30 May Why I Decided To Save $3500 This Month

I have my 6 months expenses saved. In fact, its probably closer to 8 months when you consider the fact that I have a separate account that I keep to counteract the depreciation on my car and save for a down payment on a new one (fancy trick I learned from my Accounting degree). So if things got super dire, I could pull from that.

I have been agressively investing since my wife and I paid off her last student loan payment December 31st, 2017. That was a $265,000 mountain we were thrilled to get rid of (and we did it in four years)!

So as of now, between startup companies, the individual stocks I invest in and a little bit of cryptocurrency on the side, we probably have around $55,000 invested. I told you…we’d been going hard at the investing (this does not include 401ks or IRAs which we contribute to heavily).

So now that payday has come! I recently brought in a deal that’ll provide us a little extra cash this month and instead of investing it, I’m shifting gears a bit. Why you may ask? Or maybe you didn’t ask, but I’m going to tell you anyway!

How things look from where I’m sitting

(Note: the following is my personal, fairly-well-researched opinion and is not actual investment advice)

So my go-to for extra cash has been the stock market. I’m 31 and have a strong appetite for risk to get a greater long-term reward. I follow a pretty easy strategy that is mostly copied from Warren Buffett, probably the greatest investor in history.

I buy companies, not stocks. What does that mean? Okay yes, I buy their stocks but I’m buying them based on whether or not I believe this company will be in business in 10 years and if I think they’ll be doing well. I’m not trying to make a quick buck on these. I buy companies that society uses everyday, have shown consistent innovation, pay dividends and have a strong upside. So far, it’s worked really well!

But I’m waiting to buy more even though the market is down. Why? Well a few reasons. The short list is below:

• Trade war with China is causing disruptions and uncertainty in the market
• The US has had an incredible 10 years of unprecedented growth and needs to correct eventually
• Stocks in general are pretty overpriced (says the great Warren Buffett who I mentioned earlier)
• The “value” buys aren’t as obvious and need a little more researching than usual
• I have begun looking outside of the stock market for other investment opportunities
• And I should note for future readers that I wrote this on 5/29/19 so we’ll see how it goes

So that’s a quick summary as to why I’m holding on. Timing is EVERYTHING. I’ll give you an example.

I was looking to buy an energy ETF (exchange-traded fund, important term to know) just last week. Despite it being “on sale” or down more than usual, I decided to wait thinking things might not have hit rock bottom. Turns out I was right (that’s definitely not always the case)! If I had bought it then, I would be down 14% today!

Now here’s the funny math. To break even, I need more than 14%. To get my initial investment back, I would need 16.3% to get back to my initial investment. That’s how it works. Losses take more to get back. Now don’t let that discourage you from investing. Take that knowledge, learn from it and take measures to make sure it doesn’t happen often and when it does that the losses aren’t that bad.

You WILL lose money when investing. Even the professionals lose on investments. The goal is to win more than you lose, that’s all. And the worst thing you can do is NOT invest! You are definitely losing money with that plan, but that’s a post for another time.

So why am I saving my $3500?

I’m waiting for Ms. Right to come along. Not Ms. Right to marry me, I already killed it in that area. My $30 investment to eHarmony.com that I used for one month was the BEST investment I ever made. It’s still paying dividends (it’s hard to make finance stuff sound dirty but I tried).

The point is, part of my strategy to invest is to find areas where there is a large amount of value! To get something for 75 cents on the dollar when everyone else paid a dollar! I read a great book called The Little Book of Value Investing that I highly recommend which shows how to do this (not just in stocks but in anything).

I’m having a hard time finding those opportunities, not because they aren’t there, but because they aren’t where I usually look. There is ALWAYS fantastic opportunities, you just have to know where to look.

So the best thing you can do while looking is to stock up cash. I don’t care what anyone says, cash is king. So I’ll get a little pile of money saved up and keep on looking and when things change or I find a new place to invest for the time being, I’ll be ready to pounce on it!

Again, this is a small insight into how I think about things. I’m constantly learning and things are constantly changing. I love the challenge. There are many strategies that can lead you to financial freedom and I’m not even recommending this one for everyone! It all depends on your financial footprint because that is unique to you.

What’s important is that you are paying attention and have a plan because too many people don’t have one. So be awesome instead, have a plan and keep learning!