When I was 24 years old, I received a $1,600 inheritance from my grandmother. Although I desperately wanted to spend that windfall on clothes, shoes, and home furnishings to brighten up my bleary studio apartment, I made a courageous decision. I invested the entire amount in the stock market.
It took more than courage to invest that $1,600. It took sacrifice. I made the decision to delay immediate gratification in hopes of receiving something more pleasurable in the future. Having been raised by a twice-divorced mother who was both emotionally and financially insecure, what I wanted more than anything was to become financially independent. I never wanted to rely on anyone else to take care of my financial needs.
When I was 39 and about to get married for the first (and hopefully only) time, I asked my fiancé, Dan, to sign a prenuptial agreement. I had amassed wealth by investing during the previous 15 years and I wanted to protect it in case our marriage did not work out. Between my workplace 401(k), an individual retirement account (IRA), and the online brokerage account I had opened when I placed my first ever stock trade, I had slightly over $1M in individual stocks and stock funds.
It sounds like a rags-to-riches story: a young woman who had been laid off twice receives a modest inheritance from her poor grandmother and by the time she turns 40 is a millionaire.
In January of 1993, I bought 40 shares of Starbucks stock which was trading at slightly under $40/share. After a few months, the share price went up a little bit and I was pleased. However, I knew it was too risky to have all my savings in just one company. What if Starbucks went bankrupt? I could lose it all. I knew I needed to spread out my risk through diversification by investing in a variety of companies. But where would I get more money to buy more stock?
At that time, relatives such as my great aunts and uncles would send me checks on my birthday. They would range in size from $25 to $50. I saved up all those checks and bought stock in a second company. Then when Hanukkah and Christmas came around and I got more checks, I bought stock in a third company.
Every time I received a raise or changed jobs for a higher base salary, I made sure to increase my current standard of living by just a little bit and invest the difference between what I earned and what I spent. I lived below my means and paid off credit cards in full each month so I didn’t run up interest payments. By the time I was 31, I had paid off my undergraduate student loans and had more disposable income which I could sock away in my company’s 401(k).
While I was single I decided to continue renting instead of purchasing a home. Since I didn’t need to come up with a down payment, I could keep my savings invested in the stock market.
Every time I received a raise, I made sure to increase my standard of living by just a little bit and invest the difference between what I earned and what I spent.
I am often asked how I had time to learn about the stock market and research specific stocks. All I did was reallocate the couple of hours I spent every month reading Shape and Glamour magazines to reading the Wall Street Journal instead. I used to be the gal at work who discussed diet and beauty tips with my female colleagues. A few years after changing my reading habits I found myself discussing stock tips with my male colleagues.
Since not everyone has an inheritance sitting around, one way to obtain cash to make one’s first investment is by selling jewelry that is unwanted or no longer worn. For example, earlier this year a woman auctioned off her bridal set ring for $1,962 on Worthy. After deducting the fee, she received a payment of approximately $1,570, which is close to what I had when I made my first investment.
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