating investing is? S&P, ETFs, IRAs…the acronyms are endless and it feels like there’s so much to learn. I read a lot of articles about investing to research this post, and let me tell you, most of them triggered the MEGO effect (My Eyes Glazed Over). So the last thing I want to do is to try to help people but then end up scrambling their brains instead.

I want to do it right.

For that reason, I’m going to start with one concept at a time. First thing’s first: I have to make you WANT to invest.

An Example of How Much I’ve Made Investing

Everybody tells you need to invest, but then they use a hypothetical example based off a small amount that doesn’t seem that impressive. Like, “if you invest $1,000 and you get 6% returns, you’ll make an extra $60!”

If you tried to wake me up with that news, sorry, but I would have just rolled over and covered my ears with my pillow.

I’ll take it a step further and show you some of my real returns, so you can see what can happen with a more substantial amount of money and a decent amount of time. I’ve been investing for eight years, and here’s how one of my accounts has grown:

Example investment returns

If you don’t know what’s going on in the chart, don’t worry, I’ll explain.

The chart says that I contributed a total of $116,258 over time, and I’ve made $72,927 in returns.


Add those two together and the total value of my account is $189,186, as of last week. On average, I’ve made 10.6% in returns. That’s a heck of a lot more than 1.5% interest in a savings account.

If you look closely, there was a brief time in 2010 where I lost money, but I did nothing, the stock market rebounded, and for the most part the money has grown. All I have done is just dump money into the account, and then go about my normal life. There were some years where I didn’t contribute any money at all. And now I’m about $73,000 richer.

Investing Fears and Ignorance Can Set You Back

I’m showing you this chart, because I wish somebody showed me something like this when I was in college. My friend told me I should open a Roth IRA account, but I wish she explained it differently to me, because I did NOT follow through with opening that Roth IRA account. Maybe if she showed me what type of results I could get I wouldn’t have missed out on years of returns. “You need to invest” isn’t compelling enough, but real numbers talk.

The prospect of being old didn’t motivate me to get better with money.
But knowing I’m missing out on making money with very little work? Now I’m listening.

Instead of acting right away I sat on the investing sidelines for a few years because I didn’t understand what it was or why I should be doing it. Or, what I was missing by NOT doing it.

Next, I had to get over how risky investing seemed when I didn’t really know what I was doing. Would I lose all my money? After all, Mom always said putting money into stocks was like going to Vegas, recklessly throwing down some chips, and ‘flushing your money down the toilet’. To make it more anxiety-inducing, it’s like you’re at the blackjack table when you’ve never even played before.

Instead of focusing on the negative, I decided to focus on the positive. There were three specific ideas that helped me get over my fears.

Motivation #1: Cash in a Savings Account Is Actually Losing Money

This motivation was easy: I didn’t want my extra money in a savings account earning 1% interest!

I was at a point where I had no credit card debt, my student loan repayments were moving along just fine, and my savings account kept building up with no real purpose for the money.

Most of us who aren’t investing probably keep our money in a savings account. It’s not a perfect comparison, but here’s what would have happened if I put that $116,258.86 in a savings account at 1.55% interest:

After eight years, that money would have grown to $131,599. That means I would be $57,587.59 poorer right now.

For simplicity’s sake, I haven’t included the fees you pay to invest. But what would you do for an extra $50,000+?

If you want to play around with different numbers to see how your money could grow, check out this calculator.

So for me, making a crappy investment decision was most likely going to be a better bet than earning 1.5% in a savings account. Of course you want to have SOME cash in a savings account. Having access to cash in case of an emergency is worth the measly interest rates. But once you have an emergency fund that you feel good about, it’s worth thinking about whether overfunding your savings account is the right strategy for you.

Motivation #2: The Importance of Investing in Your 20s

Then I came across some charts that blew my mind. They said if you invested early and then never again then you’d have MORE money than someone who invested a larger amount later. Example:

Let’s compare someone who starts investing at 25, contributing $3,600 annually for 11 years, to someone who starts investing at 35, contributing that same amount for 31 years. Here’s how each of their accounts grow year after year, assuming 7% in returns.

Investing at 25 versus 35

The emojis don’t lie. The 25 year old smokes the 35 year old in terms of results. Here’s a summary:Investing at 25 versus 35

At 65, the person who started at 25 has $462,813. And the person who started ten years later, at 35, has only $393,185. By waiting 10 years to start, the 35-year-old missed out on about $70,000. But wait, the 35-year-old contributed almost THREE TIMES the amount of money, and for 20 more years. How could that be?

That’s the beauty of compounding, which means you earn money not just on your contributions, but on your returns, too. And the longer you have your money invested, the more potential you have to compound that money. That’s why it’s so important to start early.

Since I started doing the adult thing late, I needed to get cracking ASAP, and I was willing to front-load as much money as I could so I take advantage of time in the market.

Motivation #3: The Sweet Rewards for Playing the Long Game

I’ll be honest: when you first start investing, it’s not that exciting. It’s a slog at first, contributing small amounts of money and seeing tiny returns, but you have to remember: Investing is about the long game.

I cribbed this chart from my friend Zach’s blog, Four Pillar Freedom, which shows how long it can take to accumulate a million dollars. Notice how it takes about 7 years to get that first 100k. Now see how it takes only 5 years for the next 100k, then 3 years for the next. That’s a result of the compounding effect and how you get to that stage where it feels like you’re printing out money.

How long it takes to get to a million dollars

For a real-life example, here’s how long it’s taken me to reach each 100k milestone so far:

  • 100k: 7 years
  • 200k: 2.5 years
  • 300k: 1 year

That first seven years? Kind of a drag, but I kept shoveling money into my account no matter if the market was up or down. The more money you invest, the quicker it can snowball. I know that can be maddening to hear, because having an amount like $10,000 to invest sounds laughable to some of you right now. But remember I started with $0 and a low-ish salary ($33k), too. I was able to invest as much as I did by living below my means, taking advantage of every 401k company match, and investing all my raises. As your salaries scale up, so can your investment contributions. By taking the long view, I could see that investing my money was a much smarter strategy for me than using it to inflate my lifestyle.

Starting Is More Important Than Knowing Everything

My first 401k was riddled with sub-optimal choices: The fees were too high, the funds were vetted by past performance and star ratings I didn’t understand. Because funds are rated like restaurants on Yelp, right?

I never looked at my account until I heard coworkers complaining about all the money they lost because of the recession. Curious about my own portfolio, I logged in and saw a surprising number staring back at me. It was way, way higher than what I had actually contributed. That’s when I realized two things:

  1. If everybody else is losing money in the recession and I’m not, then I must have done something very, very wrong.
  2. Hey, this investing thing seems to be working somehow.

Even if the 401k wasn’t perfect, it was a gateway to other financial tools to grow my money even further. Like a Roth IRA. And a Traditional IRA. And then a brokerage account.

And yes, my investing strategy has vastly improved since. Here’s how I approach my 401k now.

This is it for my first investing post–why it’s so important to get started. We’ll talk about the ‘what’ in future posts.

How did you get over your fear of investing? Were you lucky enough to have someone help you, or did you jump in like me? Do you regret not starting earlier?

Feature Image: Union Los Angeles

You May Also Like