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|Subject: I Lost a Fortune Today, and I'm Proud of it!||Date: 9/27/2002 10:44 PM|
|Author: babyfrog||Number: 35063 of 81638|
I follow a very automated saving and investment strategy. Once a month, on payday, money gets automatically taken out of my paycheck to fund my 401(k) and an ESPP. Additionally, automatic transactions pop money out of my checking account to fund some DRiPs, my savings to go into my Roth IRA for next year, and a few cash accounts for emergencies and to fund some upcomming purchases. My budgeting, saving, and investing motto is "You don't miss what you never see."
I have a spending problem - cash burns a hole in my pocket. I cannot be trusted with my own money; I fully admit that (Other people's money, I'm great with, but my own, I spend like water). As a result, when I got serious about finances, I determined that the only way I was going to save any real money was to have it automatically removed from my paycheck and/or bank account on payday.
As a result of prioritizing my life, budgeting to live within my means, auto-investing on payday, and automatically adjusting to hide darn near everything from my last few raises, I've managed to build up a pretty nice sum in my retirement accounts, considering that I am 27 years old. I typically only check my investment balances once a month, on payday, to make sure that the automatic transactions all went off without a hitch and to update my quicken.com records. Today was payday, so this evening, I made my routine check and update.
After I reconciled all the balances and numbers, I was in for quite a shock. The "Today's Change" column showed my investments losing more money today than I take home (after taxes, benefits costs, and other automated transactions are deducted) in two months! Two months!!! That is the largest one day total loss I ever remember seeing in that account. Needless to say, my initial reaction was one of shock, dismay, and dispair. I even had some preliminary thoughts of abandoning this strategy for one of "bury it in coffee cans in the ground".
After the initial shock wore off, however, reason (or was it 'rationalization'?) prevailed. I realized a few very important things - things that eventually, made me proud of the fact that my accounts lost the equivalent of two-months take home pay, today.
1) The money was there to lose. If I hadn't embarked on the forced savings and investment plan a few years ago, all I would have saved by now would be the employer contribution to my retirement account. My losses today would not have been so steep (dollar-wise), but my total balance would have been far, far lower.
2) I don't need that money today. Thanks to my forced savings and investment plan, I live well beneath my means. I still have a paycheck that covers all my current expenses, still sock away money every month, and can still live my current lifestyle, regardless of what happens to my invested money.
3) I bought 'cheap', today. The automated equity investments that happened today bought stocks at a much lower price than I would have paid for them yesterday. Hey, I like relative bargains!
4) My emergency fund is still there. My employer has pretty concrete plans to outsource my old department (which I just left a few months ago), and the rumor mill suggests that my new department is not much safer. In the event I do get caught by the next swing of the outsourcing axe, the money I might need to live on during any short-term transition period is still there. That money is liquid and conservative enough to have been unaffacted by today's broad-based decline in my investments.
5) I still have plenty of time. I'm 27 years old. I cannot retire (presuming I stay with the same employer) for another 28 years; cannot (easily) take withdrawls from my retirement accounts for another 32.5 years; and cannot collect 'full' social security (if that'll still be around) for another 40 years. I started young enough, aggressively enough, and with enough diversification so that, if my models prove correct, my retirement investments will be enough to support me through a ripe old age, regardless of what happens (short of a perpetual catastrophy) in the stock market.
Given all this, I'm proud of the fact that, net, I lost twice as much money in the stock market today than I took home in my paycheck. It tells me that I'm doing everything right, from a long-term perspective. I plan to stay the course, keep investing, and continue focusing on the long haul. I do plan to evaluate my automated investments, however, to see if today's drops were caused by real, firm specific problems, general economic uncertanty, or just plain market skittishness. I expect no reduction in the amount I automatically invest every month. The causes behind today's drops, however, may prompt me to seek out alternative locations for future investments.
I never thought I would see the day when a payday left me poorer than the previous day. I really never thought I would be happy to see that happen. And I especially never believed that I would be bragging to people about how much money I lost in the stock market. Yet, here I am, doing just that. It's funny how things work out, sometimes, isn't it?
Thanks for taking the time to read this; I do appreciate you spending your valuable time on the late evening ramblings of a guy like me.
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