I Just Lost $2,000 in Three Weeks and I Don’t Care
Between September 9 and September 30 I lost $2,219. It’s gone. Vanished into thin air. Like it never existed.
Apparently the stock market took a little bit of a dive over the last few weeks. I didn’t really notice because, well, I honestly don’t pay much attention to the news. But I do take 5 minutes each week to mark down how our investments are doing (mostly because it will be interesting to look at years down the road), and this week I couldn’t help but notice the sharp decline.
Our retirement savings, once flush with cash, are now a little bit lighter. Three weeks ago we were closer to financial independence than we are today.
But to be honest with you, I couldn’t care less. That $2,219 means nothing to me.
Here’s why.
It’s future money
The money we lost is all in retirement accounts. A Roth IRA for me, both a Roth and Traditional IRA for my wife. There’s also some in a regular old taxable account, but that money is also earmarked for retirement.
We don’t have any plans to use that money any time soon. It’s all future money. It’s purpose right now is to sit tight and ride the waves of the stock market, hopefully growing over time so we can use it decades down the road.
If I needed the money tomorrow, I might be freaking out. But since I don’t need it for another 30 years or so, it doesn’t phase me in the slightest.
But then again, if I needed the money tomorrow it wouldn’t be invested in the stock market. That’s why I keep things like my emergency fund and my irregular expenses funds in savings accounts. They don’t earn a ton of interest, but I do know for sure that the money will be there tomorrow if I need it.
My today money is kept out of harm’s way. But my future money? Well to be honest it’s hard to care all that much about losing a little bit when it’s still so long before I can even use it.
The stock market does this all the time
This isn’t the first time the stock market has taken a dive and it certainly won’t be the last. Heck, this isn’t even the first time it’s happened this year.
Back in late January we lost $2,041 in just two weeks. And if we go back to June 2013 we lost $1,935 in a single week. Talk about bad!
Here’s the thing: the stock market goes up and down. That’s just what it does. Some weeks, like the past few, will be bad. You might lose a few thousand dollars in a short period of time.
Other weeks will be great. Actually, I don’t have to go all that far back to find one of those good periods. Between August 7 and September 1 the value of our retirement accounts increased by $2,431. That’s actually more than what we just lost, and it happened right beforehand!
The stock market falling is not a cause for alarm. The stock market rising is not a sign of great things to come. Both happen all of the time and neither one gets me excited.
We have a plan
My wife and I have an investment plan. You can read all about it here: My Personal Investment Plan.
Our plan defines what we’re investing in and how much we’re investing in it. That’s it. It doesn’t say anything about reacting to what the stock market is doing this week or any other week.
Without a plan, I might be worried about what I should do now that the stock market has fallen a little bit. Without direction, I wouldn’t know what step to take next and it would be harder to resist the call to panic.
But because we have a plan, and because it’s clear on what we do and don’t care about, it becomes easy to simply not worry about the things we don’t care about. Our plan doesn’t care what the stock market is doing, so I’m free to not care about it either.
If you would like some help making your own investment plan, I would check out this resource I put together for just that purpose: The New Parent’s Guide to Investing.
Or if you would like a little more personal guidance, you can click here to learn more about how I work 1-on-1 with clients to make a plan that fits their personal goals.
Care less = more free
I could lose another $2,000 this week. I could gain $5,000 instead. Those are big sums of money, money that could pay several months of rent, or decades worth of cell phone bills.
But I wouldn’t care either way. We’re investing for the long-term, so the short-term swings simply don’t mean anything to me. I’m free to care less about the stock market, which makes me free to care more about the things that actually matter to me.
It’s a nice place to be.
I also like to look at it as though the losses and gains are just “paper” and aren’t real until we sell the shares and realize them. And luckily the plans to do that are still pretty far in the future, so I’m not too worried about what happens because they will gain and lose tens of thousands (if not more!) more between now and then.
Another trick I do is to try and bring it back to percentages. Last month’s losses were around 2% on our 401Ks and IRAs, and at $8000 it was noticeable. But when we had $1000 in there, would we have noticed a $20 drop? Probably not, even though it had the same effect. Having enough money that drops like this become noticeable is a mixed blessing, so sometimes it helps to normalize it to times when we had less.
I love both of those points! Especially the one about the percentages. Having more money invested is a good thing, but it also means that even the small losses are bigger. Keeping that in perspective can be tough when you look at the raw numbers, so keeping it relative by looking at percentages is a great idea.
I can relate to this. I check our balances monthly and noticed the loss. While I wasn’t happy I know this is just the ebb and flow of the stock market and I’d be seeing gains again (hopefully soon). 🙂
Yep, the ups and downs are just part of the deal. I like your outlook!
No reason to panic at a short term loss as negative returns create opportunities that lead to increased returns in the future!
Good point. There’s no time to buy like when everything is on sale!
That is the reality and it is no big deal. What goes down goes back up eventually. This made me think to hop in and check my accounts and I’m down about 28k from the last I checked. Meh. I’m not pulling out my money tomorrow. I watched my prior boss pull up her retirement during the recession and she was down over $500k…luckily she didn’t over react and got it all back and much more. Not fun to lose money, but have to have the big picture in mind.
“Not fun to lose money, but have to have the big picture in mind.” Well said. I certainly don’t enjoy seeing those account balances go down, but you have to remember that it’s just part of the deal.
Investing for the long term, ignoring the “noise” and allowing the market to do its thing seem to be the conventional wisdom for investing and sleeping well at night. Figures show that, over the long term at least, money invested in stock markets grows. Lots of people are talking about a large correction due to the massive amounts of new money which have been pumped into the markets in recent years, but only time will tell if there’ll be a crash or if we’ll weather the storm without harm.
Well, there will definitely be another crash at some point. There always is. The catch is that no one has found a reliable way to predict when it will happen, so it doesn’t make much sense to worry about it. The best you can do is manage your risk by having savings in place and choosing an asset allocation matches what you’re willing to risk.
Great perspective as always, Matt. You know the part that’s ironic for me? I’m always saying I want the market to go down, so I can buy investments on sale. Then, when it does, I get sad that my net worth went down.
Haha, I’m the same way! I think it’s just human nature. But it’s the actions that matter, not the feelings.
Great post. All that’s needed to invest for retirement is patience, a plan and ignoring the news. Following the markets every day and reacting to every bit of news seems like a recipe for high blood pressure.
Love those 3 points: “patience, a plan and ignoring the news”. Yep, that’s pretty much it!
We don’t have investments other than our IRAs, and I try not to pay too much attention to that, honestly. As you said, stock markets wax and wane. So when I do see drops, I just remind myself that there’s a pretty good chance it’ll come back in time.
I have to do some negligence to keep my sanity. We’re more or less a one-income household (husband is on disability), so we can’t even max out IRAs at the moment. So if I worried every time our retirement accounts dropped, I’d be paying for ulcer medication.
Haha, I think a little bit of intentional negligence is a good thing in this case. I don’t pay much attention at all to what the stock market is doing either, simply because it doesn’t matter. But not paying attention definitely has the benefit of making it less likely that I’ll do something dumb too.