Save First, Ask Questions Later

I was 23 when I first became eligible to participate in my job’s 401k plan.  They made us attend a presentation about what a 401k was and how to use the website.  It was more of a how to use the plan rather than a how to save for retirement.  Which makes sense.  It was our HR department leading the presentation, and I’m sure they weren’t legally allowed to give financial advice on behalf of the company.

I bring this story up because over the last 5 years I’ve saved a halfway decent amount of money.  I’ve also come a really long way as an investor.  At 23, I’d never heard of index funds or expense ratios and had never looked at that famous chart of the history of the Dow (you know, the one where it only goes up over time?)


I did what most people probably do when they start out.  Pick a percentage (usually ranging from employer match to 10 or 15%) and pick some funds, usually whatever has done the best over the last 5 years.  I can’t remember what percentage I elected, but it wasn’t a whole lot.  I think I contributed maybe $150 a month.  But I was sure as hell going to pick my funds carefully, because that’s where you make and lose money…right?

The thing is, when you’re young and just starting out, picking the right funds really isn’t that important.  You usually can’t buy individual stocks in a 401k, so you don’t have to worry about those.  But what about expense ratios?

It’s true that over time, especially in your later years, expense ratios can eat away at up to a third of your money.  It’s also true that the best strategy for most people is going to be picking a target date fund, or a total stock market fund and a total bond market fund.

These things don’t make a whole lot of difference if your account balance is $1000 and you’re adding another hundred a month.  Picking the right funds isn’t going to make you rich quick, and picking the wrong funds won’t make you lose all your money.

I’ve read a lot about investing over the last few years, partly because I think it’s interesting stuff and mostly because I wanted to make sure I wasn’t screwing myself by putting my money in the wrong place.  And I don’t have any real strategy or deep insight, except for this:

Save First, Ask Questions Later

Over 5 years later I’ve finally realized what I think is the key to becoming a successful investor.

Focus on Saving first!

I’ve seen a lot more progress come from my contributions than from swings in the market.  I’m more exited about seeing my dividend payouts go up and could care less what the market is doing.  My real progress came when I decided to focus on my savings rate and keeping the rest simple.

Picking the right funds when I first started out may or may not have increased how much I have today.  But creating a habit of saving a larger portion of my income certainly would have.  What if I contributed 25% instead of just 10 or 15?  I’d probably have almost double the money.  Was it doable?  Who knows – I never ran the numbers to find out.

At some point, you’ll have to ask the questions and find the answers and learn at least a little bit more about investing.  It turns out though that that’s the easy part.  The hard part is making the decision to have a little less money now for more in the future.  The hard part is delaying gratification, running the numbers and being honest about your spending AND your income, and learning that TIME is your most valuable asset, not MONEY.

And life is usually better once you get the hard stuff over with.

Image by Sira Anamwong at

9 thoughts on “Save First, Ask Questions Later

  1. Yeeees yes yes. It was tough for us to realize that, even while getting out of debt, we had to make savings a priority. You really don’t think about the importance of saving until you *don’t* have it.

    1. This is too true. I stick to a pretty scarce budget and don’t like having money “just sitting around”, but I know having a decent amount already in savings is what allows me to do this and sleep at night. I’d love to take a chunk of that money and throw it at my student loans but I’d like to think the habits that let me build that chunk will lead me to debt freedom sooner or later.

  2. Some good advice here, Matt. You need patience to succeed in investing, and it is a habit indeed. This is what I tried to cover in my RF-featured article from an investing perspective:

    It is sad that in this day and age of instant gratification, the idea of saving first and staying invested for years (with little tangible returns) is a huge challenge for many people. Articles like this serve as good reminders.

    1. Thanks for reading TFR!

      That’s a great post and “the dog years of investing” describes it perfectly. It’s important to realize that “boring/routine” and “investing” belong in the same sentence – exciting goes both ways!

  3. I completely agree here! This sounds like both Mr. Adventure Rich and I! When Mr. AR started his job, he checked the box to contribute 5% (qualifying him for a 5% match) and promptly forgot he had a 403(b) for about 4 or 5 years. When he realized he had an account, there was nearly $10K in it! For me, I elected about 5% not knowing what a 401(k) was but knowing it was a “smart thing”. I then heard about investing and started researching “how to invest”… I had no idea my 401(k) was an investment! Haha- I quickly learned and started contributing more 🙂

    Moral of the story: Save First!

    1. This is awesome! I imagine it happens to quite a few people nowadays with auto-enrollment being so popular now. And the stock market the last few years certainly doesn’t hurt either!

  4. Great post! It is certainly a good idea to save first. So many times I have heard people who are confused by or concerned with the options for a 401k. Many times this leads to not saving money at all and we give the excuse “I don’t know what I am paying into”. Although I think it is important to know what you are investing in, it is even more important to start.

    1. I agree, it’s a shame that the most effective way – automatic contributions through payroll deductions, usually auto-enrolled – to get people saving for the long term is also maligned by so much bad information and confusion. I think it helps a lot to actually “work” the account – logging in, seeing your contributions, seeing how you earn and lose money. It gives you a tangible experience rather than trying to understand some abstract thought, and you see that investment accounts work a lot like your regular bank accounts in many ways.

      Thanks for reading!

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