Ok responsible people. This edition of “Becoming Financially Successful” has to do with growing your money. This is a very important edition as its pretty safe to say that we all know investing can be tricky.
Let’s take Chris for instance. Chris just made a 10k investment in the stock market. He currently has the possibility of making 100k by the next time he opens his eyes the following morning or seeing far less of it overnight. Now simply by him knowing this, waking up everyday tracking his portfolio can be stressful. But heres what I want you to ask yourself: if Chris never invested that 10 grand….where would it most likely have gone?
We all know the truth. For most of us it would have been squandered on TVs, clothes, shoes, clubs, rims or lent out to “friends” and probably never seen again. Sure, there are some who like to keep their money in 0.05% interest bearing savings accounts. But for the majority of us tracking an account that doesn’t pay much without maintaining an extremely strong savings goal ..we would burn right through that money as soon as any “psuedo emergency” comes along.
So why do people like myself invest? For many of us investors, all of the other things we most likely would have done with that money would have never brought us lasting happiness anyways. We know ourselves. A lot of us have come from places of squander. Addiction to consumerism. Buying that brand new truck then getting sick of it after 3 months. Well we have woken up.
Instead of working hard for our money all of these years, we now aim to make our money work hard for us. We have our eyesight’s set on not having to commute to a dead end job with people we hate and job duties we loathe. We don’t like the idea of waking up at 65 with no cushion, a ton of health problems, the possibility of being crippled and no ability to make a living or pay for necessities. Others have battled the reality that we’ve pretty much done everything interesting there is to do at our current pay grade and understand that the world is a huge place that we deserve to see. To take advantage of many of the things the world has to offer in a reasonable fashion and a reasonable amount of time, don’t kid yourself… it costs money…and a lot of it.
Or perhaps, some of us have realized one of the most important things of all. Accumulating personal wealth buys us time. According to the investors at Motleyfool.com:
“Money is storage for value, and it stores its greatest value not when it’s helping us keep up with the Joneses, but rather when it’s being used to buy us time. Time to spend on the activities we love. Time to pursue the goals we are passionate about. And time to do all the things that bring meaning to our lives.”
Basically, if 80 percent of your workweek is spent frivolously in careers you are tired of and going to helping some CEO buy the time to do the things that bring meaning to HIS/HER life…then you are going about your time management ALL wrong.
So what about the people who lose all of their money in the market? For one, even back in March of 09 when the market completely fell apart, the Dow only dropped about half (50%). That means if someone lost all of their money, they didn’t have a completely diversified portfolio of at least 4 stocks to begin with. They most likely decided to gamble everything on one company like a Bear Stearns. If they truly lost everything? That company would have had to have gone bankrupt. But smart people know, and you can take a look for yourself, most companies on the stock exchange won’t ever come close to being bankrupt. Also, if that person did have at least those 4 stocks they were supposed to have in a diversified portfolio, and they didn’t panic but instead kept contributing money during the low times, they would have made a TON of money between back then and now. (See here)
So if you’re scared to lose money and you don’t currently invest, the next time you hear about some guy named Chris losing 30% of his portfolio or that the stock market has dropped in half, I want you to stop, think about it for a minute, then actually be happy for him. Yes, currently his investments may be taking a 30% or 50% beating, but with all of the money YOU threw away on credit cards and paying for things that have yet to make you happy, how much did your “KeepingUpWithTheJoneses” investment portfolio drop in value? That’s right…100%. Almost all of that crap loses permanent value with most of it going to zero. As long as Chris doesn’t sell his investments, at least he still has the possibility to watch the value of those investments return, go much higher and secure his tomorrow. How much is that $60k Escalade you bought in ’03 fetching on the open market these days?