Broke Investor

Oh, and dividends!

​It took $40,000 before I finally believed that investing actually works. It was something I knew in my mind, but not something I really understood or felt to be true. As with most things, we don't understand until long after we've taken action. We have to see it to believe it.

When I started investing, I was a broke student with a quarter-time job. I was living in a dorm that was exactly nine feet across - three feet for my bed, a three-foot gap, and then three feet for my roommate's bed. I'd say I had nothing, but I had a lot less than that. I was generating a student loan debt that I am still paying off sixteen years later. I didn't own a car; I didn't even have a driver's license. Everything I owned fit into that tiny dorm room, either in the built-in closet or under my bed. I was 26, divorced, and owned no appliances, no furniture, no housewares, no tools. I didn't even own my own sheets. The only thing about investing that made any sense in my situation was that I had nothing to lose.

I never would have done it on my own, because I was still deep in scarcity mindset and investing for the future does not fit with that. I owe my start in investing to an older mentor who looked out for me. The rules changed at my job, and my job classification was suddenly required to contribute to the retirement plan. Unbeknownst to me, my mentor realized that this mandatory contribution would eat a huge chunk of my paycheck, and she negotiated a raise for me that would cover the difference. I barely knew this woman. She did for me what she would have done for herself or for her own daughter. I would love to pay this forward and know that anything I said helped one single person to start preparing for retirement.

The first time I got a retirement statement, I didn't even have a hundred dollars in my account. The next quarter, I called out, "Three figures, woo hoo!" I joked that I now had enough to retire for a full day.

Fast forward a few years. I was working at my first post-college job. I was sleeping on an air mattress in a rented room. I had two maxed-out credit cards, two student loans, a couple of personal debts, and about twelve hundred dollars in my retirement account. My net worth was about negative $25,000. The first thing I did at my job was to sign the forms for the maximum contribution to my 401(k). The second thing I did was to make a spreadsheet with one tab for my monthly expenses and another tab for my debts. Then I set about hustling.

My priority was to work as hard as I could every single day, learn as much as I could, get allies, and become indispensable. I needed a rock-solid reference and I wanted a promotion and a raise. Check, check, and check. That was my hobby, my entertainment, and my recreation. Tiny sums of money trickled into my investment account, while I went home, read library books, went to bed early, and finally paid off all my personal and consumer debts. I paid off one of the student loans six years early. No concerts, no alcohol, no coffee, no hair coloring, no tattoos, no piercings. I was too busy sawing the shackle of debt off my ankle.

I'm ascetic by nature. I will routinely go a month without spending on myself, just to keep my self-discipline up and running. I've never had a professional manicure or pedicure. Saving money is no big deal. Investing, on the other hand, was never a part of my world. I didn't know anyone who did it. I associated it with stockbrokers in 1929 jumping out of their office windows. I thought it was exactly like going to a casino. I had developed the habit, though, of reading personal finance books, and they always discussed investing. I went on to read several investment books. I saw that these wealthy, famous investors had different philosophies and that they sometimes gave completely contrary advice. Above my pay grade, I thought. Better stick to what I know.

There was this 401(k) money, though. In my mind, I was forcing myself to save part of my paycheck in a way that would keep me away from it. I really, really wanted to get out from under my debt load. I hated owing personal debts, and I hated having this student loan that was more than my annual salary, and I hated credit card debt most of all. It made me break out in hives just thinking about it. I mean, actual literal physical hives. If I hadn't put the 401(k) money aside, it would have vanished down the drain of debt. As soon as I was debt-free, I would have relaxed and spent it on lifestyle upgrades like moving to a safer neighborhood.

I didn't really believe that the pre-tax money going into that 401(k) account meant anything. There sure wasn't much in there. I'm a serious student, though. I had read so, so much about how investing works. I scoffed at it, I thought that almost everyone got duped and lost all their money, but I figured I might as well perform due diligence. I would pick some investments, move my money, and wait and see. I spent a couple of days reading prospectuses (brochures explaining what a fund does) and reviewing advice on how to allocate my money. Then I spent maybe an hour filling out forms, and I took the emotionally challenging step of sending them in.

One fine day, my $1200 had somehow magically turned into $40,000. That was the day I truly realized that investing is different from saving.

I get "advice" all the time. Financial "advisors" want to take over my accounts and plan my investments for me - for a fee... My husband offered to do the same at one point, until he realized that I seem to know what I'm doing and started buying some of the same stocks that I do. Various acquaintances have tried to explain that my investment strategy is "how people go bankrupt." Um, I'm not buying futures! Show me your portfolio and then I'll be happy to sit through your advice.

To tell the truth, I'm really not very good at math. I can't even calculate a tip unless I have total silence. Investing isn't about math skills; it's about trend analysis. I only buy when I understand how the company makes its money and what its future plans are. I read a lot of business news, biographies and memoirs, and various business books. I find them entertaining, so sue me. I don't take other people's advice on investing because I understand how other people make their decisions. There are few things that make me smile quite as sincerely as when I look at my accounts and see that I've doubled my money on a pick that someone tried to talk me out of.

A correction will come soon. In fact, I'll bet you a shiny new nickel that a major crash will also come at least once in the next 25 years. Possibly three or four crashes. My accounts will decrease, and all my little dead presidents will have tiny copper and zinc tears trickling down their noses. Well, I assume so. During the last crash I made a quarter of a percent. I know that the performance of the market is stochastic, meaning that there are no predictable trends or patterns. I know better than to think that my rows of green ink are enough for me to relax and stop fussing over Future Me. What I also know is that I have a better understanding of how investing works than at least eighty percent of the adult population. My experience has convinced me that if I study hard and work hard, I can learn everything I need to know. That has been great for my self-confidence. My personal power bubble is much larger than it used to be.

The major difference between me and the average person is that I think about Future Self every single day. I *am* the Future Me that Past Self 2001 was thinking about when she moved into that tiny dorm. Past Me was willing to deprive herself so she could take care of me, knowing that she would be me one day. I carry that torch. I know that Future Me 2050 is going to need all the help I can give her. She would want me to keep learning and challenging myself, and she most especially would rather I eat the ramen than force her to. You're welcome, Future Self.

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