I started my first real job right around 1/1/1998, about 20 years ago. To get my investment portfolio (primary home excluded) to the first $1,000,000 (Double Comma Club), it took a long time, almost 17 years. Or, because I like to measure stuff in days:
During that period, I worked hard at various programming jobs. Some of them were very stressful and I occasionally worked long hours. Mindy* worked for most of that time as well. In between two full-time jobs, we flipped homes. We worked a lot:
- Friends: Did you see what happened on Blah Blah Blah TV show last night?!??
- Us (*blank stares*): We were setting tile until midnight.
Note: Now that I’ve left work and have loads of time, I still don’t spend any of it watching TV.
Last Friday (11/29), we joined the Multimillionaire (Double Double Comma?) Club! Yay $2,000,000!:
The second million was a lot quicker, taking right around 5 years or:
The second million was also a lot easier. About halfway through those last 1,828 days, I quit working. Having your money work for more money is ALWAYS better than trading your precious hours. Besides, once your snowball gets to a certain size, it works way harder than you ever could. Your job earnings become a case of diminishing returns.
I have no clue how long it will take to earn the 3rd million. Mr. Market has been on an incredible run and I don’t expect it to continue, so it may take longer. On the other hand, I now have 2 million little workers instead of 1. Money makes more money which makes more money. This is also known as compound interest. And it is beautiful.
What I’ve Learned About Money
I love to think about money. Probably too much. But, it’s a better hobby than cocaine, competitive eating, yelling at kids on my lawn, or monster trucks. Here is some of what I’ve been thinking about lately.
No one knows what the hell is going to happen.
“Prognosticators” make predictions constantly. In this prediction, Robert Kyosucki stated that:
2016 would bring about the worst market crash in history.
The article was published in March of 2016. If you listened to Robert’s shitty advice and sold your S&P 500 index fund, you would have missed out on a 53% return. Oops.
In this turd-burger, also from March of 2016, Doug Kass proclaimed:
I have a high degree of conviction that staying out of the U.S. stock market could be an appropriate move for the balance of 2016.
And how did the rest of 2016 work out? Really, really great:
But, at some point, someone will say something like this:
The market is on the verge of a 20% correction!
And this person will scream from the top of a mountain when the market corrects 20% the following week. What they won’t tell you is that they’ve been making the same prediction every couple of months for the past 5 years. So have 898 of their buddies. Someone will be “right” at some point.
But they’re all missing the point, because:
Big losses will happen and are normal.
Mr. Market will take a massive dump. It will smell even worse than Robert’s and Doug’s advice.
You could see 50% of your stock market wealth wiped out in a week. Or a day.
Just like bad advice, screaming babies on planes, dogs that crap in your yard, Mr. Market tantrums are a fact of life. Returns can’t be steady and predictable because Mr. Market is complicated. The important point to remember is this:
A stock’s price is a reflection of the underlying health of a company along with a bunch of semi-related nonsense.
If the stock market dropped 50% tomorrow and your precious Widget stock got dragged down too, does that mean that the underlying company is now only 50% as good? Nope. It just means that Mr. Market lost his cool for a day and Widgets R’ Us got dragged down in the melee. What to do then?
If Store A is selling an identical TV for 25% less than Store B, do you go with the latter. No! You go for the best price.
The stock market is the opposite to most humans. Folks freak out and sell when the store goes on sale and buy when it gets expensive.
The next time Mr, Market loses his mind, keep yours. Don’t sell. Consider buying more while prices are cheap. Big losses will happen, but they’ll be followed by even bigger gains.
Timing the market is incredibly dangerous.
No, no, no. Just don’t do it. Here is an incredible chart:
So, if you missed the 10 best days in the market, your returns were less than half of what they would have been had you just left your money in the whole time.
If you’re about to retire and worry about sequence of returns risk, consider moving a couple of years of spending to cash. If the market takes a hit, you won’t have to worry about selling your stocks back to Mr. Market when he’s not paying as much.
Most money is made at the end.
Someone once trolled me with this:
Dude, you’ve made all of your money in the past couple of years.
And… what is the issue?
This is how the market works. With dividend reinvestment, the markets have returned close to 10%/year historically. Per the Rule of 72, your money is doubling about every 7 years. Let’s do an experiment in which a 30-year-old invested $100,000 and never put in another dime:
- 30: $100,000
- 37: $200,000
- 44: $400,000
- 51: $800,000
- 58: $1,600,000
- 65: $3,200,000
- 72: $6,400,000
- 79: $12,800,000
During the first 28 years of the experiment, the portfolio has grown by $1,500,000. In the last 7 years, it grew by $6,400,000. This is amazing to consider:
In 1/4 the time, the portfolio grew 4x as much!
This amazing growth illustrates an important point:
You must start as early as possible.
It’s time for a story!
When I was about 20, my college girlfriend took me to a weekend investing seminar. I didn’t want to go. At the time, I thought investing was incredibly boring.
The first thing I noticed at the seminar was a huge plate of huge cookies. Score! The second thing that I noticed was that everyone else in the room was at least 60. At one point in the seminar, the presenter locked eyes with me and said something like this:
Your advantage is your youth. Start now!
His words shook me out of my cookie-coma and I still think about them (the words, not the cookies) at least once a week (who the hell am I kidding, I could go for one of those cookies right now!).
The sad fact was this: All of those 60-year-olds in the room? Their opportunity was long gone. $1 invested at 25 means a helluva lot more than $1 invested at 65. Plus, you can’t take risk when you’re older because your working years are short.
The best time to start investing was the day you were born. Back then, you were laying around loading up your diaper. Unfortunately, you were only thinking about food, sleep, and whatever the hell babies think about.
The next best time is whenever you have some spare dimes to rub together.
Focus on happiness.
Yeah, it’s important to learn how to invest, but it’s equally important to learn how to be happy. Here are some tips:
- health: It doesn’t cost anything to go for a walk or run around your town.
- sleep: Free, yay! I started paying attention and realized that I’m a different person when I sleep poorly. And by different, I mean ornery and unhappy.
- community: You can’t go wrong when you surround yourself with fun, thoughtful, people.
- money security: Worrying about money sucks. The best part about having money is that it frees you from having to worry about money,
- good food: Food costs money, but you have to eat. The good news is that you can eat premium food at home for way less than eating crappy food out.
- meaningful work: This is the hardest nut to crack. We’re all happier when we’re working at something we love. What that something is is different for everyone. I love to create. Here is the last thing that I built, just a couple of weeks ago:
They say that you can’t buy happiness, but I wouldn’t mind being know as the melancholy guy driving the Lamborghini.-a wise human
Here are some things that won’t make you happy:
- shiny new things: Well, a new gadget or car will make you happy, but not for long. And when your happiness has worn off, you don’t get your money back.
- staring at your phone: Put it down and talk to your kids.
- big homes/vacation homes: More toilets to clean.
- most things that consume mental bandwidth: My NSX was fun to drive, but was another thing to worry about, so now it has a new home. Life is better when it’s simple.
Double Double Comma Club
The Double Double Comma Club is an exclusive one. We’re in the top 10% in the United States. Yippee!
I must say that it feels fine. Even if the stock market dropped by 50%, we’d have nothing to worry about. A money security blanket is a fantastic luxury. In my opinion, it’s the best luxury:
- If I get a horrible disease and croak, at least I’ll do so knowing my family is taken care of.
- On the flip side, if I go nuts and want a Ferrari, I could have one.
I hope that neither happens.
*What is the best passive income source? It’s a working spouse! I feel like a bit of an FI Fraud because I have a wife that went back to work. I don’t have to worry about withdrawing money yet. But it gets even better because we’re still saving. So, am I retired or just a stay at home dad? Or maybe, I’m just a deadbeat. It’s complicated! 🙂
But, when I started this blog, I didn’t think Mindy would go back to work. It so happens that the perfect gig came up. She loves her job and will quit the moment she no longer does.
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*Only if your life is pretty bad to begin with.