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Taking pride in incremental improvements

Taking pride in incremental improvements

Incremental improvements win long term game

Big gains get all of the glory. Lottery winners. Moonshot bets on bitcoin. One-in-a-million penny stock wins. The seduction is obvious: I don’t know about you but I want to go from the start line to the finish line as quickly as possible. Unfortunately, obsessing over big bets and big gains takes all of the joy out of the incremental gains that actually build wealth on a predictable basis.

This post is all about the little gains I never celebrated, and my plans to improve them even more in the future. These tiny incremental improvements collectively add up to big, big wins.

Investing over $15k in my long term portfolio

Over the past 3 years, I have incrementally invested over $15k in my long-term portfolio (taxable, not retirement). My goal was to do around $8k in that time span, and I nearly doubled it simply by throwing an extra $200-$300 towards the portfolio when I had a little extra cash lying around. Since the market has been so strong, even that small incremental improvement has netted an additional investment gains over the same period. Looking at Personal Capital, I can see it's around $2k in additional cheddar. That’s almost $10k, just from throwing some “spare change” in the piggy bank.

Little contributions making a big difference

Little contributions making a big difference

Over the next couple of years, I’d like to enshrine these incremental gains as much as possible. I’m considering automatically deducting $50 from my weekly spending money and sending it straight to my portfolio. That’s $2500 a year. Maybe I can make it even better by increasing the amount by $5/week every month.

Raises at work

Since 2015, I’ve received 5 raises. Some of them were larger than others, but collectively I’ve raised my salary by over 75% in 3 years. A lot of that was because I moved to San Francisco where both rents and salaries are much higher, but I’d say that 40% of the gains were merit based. 3 of them were raises I ASKED FOR, which I am very proud of.

Oddly enough, although I celebrated each raise, none of them amounted to over 15% individually so I didn’t feel like my life was really changing. But if I look back now I can see that, in aggregate, these raises really were life changing. It would be pretty devastating to drop my salary by ~40% now and return to where I was.

My plan for the future? Keep on asking for raises and promotions… and keep earning them. Before I asked for a raise this year, I printed out salary estimates from both Payscale and Glassdoor. I got more than I expected, although it wasn’t as much as I asked for. In an interesting twist, however, my boss mentioned that she “Knew you expected $xyx, and you can expect another mid-year raise to get you to that point.” A little bit of data can enormously improve the chances of a raise, and follow on raises as well.

Going from 50% to maxing out my 401k

I know, I am a bad person! I didn’t max out my 401k until last year.I have a long term portfolio that I was prioritizing for other reasons, but it’s still bad. This year I am incredibly proud of myself for finally maxing out my 401k. I didn’t do it all at once, either. Every time I got a raise, I upped my contribution by 1% until I was maxed out. I never felt the difference, but incremental gains got it done.

Over the next couple of years, I am planning on maxing out an IRA as well. I know, I know, I should already be doing it. I’m working on it… slowly.

Paying down debt

Since 2016, I have gone from $325k in debt (mostly mortgage), to less than $290k. I’ve paid off my credit cards as well as a significant chunk of a 3 year SOFI loan that I have. Although it isn’t much, I try to raise my payments by a couple of dollars every month, and it’s definitely making a difference.

If I keep doing what I have been doing, I should be able to pay off our mortgage ten years early, and be debt free (except the mortgage) by 2020. By that time, I should be at around $250k in debt… all mortgage at 3.9%. That rate is so good, it'd hard for me to want to prioritize reducing it compared to other things.

What are your “little” wins?

Like everything else in life, success in investing and personal finance is incremental. I want to drop my mile time by a minute in a day, and see my net worth jump to $10m in a year… but it isn’t going to happen.

I CAN drop my mile time by 3 seconds every week. I CAN save a little extra every paycheck. I CAN increase my retirement contributions every time I get a raise.

I will be wealthy, someday. For now, I’m taking pride in every incremental win I can.

Using debt as a forced savings plan

Using debt as a forced savings plan

Using different types of diversification in portfolio management

Using different types of diversification in portfolio management