A lot of savings is really just deferred spending. Savings for a wedding, new car, or vacation will be spent within the next year or so. Other savings, like for an emergency fund, may or may not be spent later – and may come out as a wash in your net worth. Even retirement savings are meant to be spent later. With one catch.
These dollars are different. When invested, and left untouched, something happens.
They start doing work!
There’s a reason I bolded the part about leaving those dollars untouched. When you leave them untouched – for 10, 15, or 30 years – they make a whole bunch of new dollars. You might be sweating a little at the thought of investing your money, especially if you know nothing about the stock market. The most important thing to remember is that the longer your money sits and has a chance to grow, the more it will grow! The total stock market index fund in your 401k will outperform any fancy mutual fund out there if you keep investing regularly and don’t touch it for at least a couple decades. The power of compounding over a long period of time is better (and I presume less stressful) than trying to win at the stock market.
“Real” Saved Dollars
Imagine the dollars you save in your retirement account have personalities. You’ve just saved them! Given them a roof over their head and the companionship of other dollars. They’re so grateful for what you’ve done for them and they want to pay you back. They know how to make more dollars (kind of how rabbits know how to make more rabbits). And you like dollars.
More dollars appear, and then turn around and make even more dollars. After a while you can start taking out some of these dollars and sending them out into the world, basically for free, because there’s always more dollars being made.*
*I know the stock market has the potential to go down just as much as it goes up. The point of this post is to illustrate that $’s aren’t just above 4’s on keyboards or random numbers. They’re real things that if you appreciate them and take care of them (whether in a savings account or a 401k, but probably not under the mattress – have you ever been under a mattress? It’s really hard to breathe.) they are capable of pretty powerful things.
And a blog update!
While the past week has been hectic (to put it mildly) at my real job, exciting things have been happening in the blogosphere (do people still call it that?).
Last week Finance Yo Self was featured on the truly awesome Rockstar Finance (a site I read every single day). If you haven’t been there yet, stop reading this article and click that link now! Rockstar Finance was created by J. Money, the author of one of the best personal finance blogs out there, Budgets Are Sexy, and works to promote the content of a community of finance die-hards.
We were also referenced in a post on Lifehacker.com, another site I read daily. So thank you both for that!
I’ve been really into the idea of writing a blog for over a year now and spent a lot of time writing, experimenting with wordpress, formulating ideas, and starting and stopping a couple of projects. But something really clicked a month or so ago and the basis of what I wanted to write about finally made sense – that now, more than ever, people have access to the types of resources that enable them to solve their own problems. The combination of self-service with the support of a community makes us problem-solving machines with the need to pass on ideas and experiences.
So while this blog is primarily about personal finance on the surface, I think deep down it’s really just about problem solving. And Finance Yo Self was catchier than Problem Solve Yo Self!