How I invested $5,500 on a $17,000 Income in 1 Year!

This spring and summer I spent 3 days a week working at a friend’s organic market garden. Growing produce for local farmer’s markets. The other 2 days a week I worked at another farm working the grounds and setting up for weddings. I got to spend all day outside. Covered head to toe in dust and mud, eating as many veggies as I wanted. Doing exactly what I love. The only thing is, I only earned about $17,000 this year, but I loved what I was doing so I didn’t care.

I could have invested 10% of my income as suggested by so many investing articles, but I was not earning a typical income, or living a “normal” life with a “real job” so I why would I want to invest at a typical rate.

You know, I probably won’t get a “regular job” this year either. I love working seasonally at jobs that are hands on, learning real skills, like how to grow my own food, or how to produce raw milk.

Even though I worked very hard for a low income, I was able to get off to a good start saving for retirement. Within one year I deposited $5500 into a Roth IRA account compared to my income I invested over 32%. These are the steps I took in order to maximize my investments on a small income:

Invested before spending. When budgeting, the best way to make sure some of your money goes into savings is to pay yourself first. Instead of saving whatever is left after spending, allocate money towards savings and investments first. My teacher once told our economics class this in high school but I never realized how important this was. It is incredibly easy to spend money without any “savings” left over, but when you put aside money for savings first it is hardly missed.
Renamed all of my checking and savings accounts. This step is was to keep me focused on where I wanted my money to go. My checking account used to be called “Student Loans” to remind myself that any extra money I have should go towards my student loan payoff. Now my checking account is called “Little Employees”, a term I learned from Mr. Money Mustache, reminding me not to use money without thinking, and to give each dollar a job. Each dollar I earned from working a very physical job on the farm – actual love, blood, sweat and tears went into my work. Since I was working so hard, I want my “Little Employees” to be working just as hard.
Chose what to save for. I decided that at my age (24), with many years available to me for accruing interest, the best thing for me to start investing for was retirement. You can set any savings goal that is relevant to your life. Saving for an emergency fund, college, a house. For me the best choice was to start saving for retirement.
Decided where to put my money. I chose to open a Roth IRA. A Roth IRA is a nontaxable investment account. Meaning, I pay taxes on earned income now, invest up to $5,500 per year, and when I reach the age of 65 I can withdraw from my investment without paying taxes on the earnings. I chose this type of account over a tax-deferred since my income bracket is currently low. my tax liabilities are also very low. I hope to increase my earnings in the future, which will increase my tax requirement. Meaning I am at a better advantage to pay taxes now and avoid paying taxes on my interest in the future.
Opened a Roth IRA account with Betterment. Betterment is an online based investing firm that makes investing easy to automate. With relatively low fees. I was able to invest every week automatically. I was also able to pause my contributions if anything came up and restart them with just a few clicks. There are many firms to open an account with, some of the others I looked into were Fidelity, Charles Schwab, and TIAA.
Chose my savings rate. I have read many investing tips that suggest saving 10% of your income for retirement. That is great. If I wanted to work my whole life. I would rather save more now than work longer. Because my work this year was seasonal, some weeks I worked 12 hours and others I worked 60. So instead of only saving 10% of my low income, I saved 10% of the income I thought I should be making at my age, about $50,000. I enjoy my work and don’t mind being creative with a small income. My goal is not to be cooped up in an office. My dream is to work outside, and do tasks outside that don’t feel like work.
Started investing $100 a week. Over the course of a year investing $100 a week would add up to $5200, so I knew I would need to make a few additional payments if I wanted to max out my account at $55000 for the year. When I received a bonus or was able to work extra hours I deposited it into my Roth IRA instead of spending the extra money.
Stuck to a tight budget. I lived at home for part of the year paying about $500 towards rent each month before moving out and getting a roommate. I am easily entertained, so I don’t go out much just to shop or go out to dinner. My favorite thing to do is walk to the river or lake in town. I do enjoy going to coffee shops with friends but even that is a rare occasion. I find the best way to live on a tight budget is to be content in the simple things.
Paid my ahead on my student loans. To free up some extra money I paid my loans with the money I earned from my shop Pedersen Post. I only earned an extra $50-150 each month, every little bit help buffer the due date on my loans.
Found extra work in order to keep up with my investing goal. When I wanted a little spending money outside of my tight budget I babysat, cleaned a friends apartment, and created printables to sell online. I was able to make an extra hundred dollars to keep up with my weekly investments and have a little extra to have a cup of coffee with friends here and there.