How to Set $93,000 on Fire

My first experience investing did not go well.

You could say I set $93,000 on fire.

Here’s what happened.

Back in 2008, I was a third-year law student. My entire life savings at that point was about $10,000. A lot of this money came from savings bonds gifted to me by my grandma for my birthday since the year I was born.

I mentioned the year was 2008, otherwise known as the beginning of The Great Recession. As detailed in Forbes Advisor:

The Great Recession of 2008 to 2009 was the worst economic downturn in the U.S. since the Great Depression. Domestic product declined 4.3%, the unemployment rate doubled to more than 10%, home prices fell roughly 30% and at its worst point, the S&P 500 was down 57% from its highs.

Suffice it to say, 2008 was not a great time to be graduating or looking for jobs.

Those of my friends fortunate enough to have secured a job offer soon learned that their offers were being rescinded. Such were the times.

But, I digress.

Back to how I set $93,000 on fire.

As I mentioned, my life savings at the time totaled about $10,000. I had previously decided to use a financial advisor to invest my money for me.

I had been working with this financial advisor for a few years prior to The Great Recession.

All these years later, I couldn’t tell you what she had me invested in prior to the markets imploding. I’m assuming that she took into account my age and risk tolerance and designed a suitable portfolio for me.

What I can tell you is that my portfolio suffered the same fate as just about everyone else towards the end of 2008. My $10,000 balance was shrinking.

At that point, my advisor took me out of the markets and stashed the remainder of my money in a savings account earning close to 0% interest.

I didn’t notice this maneuver right away. In fact, it wasn’t until 2010 that I noticed that my money was sitting in a savings account.

When I finally caught on that my account balance had not changed for a couple years, I called my advisor. She explained that she had pulled me out of my investments when things weren’t looking too good.

She didn’t have a good explanation for why I was still in the savings account in 2010. To be honest, it seemed like maybe she forgot about me. 

By that point, the markets were improving. I had already missed all of the upswing from 2009. Since I had felt neglected, I withdrew my money and closed my account.

I wish I could tell you that I started investing on my own at that point.

Nope, that’s not how you set $93,000 on fire.

Instead of investing, I let the money sit in my checking account until it just kind of disappeared. I had no plan for the money. All these years later, I have no clue what I spent it on. I just know that it disappeared.

But Matt, you said you only invested $10,000. How did you end up setting $93,000 on fire?

I’m glad you asked.

If I had known then what I know now, I would have invested that $10,000 in a low-cost S&P 500 index fund.

I also would not have taken my money out of that S&P 500 index fund when the markets dropped.

Time was on my side. The smart thing would have been to do nothing at all.

Between the start of 2009 and the end of 2024, the S&P 500 earned an average annual return of 14.98%.

That means my $10,000 invested in a low-cost S&P 500 index fund at the start of 2009 would have been worth $93,265.90 by the end of 2024.

That, my friends, is how I set $93,000 on fire. 

And, I have nobody to blame but myself. 

Let me make one point perfectly clear:

It’s nobody’s fault but my own that I missed out on those earnings.

It was my fault for not taking a more interested, and educated, approach to my personal finances.

In a way, I’m glad I learned that lesson with only $10,000 at stake instead of later in life when I had more to lose.

It’s not my financial adviser’s fault. She did what she thought was best. For some people, her strategy was probably successful.

My problem was I blindly trusted my adviser without educating myself first. I didn’t know the right questions to ask. I didn’t understand the plan.Worst of all, I didn’t pay attention when my account statements arrived in the mail each month.

In my mind, once I transferred my money over to my advisor, I was excused from taking any responsibility for my future.

That was a mistake I’ll never make it again. When things didn’t go well, I had no one to blame but myself. 

We all need to understand the basics of investing.

Whether you choose to work with an advisor or not, it’s up to each of us take accountability for our own future.

We need to educate ourselves enough to be part of the planning process. We need to know why we’re taking certain steps and be savvy enough to ask the right questions.

You may be more comfortable working with a financial advisor. That’s perfectly fine. You still need to understand the basics of investing.

My problem in 2008 and 2009 was that I hadn’t educated myself. I like to share this little story to illustrate how important it is to pay attention to our finances.

These days, I manage my own investments. I’ve determined that paying fees for someone else to manage my money is not worth it to me. 

By the way, we’re going to spend a lot of time talking about fees so you can decide for yourself if you want to pay them.

Whether you manage your own investments or you use an adviser, it’s critical to understand the basics about investing in the stock market. The good news is the basic principles of investing are relatively straightforward. 

Always remember: there are some things we can control and a lot of things we can’t control.

We’re going to focus on what we can control.

That means focusing on how much fuel you’re generating each month to invest in the first place.

Then, it means minimizing fees and maximizing your time in the market. 

If you can successfully implement just those ideas, you will wake up years from now with major gains to your net worth due to the power of compound interest.

There are other strategies we’ll cover, as well. You’ve likely heard fancy terms like “diversification” and “asset allocation.” We’ll talk about what those phrases mean with the goal of convincing you that investing does not have to be complicated. 

That’s right. Investing does not have to be complicated.

You don’t have to read the Wall Street Journal. You don’t have to study financial statements. Even people who do that for a living struggle to predict what’s going to happen next. 

So, let’s not waste our time. We’ve got better things to do on our way to financial independence than studying corporate balance sheets. 

With even just a little bit of knowledge, you can feel comfortable and confident investing in the stock market. Then, all you’ll need to stay on track is the occasional reminder to think and talk about money with your loved ones.

You won’t even have to set $93,000 on fire first.