The Early Years Are the Hardest

After I posted my recent savings rate, I began to wonder how that savings rate changed as I got older.  In the early years, I was earning less and was paying rent or mortgage payments.  Both my earnings and my expenses improved as I got older.

So I went into the way back machine (my Excel budget spreadsheet) and calculated my savings rate each year. Then I thought it might be helpful to know my net worth each year as a percentage of the net worth I had when I retired this spring.


I made it look like Christmas because Christmas is only 83 days away–Yikes!

The red line shows my savings as a percentage of my income each year.  The large downward spikes are years that I paid cash for cars and our boat.  The little dip in the year I turned 50 was a fun travel year (you have to celebrate those milestones!).

The green bars show my net worth as a percentage of my largest net worth–the net worth when I retired.

What isn’t showing is that I got my first big girl job the year I turned 22.  I wasn’t able to find my greenbar paper (old accountant joke), from age 22 to 28 so I don’t know what those years looked like.  I do remember when I married at 24, my net worth was about $0.

It took almost 13 years (age 22 to 34) to accumulate 10% of the net worth I retired with.


But, I had three years where my net worth grew by 10% of the ending amount in only one year! 

I was slowed down on that first 10% partially because I went back to school for a year (Ms. Liz is a law school drop out).  Of course, stock market returns and real estate values affected my trajectory a lot.

It can be incredibly frustrating to be working hard, earning as much as you can, saving like crazy and not see the needle moving much.  But the early years are what set you up for your financial success.

Let’s look at how contributions of $5,000 per year grow with a 5% return.  They grow to $775,000 over 44 years.  (5% should approximate a balanced portfolio’s return net of inflation so the final amounts should approximate today’s value):


If you wait one year to start your $5,000 contributions, you don’t lose out on your first year’s change in value, you lose out on your last year’s change in value.  If you wait one year, your ending value is $42,000 less!  Increase your contributions by 2% each year and your ending value is $279,000 more–look at you, you’re a millionaire!

Yes, it is frustrating in those early years – in this example, it took 14 years to accumulate $100,000 of savings, but then it took only nine years for the next $100,000 and six years for the next . . .  But these are the most important years–skip one or two and poof your ending net worth decreases substantially.

You have to save for your future, even if you plan to retire at a normal age.  Currently, social security provides about 40% of a retiree’s needs.  In the future, I would expect social security to provide even less of your needs.  You will have to come up with the other 60% by decreasing your expenses (paying off your mortgage and other debt does this), generating income through work, or generating income from investments.

Don’t look at setting aside savings as missing out on something today, look at it as being able to do something tomorrow.  The best illustration of this I’ve found, is the Pugs video.  I haven’t researched their products but their video is an entertaining way to show how increasing your savings today, affects how future you lives.

Need more inspiration? – meet the Fiery Millennial who accumulated a net worth of $100,000 at age 25.  She makes me look like a slacker!

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Author: Ms. Liz

A CPA, I retired at 51 and I am helping people create their fantastic futures!

8 thoughts on “The Early Years Are the Hardest”

    1. It’s great to hear from you, Gwen! I promise it only gets easier. Keep rocking it–I know you are an inspiration to many (including me!).

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