During the stock market crash of 2008, I was one of the millions of uniformed investors who pulled every dime out of the market and locked in the losses. My portfolio included every stock that someone whispered about, growth stocks, popular stocks and even stocks that went against my values.
Outside of the stocks ticker, I couldn’t tell you much about the companies I was buying. I didn’t know if the stock paid a dividend. I couldn’t tell you about the company’s future goals and I certainly couldn’t tell you who was running any of them.
Back in 2008, I didn’t have a plan. I was investing because it seemed like the responsible thing to do. Did I think I would hit it big on the next Amazon? Was I investing for income? Was I out to grow my future wealth? I had never really thought about my “why.” I was just throwing money into a nebulous void because it seemed like the right thing to do. And when the market began to roll downhill, I just wanted all my money back because I wasn’t really “invested.”
I remember feeling grateful that I had gotten a lot my money out before it hit the bottom. And I remember thinking, “Why would anyone keep watching their money disappear?” What part of the game is that? I was right in one regard. It was clearly a game, but unfortunately, I didn’t know any of the rules. You can never win a game if you don’t know the rules.
During the 2008 crash, I remember reading a great blog called My Open Wallet by a woman that lived and worked in New York. She shared in great detail how poorly her portfolio was doing during the 2008 crash, but she also expressed how determined she was to just keep her head down and continue saving, investing and paying down debt (her mortgage). Every month for quite a few months her net worth/portfolio continued to drop. But she reported the losses and kept with her plan, which was to build a substantial portfolio and live off the income it generated.
I’m happy to report she is no longer the prolific blogger she was once was reporting on every detail of her personal finances. Today her writing is very sporadic. She checks in with her loyal readers and offers updates on her new life away from NYC and away from work entirely. Because in 2017, she retired from the rat race and is now living comfortably off her stock portfolio of approximately $1.3 million.
I often wish that I had followed her lead. But if I’m honest with myself, I simply wasn’t on her level. Her “level” has nothing to do with income, education or status. The “level” that I’m referring to is her discipline level. On a scale of 1-to-10 this woman was a 9 because no one is perfect. I, on the other hand, had to be a 3, 10 years ago. I was not disciplined enough to keep a spreadsheet of all my spending, track my net worth, research my stock holdings before purchases, use all tax refunds and bonuses to pay down my mortgage, max out my retirement accounts and invest religiously.
As time went by and she got closer to her dream of financial independence, I certainly wasn’t any closer to mine. I hadn’t even verbalized the words “financial independence.” Perhaps I didn’t believe it was possible for me. But what I managed to realize is that I was stuck.
Since cashing out my portfolio at the time, I hadn’t made any significant financial progress in my life. I had a savings account and a 401K but I wasn’t committed to them. I didn’t have a one-year emergency fund and I wasn’t even trying to max out my 401K. I knew I wanted to be on another financial level but I didn’t know how to get there.
Then it dawned on me! This woman basically left a road map for me on the internet. I just needed to stop reading about her accomplishments as a spectator and join in the financial game she was winning.
My first job was to do an assessment of all my finances. I needed to know the total value of all my accounts (assets) and how much debt I owed on credit cards and loans (liabilities). Once I knew my net worth I started tracking my monthly spending on a spreadsheet. My biggest moment came when I began tracking my net worth. My net worth told me everything I needed to know. And my only goal has been to make it go up every month since.
I started (slowly) but eventually I began maxing out my retirement account. I didn’t think it was possible. How could I max out an IRA and still enjoy my life? It took two years of coming close before I finally maxed it out and I never looked back.
I had a plan. I started saving with the purpose of building a one-year emergency fund. I began to seriously educate myself on investing outside of a retirement account. And I now invest with a long-term plan and purpose. I learned that I’m a conservative investor, I learned that multiple streams of income are extremely important to me and that I like instant gratification. This put me on the path to dividend investing and, once again, I haven’t looked back.
The February 2020 crash is for me what the 2008 crash was like for the successful blogger of My Open Wallet. It is my turn to stay the course that I have planned for myself and ignore the chaos of the world, knowing I will come out on the other side of it.
Okay, enough of my financial déjà vu and having a second chance to get it right during this 2020 crash. Time for the net worth update:
February 2020 Net Worth Update
Cash Accounts
Checking $ 500.00 (no change)
Savings $ 3,900.00 (- $456)
Business $ 10,347.00 (+$1,100)
MM/E Fund $ 16,663.00 (+$472)
Taxable Investment Accounts
Ally Brokerage $ 16,011.00 (-$392)
Investing MM $ 159.00 (-$50)
Vanguard $ 1,158.00 (+$4)
Acorns $ 898 (-$6)
Tax Advantage/Retirement
Bonds $ 17,481.00 (+$224)
SEP IRA $ 13,837.00 ($-516)
Traditional IRA $ 23,786.00 (-$1,466)
$102,762.00
Liabilities:
Credit Card: $0.00
- Checking: All savings/bills are automatically deducted from this account. Any money left over after deductions is sent to the emergency fund.
- Savings (P to P): This account is down $450 this money was used to purchase additional shares of stock. I wanted to take advantage of the market dip and will probably use more of this money as the market continues to drop.
- SEP IRA: This account took a step backwards. My automatic monthly deposit wasn’t enough to keep it even. The bright side is, more shares were purchased at a lower price
- Traditional IRA: This account was hit hard. It is down over a thousand and my automatic deposit was again swallowed up in the downturn. But I managed to make a few buys within the IRA at basement prices.
- Business Account: This account is a bright spot. Being careful with my spending allowed me to deposit just over $1000 this month.
- The E/Fund: Haven’t had any reason to hit up the emergency fund. But interest rates were cut this month, which means less passive income for the overall portfolio. This money is for emergencies only, so it is what it is.
- Ally (taxable): Purchased a few shares (UPS, PEG, MAIN and DAL), which created $37 in new dividend income.
- Bonds: The current I-bond rate is 2.22% This is still way above what banks are offering now.
- Ally Investment Money: This money is always being used to buy dividend-paying stocks.
- CC Debt: With the market crashing every other day I’ve been mindful of my credit card spending. Not looking to burn the candle at both ends.
This is the first time in 28 months that my net worth has gone down. I had two years and four months of consistent net worth growth (not bad). The last time my net worth declined was when I purchased my home. My 45% savings rate was no match for the rapid market declines. That said, I’m not looking to change a thing. I’m aggressively picking up great stocks that go on sale, continuing to grow my cash cushion, and preparing to add a new stream of income to the portfolio in the form of real estate or a business toward the end of the year. The only thing that would halt my purchase of real estate or a business would be the addition of a lucrative new side hustle contract. Which, would leave me with no time to take on a time intensive venture like real estate or a new business.
It is a fight to build wealth no matter where you are in the process. Everything around us conspires to take money out of our hands. But you must fight the good fight. Continue to save, invest, and grow your net worth even when it seems impossible. Save your pennies (copper) until they become dollars (cotton).
