{"id":8423,"date":"2022-06-19T13:36:43","date_gmt":"2022-06-19T18:36:43","guid":{"rendered":"http:\/\/blog.jlbn.net\/?p=8423"},"modified":"2022-06-19T14:38:38","modified_gmt":"2022-06-19T19:38:38","slug":"im-on-track-to-retire-with-millions-heres-how-i-bounced-back-from-my-3-biggest-money-mistakes","status":"publish","type":"post","link":"http:\/\/blog.jlbn.net\/?p=8423","title":{"rendered":"I\u2019m on track to retire with millions: Here\u2019s how I bounced back from my 3 biggest money mistakes"},"content":{"rendered":"\n<ul><li>\u201cMy mistakes were costly in the moment, and there are times I wish that I used that money for other things, like investing. But those setbacks did not define my financial future,\u201d writes Chlo\u00e9 Daniels.<\/li><li>\u201cIn 2018, I was financially lost. I had about $10,000 in my 401(k), almost no cash on hand, zero emergency fund, and nearly $70,000 of combined debt from my car loan and my remaining student loans.\u201d<\/li><li>\u201cToday I have a multi-six-figure net worth, a year\u2019s worth of expenses in my emergency fund, and a thriving business teaching other people how to feel in control and confident about their money.\u201d<\/li><\/ul>\n\n\n\n<p>Before I finished college, I dreamed of getting a big job and salary, and taking luxurious Instagram-worthy vacations with my somehow unlimited paid time off. But I graduated into an economy recovering from the Great Recession, with an English degree and about $80,000 in debt.<\/p>\n\n\n\n<p>I was feeling pretty stuck, and my $700 a month&nbsp;<a href=\"https:\/\/grow.acorns.com\/millions-of-student-loan-borrowers-are-closer-to-debt-forgiveness\/\">student loan payment&nbsp;<\/a>was only one part of my financial struggles. Well into my twenties, I lived beyond my means, bought a car worth half my salary, engaged in risky investing, and had a diet of take out and $13 cocktails.&nbsp;<\/p>\n\n\n\n<p>I know that my experience isn\u2019t unique. So many of us never get&nbsp;<a href=\"https:\/\/grow.acorns.com\/financial-literacy-how-schools-teach-gen-z-to-make-manage-money\/\">a formalized education about our finances<\/a>. When mistakes do happen, there is often so much shame around them. But there doesn\u2019t need to be.&nbsp;<\/p>\n\n\n\n<p>My mistakes were costly in the moment, and there are times I wish that I used that money for other things, like investing. But those setbacks did not define my financial future. Today<strong>&nbsp;<\/strong>I\u2019m still on track to have millions in the bank by the time<a href=\"https:\/\/grow.acorns.com\/how-not-to-run-out-of-money-in-retirement\/\">&nbsp;I retire<\/a>&nbsp;at 65, even if I don\u2019t invest another dollar between now and then.<\/p>\n\n\n\n<p>Here are some of my biggest mistakes, and how I turned them around to become confident about, and successful with, my money.<\/p>\n\n\n\n<h2><a><\/a>1. I bought a new car instead of a used one<\/h2>\n\n\n\n<p>When I moved to Chicago in my early twenties, I was making $42,000 a year, more money than I had ever before, but the bulk of it was eaten away by my student loans, rent, and unsustainable spending habits. Case in point, my decision to get a new car.&nbsp;<\/p>\n\n\n\n<p>In the winter of 2015, after a few months of a two hour round trip commute, I decided my Chevy Lumina wasn\u2019t going to cut it anymore. It was old, ugly, the windows wouldn\u2019t all roll down, and the AC was broken. At the time, I was home for the holidays and on December 23, with $1,000 in my bank account, I turned to my parents and said, \u201cI\u2019m going<a href=\"https:\/\/grow.acorns.com\/nprs-planet-money-host-amanda-aronczyk-on-her-biggest-financial-win\/\">\u00a0to go buy a car<\/a>\u00a0today.\u201d<\/p>\n\n\n\n<p>Off I went to the Toyota dealership, where I had the choice between a used 2013 Prius C for $13,000 or a new 2015 Prius C for $20,000. Even in my limited understanding of what a financially responsible person did with their money, I knew the used car was the smarter choice.&nbsp;<\/p>\n\n\n\n<p>But when I went over financing options at the dealership, I learned that if I bought the new one, I would be paying about $30 more a month on<a href=\"https:\/\/grow.acorns.com\/avoiding-expensive-car-loan-mistakes\/\">&nbsp;a car loan<\/a>. So, with all the confidence of a 24 year old with $1,000 to her name, I said, \u201cWhy not?\u201d<\/p>\n\n\n\n<p>Which I quickly regretted. Ultimately, this car ate up enough of my monthly income that I wasn\u2019t able to save much. Because of those expenses, I went for nearly a decade without an emergency fund. Throughout my twenties, even a $100 expense could throw me into a panic, and I never felt like I could catch up, especially when I was also trying to get rid of my debt.&nbsp;<\/p>\n\n\n\n<p>If I had bought the used car and invested the $7,000 difference, the money could be worth nearly $12,000 now.&nbsp;<\/p>\n\n\n\n<h2><a><\/a>2. I thought I needed to pay off debt before I started building wealth&nbsp;<\/h2>\n\n\n\n<p>In October 2018, I got a job that gave me a $20,000 pay bump, and with my new salary I wanted to pay<a href=\"https:\/\/grow.acorns.com\/how-to-get-out-of-student-loan-debt-faster\/\">&nbsp;my student loans<\/a><strong>&nbsp;<\/strong>off as quickly as possible. I thought doing this, even if I had to scrape by and sacrifice some of the things that brought me joy temporarily, it would help me create that happy and nomadic life I had once pictured.&nbsp;<\/p>\n\n\n\n<p>So I refinanced my student loans down to 3.54% and started dedicating about $2,000 a month to my debt. During this time, I was reading all I could about personal finance, and came across\u00a0<a href=\"https:\/\/grow.acorns.com\/fire-retirement-journey-how-im-starting\/\">the FIRE movement.<\/a>\u00a0That completely changed my perspective. I realized that I didn\u2019t have to wait to pay off all my debt before I started building wealth through investing.<\/p>\n\n\n\n<p>During the nearly two years I focused only on debt freedom, from October 2018 to January 2020, I paid off $40,000 of low-interest debt, and saved about $5,000 in interest. However, if I had invested that $40,000 instead, I\u2019d have over $278,000 invested right now instead of $228,000.&nbsp;<\/p>\n\n\n\n<p>With an average annual return of 10%, that $228,000 I currently have invested could turn into $3.9 million in thirty years, but $278,000 could turn into almost $4.9 million. That\u2019s a million dollar difference. Seeing those numbers laid out like that was one of the things that helped me start focusing on&nbsp;<a href=\"https:\/\/grow.acorns.com\/how-a-poor-mindset-versus-a-wealth-mindset-influences-investors\/\">investing<\/a>. But it did take some time to get over fears I had about it.&nbsp;&nbsp;<\/p>\n\n\n\n<h2><a><\/a>3. I didn\u2019t understand my risk tolerance&nbsp;<\/h2>\n\n\n\n<p>One of my most embarrassing money mistakes happened long before I knew anything about investing. In 2018, I was 27 and had just started my debt-free journey. I had also saved a small $5,000 emergency fund, which was more money than I\u2019d ever had in my bank account at one time.<\/p>\n\n\n\n<p>I had an ex who flipped houses in the Chicago area. His investors boasted 20% returns on every project, and while we were dating, I\u2019d seen him somewhat successfully flip a home a few times. So, of course, I decided to invest my entire life savings, at the time, in his business.<\/p>\n\n\n\n<p>It started with my $5,000&nbsp;<a href=\"https:\/\/grow.acorns.com\/emergency-savings-fund-mistakes\/\">emergency fund<\/a>, and then I saved up another $5,000 to give him, and eventually, I had about $25,000 of my own money invested with his company. For a while, things went well. He\u2019d use my money to invest in a new flip property and when it was over, I\u2019d receive the principal and interest on my loan, with an option to reinvest. I kept reinvesting until he owed me about $58,000<\/p>\n\n\n\n<p>Then 2020 hit, and payments fell behind. At this point, I\u2019ve been told that the payments will be coming next month for over a year. Right now, despite claims I\u2019ll get paid, I\u2019ve mentally written the money off as a loss.&nbsp;<\/p>\n\n\n\n<p>One of the biggest things I learned from this experience is don\u2019t invest in things you don\u2019t understand. And with riskier investments, only put in what you\u2019re willing to lose.&nbsp;<\/p>\n\n\n\n<p>Overall, this mistake taught me how to<a href=\"https:\/\/grow.acorns.com\/how-to-manage-risks-when-investing-in-the-market\/\">&nbsp;gauge my risk tolerance<\/a>&nbsp;so that I can understand how an investment option fits into my overall portfolio for the long term. This is key for any investor, no matter what you\u2019re investing in.<\/p>\n\n\n\n<h2><a><\/a>I learned that my mistakes don\u2019t define me&nbsp;<\/h2>\n\n\n\n<p>In 2018, I was financially lost. I had about $10,000 in&nbsp;<a href=\"https:\/\/grow.acorns.com\/using-a-401k-to-save-for-retirement-tips\/\">my 401(k)<\/a>, almost no cash on hand, zero emergency fund, and nearly $70,000 of combined debt from my car loan and my remaining student loans.&nbsp;<\/p>\n\n\n\n<p>But as lost as I felt, I realized in the fall of that year, that I didn\u2019t want to beat myself up any more and only focus on the mistakes I had made. So I started making some changes.&nbsp;<\/p>\n\n\n\n<p>By April of 2019, I had paid off the car, but it was costing me nearly $4,000 a year with fees, parking, and insurance. Four thousand dollars a year for a car I rarely used just didn\u2019t make sense. In December 2019, I sold it for $10,000 and invested that money instead of buying another car.<\/p>\n\n\n\n<p>In 2020, when I turned 29, I decided to stop working solely on\u00a0<a href=\"https:\/\/grow.acorns.com\/nika-booth-debt-free-gonnabe-debt-payoff-tips\/\">debt freedom<\/a>and instead focused on<a href=\"https:\/\/grow.acorns.com\/betterwallet-marc-russell-how-to-start-investing-building-wealth\/\">\u00a0wealth building<\/a>\u00a0through investing. At this point, my student loans were down to less than $50,000 with low-interest, so I decided to stop the extra payments and pay the minimums.<\/p>\n\n\n\n<p>That year, 2020, I understood for the first time what my 401(k) was, and what it was invested in. I began putting the remaining $1,600 a month I had been throwing at my debt into my investments, increasing my contributions, and maxing out those retirement accounts for the first time.&nbsp;<\/p>\n\n\n\n<p>In that first year of consciously investing, I invested almost $26,000. Prior to that, had only invested about $15,000 through a 401(k) match from 2015 to 2020. In 2021, I maxed out my 401(k), IRA, HSA, and contributed to a Solo 401(k) and have continued this approach into 2022.&nbsp;<\/p>\n\n\n\n<p>I currently have over $200,000 invested. If I get an average annual return of 8% for the next 30 years, I\u2019ll have more than $2 million waiting for me in retirement, even if I never contribute another dollar.<\/p>\n\n\n\n<p>After a few years of focusing on increasing my income, decreasing my spending, and investing the rest, today I have a multi-six figure&nbsp;<a href=\"https:\/\/grow.acorns.com\/how-this-millennial-couple-built-a-1point2-million-net-worth\/\">net worth<\/a>, a year\u2019s worth of expenses in my emergency fund, and a thriving business teaching other people how to feel in control and confident about their money.&nbsp;<\/p>\n\n\n\n<p>None of this would have been possible without forgiving myself for my mistakes and deciding to take ownership of my future.\u00a0<\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>\u201cMy mistakes were costly in the moment, and there are times I wish that I used that money for other<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[254,3421],"tags":[888,3436],"_links":{"self":[{"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/posts\/8423"}],"collection":[{"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=8423"}],"version-history":[{"count":1,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/posts\/8423\/revisions"}],"predecessor-version":[{"id":8424,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/posts\/8423\/revisions\/8424"}],"wp:attachment":[{"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=8423"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=8423"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=8423"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}