I had a guy. At least, on paper I had a guy. That’s what you need, right? A financial advisor. Money gets taken out of your account every month, goes into the money-making market machine in the way your guy determined was best for you and BOOM, one day you can retire. Living the new American Dream. I probably should have put some emphasis on “Dream.”
I was living the “dream” back in August 2014, but to give you some context let me go back a little further, to around 2000-01.
Investing for retirement before I even cared about it
I’m in college and have a few grand saved up from part-time and summer jobs. I really have no plan for it, so my mom suggests I talk to this financial advisor lady. (“Wait, I thought you said you had a guy?” I’m getting there, Tarantino, I’m getting there.) The nice woman suggests I put my money into a Roth IRA (on account of my tax bracket being so low) and cozy up to some mutual funds. If I just put a little money in every month, I’ll be in awesome shape by the time retirement comes around in about triple my current lifespan. Sure, sounds good — she’s the expert.
So that’s what I do for a couple of years. Then I get out of college at 22 (debt free — thanks Mom and Dad!), get a “real job” at a newspaper and quickly realize life is expensive and rookie copy editors make obscenely low salaries for people with a college degree. So I tug the reins on my monthly investment of $50 and instead invest in something with a more immediate return — my social life. When I turn 26, I take a job in Utah. My pay doesn’t really go up, but my housing expenses go down and I also sell about $2,000 in stock options my former company gave every employee as a bonus one year. I increase my monthly IRA contribution to $100. That’s $1,200 a year I’m investing, plus my new company has a 401(k) with a 50% match up to 6%, which I fund up to the match. Hey, I’m doing pretty well at this retirement thing. Look at all the money I’m putting away at 26!
After a few years, I make 50% more than when I moved to Utah, but I never increased my investments. You see, along the way I also got married to a wonderful woman and gained a couple of stepsons. Sure, I’m making more, but going on vacations with kids is expensive, plus we bought a house and that always needs work, and yada yada listen to my excuses. Not only have I not increased contributions on my end, but my company stops the 401(k) match and freezes salaries to help stem the bleeding. After a decade in journalism, I notice a fairly disturbing trend: I have attended exactly two retirement parties, and I have seen more than 150 coworkers leave or get laid off. Now, it doesn’t take a brilliant mathematician (which I assure you I am not) to figure out those numbers aren’t favorable to “retirement.” Since that was something I wanted one day, more or less on my own terms, I needed to leave journalism. I shifted over to higher education, where I attended more retirement parties in the first six months than in the previous 11 years.
But anyway, back to the IRA
Around 2010, my financial advisor retired and sold her business to a couple of guys. I’m in Utah; they’re in Michigan. Needless to say, I wasn’t dropping by for a cup of coffee and a chat. (Plus my total portfolio is in the low five digits — not exactly a priority for an advisor.) My $100 went to the IRA every month, just like it was supposed to. I got some statements, but in my early 30s I’m not really looking at how much my retirement accounts are racking up. I didn’t feel any urgency. But then in August 2014, I figured the money-making market machine had done pretty well for a few years. The markets had gone up, up, up. Bulls were running wild on Wall Street. I was kind of excited to see what all that diligent investing had done for me.
What. The. Hell.
Pop quiz: Do you know what doesn’t go up in a bull market? The money market, which is where the past two years of my monthly $100 contributions were sitting. The funds I was investing into had stopped taking new money, and I didn’t even notice. Since no one told the company where to put my new money, it put it somewhere safe until I decided how I wanted to invest it. For two years. During one of the biggest bull markets in history.
But I had a guy! This wasn’t supposed to happen! That’s why I was paying him. Or was I paying him? Come to think of it, he never asked for any money. I didn’t realize at the time that he didn’t ask for money because he didn’t need to ask for money. He got his money simply by virtue of me having money invested, no matter where it was going or how well it was doing.
Every experience contains a lesson
With all life-changing events there is a catalyst, positive or negative, from which point we mark time as either before the event or after it. This was my catalyst. From that day forward, I would never again passively throw my dollars into the money-making market machine and trust that my guy had it all figured out for me and all I had to do was keep the faucet trickling. In the three years since, I’ve discovered some hard truths:
- Investing can be as easy or as complicated as you want to make it.
- You can learn almost everything you need to know in less time than it takes to research a good fantasy sports lineup.
- No one — no one — will look out for your money in your best interest more than you.
Honestly, I’m glad that happened. If that $2,400 had been in funds that made $200 or $300 I would have smiled and thought everything was just ducky. I wouldn’t have been so thoroughly angry at myself for being oblivious about my money. I wouldn’t have gotten serious about personal finance, and my wife and I would not be heading toward a comfortable — maybe even early — retirement.
I know where my money is, why it’s there and what it’s doing. Though a small amount remains with that financial advisor, now I’ve got a new guy.
I can’t agree more that you are the best guardian and investor of your own money! Even more ironic is that financial advisors also don’t necessary have a fiduciary responsibility to invest your money in the best way they see fit – many are incentivised by commissions.
Looking forward to reading your next posts and seeing how your journey goes!
xx Miss Piggy
That is so true. This same advisor ended up making a really egregious decision about selling some Apple stock my grandmother purchased in the 80s because he thought that money could grow more in other stocks. Never mind that she was in her 80s with dementia living in a home, didn’t need to “beat the market” with her portfolio, and that selling that stock triggered five figures in capital gains taxes. Naturally, he made a mint on the trade!
Thank you, another valuable one liner gleaned!
Career Evaluation: The ratio of the number of layoffs + firings to the number of retirement parties. – I Dream of Fire.
Along with the maxim, “that which is checked upon, gets done.” (some variation of a Lord Kelvin quote).
When it comes to your future, nobody cares more than you. Money isn’t everything, but it plays a very prominent role in securing your future. Glad you figured that out eventually!
Can’t agree more. My first guy, I inherited and things seemed to be okay till market started changing and suddenly he is wanting to sell and buy mutual funds a lot. Figured he must get a commission from all that. My 2nd guy seemed great till he got a year away from early retirement. I moved my money to the 3rd guy and found out the 2nd guy had hidden in my account a $30,000 high-interest loan lurking in my account. I’m sure he was making a commission of the interest. Finally decided two years later with the 3rd guy to look line by line at my investment statements. In three quarters of statements, I had paid him almost $7,000 commission for basically doing nothing. Moved all my money to Vanguard low index funds and that is when I learned that what looked like I had mutual funds turned out to be 200 individual stocks. I had agreed to mutual funds with 3rd guy but he had put me in individual stocks.
Now I have a lady and she is doing great with simple boring basic VTSAX with Vanguard! No one will ever care about my money like I will.
Wow! That’s crazy! I’m glad you got wise to all the weirdness they were pulling, but how ridiculous that that kind of stuff goes on with “professionals.” I think that’s what makes people feel like they can’t manage it themselves, when they see all these complex things going on that don’t make any sense to them and so they figure they’re the ones with the problem 🙂