I’ve told you about my jar of pennies, right? My fairy money jar? The one that has $66.30 from money I found on the ground? Usually I use my fairy money as an example of savings and possibility thinking. Today I’m going to use it as a negative example of short-sighted thinking and lack of strategy.
Okay, first of all, $66.30 is a lot more money than I would have had in savings during most of my life. I’ve had paychecks that were smaller than that. This is bad. This is supposed to summon up images of being in constant, every-single-second-of-the-day background financial stress. It’s supposed to call up images like the time a panhandler asked me for money, and I unintentionally barked laughter in his face because I didn’t even have 30 cents for a phone call, and his shoes and backpack and jacket were all in better shape than mine. From that perspective of extreme scarcity, $66.30 harvested from gutterpennies is a veritable leprechaun’s fortune.
Here’s the thing about pennies, though. I think pennies make sense to us because we can visualize them. You believe in my jar of pennies because I’ve shown you pictures of it and I talk about it a lot, but also because you’ve seen other people’s jars of pennies. You might even have one. There might well be pennies in your car, on your bookshelves, in your windowsill, on your nightstand and your dresser, and mixed in with the office supplies in your desk drawer. Pennies! They’re a thing!
What we don’t believe in are the big fictitious-feeling numbers we see in print, the numbers on our bills and our paychecks and our tax returns and in all of those news articles about retirement.
It’s this lack of faith in money we can’t see that is the reason we don’t take our savings seriously. Well, that and scarcity mindset and lack of belief in the existence of Future Self. Hey, Future Me! Say hi to the Tooth Fairy and Sasquatch! Hahahahahaha!!!
There’s another reason why we continue and continue and continue to procrastinate about saving for the future. That’s because we truly have no visceral sense of how it works when we invest. If we aren’t investing, and nobody we know is investing, and nobody we know personally knows anything about investing, how could we? Whatever we learned in school about personal finance then becomes about as relevant as whatever we learned about the First Continental Congress or polynomials or the noble gases or something. Just some random useless fact that doesn’t apply to me! “You’ll never use this,” as our motivational math teachers used to tell us, “but it will be on the test.”
I’m going to pull a little example out of my own portfolio. Now, wouldn’t it be great if, when I said ‘my portfolio,’ what I meant was my beautiful artwork? We should be so lucky. If I could draw as well as I can manage my investments, this would be an installation of a graphic novel instead of a blog. I didn’t really know what a portfolio was fifteen years ago, when I started with zero, and my first deposit was in the vicinity of thirty bucks. It hardly seemed relevant. Time has gone by, though, and I’ve started to develop that gut intuition about how investing works, simply by looking at my accounts. I never would have believed it no matter how much I read, because money didn’t apply to me or my life. N/A, not applicable. I was poor, I would always be poor, I would never be able to afford retir… wait a minute, what’s this?
Here’s an example. I bought stock in iRobot a few years back. I bought it contrary to the advice of my husband, because I’m extremely stubborn and because it was my own money that I earned and because I’m more interested in consumer electronics than he is. I bought ten shares, and I doubled my money, and then a few months ago I sold some holdings in some underperforming funds and I bought ten more shares. Now, picture two stacks of cash. In the stack on the right is $1277. In the stack on the left is $826. The stack on the right is my money, from the dollars that I put aside out of my paychecks for eight years. The stack on the left is also my money. It’s the return on my investment in iRobot. I continue to own the twenty shares because I believe that our future is going to be full of chorebots. If my speculations are correct, my shares will continue to grow in value gradually over time. If I guessed wrong, then at some future point, I will probably pull my hair and throw a tantrum about how I should have known to sell high.
Where did that eight hundred bucks come from???
Eight hundred bucks is a lot of pennies. Too many for my fairy jar! In the context of retirement savings, it isn’t much. If you visualize it as stacks of twenty-dollar bills, it ain’t nothing to sneeze at. Anyone would bend over to pick up eight hundred dollars off the sidewalk, am I right? This money came out of the economy. It came out of the weird mystical mojo that surrounds financial transactions like a shiny green aura. It’s like… money rain.
Now, the example of iRobot is unfair and not representative of the full experience of putting money into the stock market. I just like talking about it because it was my own special little decision, against the advice of the smartest person I knew, and I turned out to be right. I could also share about another stock I bought when it was at $2.20, and now it’s at $7, but again, only a fool cherry-picks the prettiest data and ignores the rest. Other examples would be that at time of writing, I am ahead $105.81 on my shares of Whole Foods Market and down $15.49 on Costco. (Those facts are related, and if you read the business press, you know why). It was a good day in the market, though, and I made like $240.
FOR DOING NOTHING.
I have to say, it aggravates the holy heck out of me sometimes. Now I can “”“earn””” (super-extra-sarcasm quotes) more in a day than I used to take home in a week, a week of commuting on the bus and standing on my feet all day and doing menial tasks for people who thought my name was Jennifer.
On the other hand: HEY, FREE MONEY!
Basically, as of right now, for every dollar I put into the market, I have gotten $1.50 back out.
If we’re visualizing this, there’s another stack of hundreds I should tell you about. That’s from dividends. Some, but not all, of my holdings pay a small percentage to shareholders. That’s our “share” of the profits. Dividends are directly deposited into a cash account in my brokerage account. When they add up to enough, once a year or so, I use the money to buy more shares of something. It’s like planting an orange tree that keeps growing oranges, selling a bushel of oranges, and then using the proceeds to buy an avocado tree. Right now I have $177 from dividends, which, in my area, is enough to buy TWO avocado trees!
The first time I realized how much money had been building up in my cash account from dividends over a few years, I was confused and I didn’t understand how it got there. Imagine, mystery money you didn’t even know was yours, just silently appearing in your account.
That’s the difference between saving and investing. When I save money, it just sits where I put it. I do still save money; that’s where my fairy money jar came from. Investing, though, is like putting pennies in a jar, and when you come back, they’re spilling over the sides and more keep bubbling up out of it. It’s a small way of contributing to the economy, putting your money to work to help build things and create jobs. It’s a way of building a better future, for Future You and for others, too.
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I've been working with chronic disorganization, squalor, and hoarding for over 20 years. I'm also a marathon runner who was diagnosed with fibromyalgia and thyroid disease 17 years ago.