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'Free money': How 2 simple words helped me grow $100,000 in retirement savings—in just 5 years

The author, Bola Sokunbi
Credit: Bola Sokunbi

After graduating from college in 2004, I landed my first full-time job as a technology consultant, with an annual salary of $54,000.

At the time, my investment strategy was non-existent. Browsing through my new-hire documentation and seeing the words 401(k) and employer-sponsored retirement plan left me thinking, "Huh?"

I almost immediately dismissed the idea of signing up for a 401(k) after reading about it, because retirement, as it was defined in the guide (age 65), was a whole other lifetime away for me.

The 2 words that kick-started my finances

But then, on the second day of orientation, just as I was getting ready to tune out during the overview of my employer-sponsored retirement plans and their 401(k), I heard the words "free money" and I instantly perked up.

Those two simple words were a complete game-changer for me.

I learned my employer was offering a free contribution match of 100% up to 6% of my own contributions. I might not have known or even cared about the 401(k) at the time, but I knew a good deal when I saw one, so I signed up and made sure I contributed just enough to get the full match.

It took a few months to be fully enrolled, but as soon as I saw how quickly the money was accumulating, I got interested in contributing more than was required to get the match.

Educate yourself, and learn from mistakes

I was also curious about how investing worked, so I started reading books and learned what mutual funds, expense ratios, diversification and asset allocation were. I even opened my own non-retirement brokerage account and created watchlists for individual stocks that I liked.

Of course, while I was doing all of this, I made mistakes.

I bought stocks because they were "hot." I panicked when the market fell and sold too quickly, losing money as a result. I happily cashed out of stocks that had made returns, only to be deflated when I saw the taxes I had to pay (which I had no idea about) at the end of the year.

My mistakes were costly, but they taught me how investing worked and established my comfort level with risk.

From $0 to $100,000 in retirement savings

During my time at that first job, my money was invested in the limited mutual fund offerings they had. I built my contributions up to where I was not only getting the full match, but also maxing out my allowable contributions.

Once I left, four years later, I had well over $70,000 in that 401(k) from my contributions, my employer's match, and the gains I had earned from my investments in the stock market. I couldn't believe it! I then rolled my retirement money over into a traditional IRA and invested my money in my choice of index funds.

As soon I was eligible to invest in my new employer's plan, I did that as well. This time, not only was I getting my employer's full match, but I decided to fully max out my contributions right away.

In five short years, the retirement plan I had with my new employer grew to over $100,000.

Since I began contributing to the plan almost right away, I didn't give myself a chance to get used to seeing that money included as part of my paycheck, so I didn't miss it. Instead, I was focused on my investments in my non-retirement accounts, my savings, real estate, and my side hustles.

Little drops make the ocean mighty

This would have been a very different story if I had listened to that little voice in my younger self's head that said, "Nah, let's pass on that 401(k)."

The small action of signing up for a 401(k) became the catalyst for the investments I made in my employers' plans, my interest in learning about how investing worked, my actions of setting up my non-retirement accounts and growing my portfolio.

It's easy to overthink yourself into a standstill and fear the unknown. But, when you set the intent to succeed and start taking action, no matter how small at first, it's just a matter of time before you start to reap the rewards.

Bola Sokunbi is a certified financial planner and author of "Clever Girl Finance: Learn How Investing Works, Grow Your Money." Follow her on Twitter @CleverGirlCGF. To hear from top experts in personal finance and get critical advice on spending and saving to stay financially afloat, join the CNBC Path Forward: Your Money Summit on November 17, featuring Suze Orman, Patriots linebacker Brandon Copeland, The Budgetnista founder Tiffany Aliche and more.

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