In January 2021, my net worth was negative at minus $15,000. In July it was $15,000 thanks to three moves.
I stopped paying my student loans. As long as the payments are paused, I invested the money instead.
I set a savings goal every month and then did everything in my power to reach it, including through part-time jobs.
Last month I achieved positive net worth for the first time in my adult life. It felt amazing because I’m a master’s graduate from a non-academic family and have been underemployed for most of my working life.
First, I would like to point out my privileges: I am a suburban white person who was fortunate enough to attend an elite university. This university offered me a significant financial support package.
Being underemployed has always been a choice — which is not the case for most Americans in this situation. I chose options like a Fulbright scholarship and an AmeriCorps position over a stable and relatively well-paying job because I wanted specific experiences.
These are all privileges that are not available to everyone.
Apart from these privileges, however, I have not received any monetary gifts or inheritances. I’ve never made more than $40,000 in a single year. However, that will change by the end of this year.
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Despite this, my net worth went from minus $15,000 to $15,000 between January and July 2021. Here’s how I did it:
1. I have changed my attitude towards life and adjusted my planning
For a long time, the debt from my master’s degree weighed on me and made it difficult for me to think about anything other than debt. After graduating, I was in over $50,000 in debt and have barely paid back anything over the years.
It quickly became the focus of my life: Extra money always went into debt because I couldn’t imagine feeling happy and free until the debt was gone.
A few years later – and still $37,000 in debt – I realized I don’t have to keep doing this; i can reschedule
After realizing that, in February of this year, I decided to put my government student loans on hold. Previously had with the Debt Snowball Strategy I’ve already paid off my four smallest loans – between $1,000 and $3,000 – and I could see that I was slowly making progress.
It was also around that time that I realized that spending all my extra money on loans that didn’t accrue interest during the pandemic was suboptimal for building wealth.
Instead, I started investing more. Both through a robo advisor and through self-selected IRA trades. IRAs are personally designed US retirement accounts that enjoy tax breaks.
Eventually I started to see some growth.
Since making the decision to focus on wealth building rather than student loan repayments, I’ve increased my IRA for the first time and replenished my emergency fund depleted by the chaos of 2020.
Together, these measures have increased my net worth for $12,000 (€11,200).
2. I set achievable monthly goals
This step, while seemingly simple, probably had the biggest impact on my overall gain.
In addition to the regular monthly transfers to my accounts, I have set my own realistic financial goal every month. For example, when my personal investment account was around $3800, my goal for the next month was $5000.
I set myself a goal every month – for a different account each time – and invested everything that I earned additionally into this goal (for example my state Corona aid). After depositing this money into my investment accounts, the magic of compound interest kicked in and my investments began to grow exponentially.
All in all, I was about $6,000 richer in July than I was in January because I achieved those goals and reinvested all interest and dividends.
When I was close but didn’t think I could make it, I looked for ways to make extra money or worked hard to cut my budget in other areas. It was like playing a video game with myself – except the points were real money and my winning prize was a better financial basis.
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3. I took time each week to find additional sources of income
I know that part-time and freelance work isn’t for everyone, but there’s usually a way for everyone to make a little extra money. For me, that meant setting aside a certain amount of time each week to look for additional sources of income.
As someone who lives in the Alaskan bush, my options are more limited than most. There are no service jobs. Instead, I set aside a certain amount of time each week that I spent looking for ways to increase my income.
So I used this time to build my portfolio of freelance work and to look for opportunities that my full-time job offered that I hadn’t already taken advantage of. Ultimately, these various sources accounted for more than $5,000 that I’ve invested over the past six months — which has allowed me to exceed my original net worth goal for that period.
Three years ago I made the first deposit into my first deposit in my IRA. Today, this account accounts for a significant portion of my net worth. I’m not a perfect example — I still have $37,000 in student loans, but maybe next time I’ll write about how I’m now debt free.
This article was originally published in July 2021 and translated from English by Amin Al Magrebi. You can find the original here.