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Dangerous thinking when watching net worth
Old 06-24-2014, 05:26 PM   #1
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Dangerous thinking when watching net worth

Anyone else have this problem?

So, you monitor your net worth. Perhaps you use mint or quicken. You log on and see your "delta" for the day.

Well, over the last few years, it has been very good news most days (if you are in equities). If you are managing your own accounts for retirement (versus an annuity or pension), you may see some pretty impressive gains some days, maybe even over $10k.

This sometimes causes me to have dangerous thoughts. You know: "Ah, I can afford that toy, I just made $10k last night!"

No, no, no! Stop it! This is a very dangerous way to think, but I have to admit it slips in every now and then.

Anyone else experience this?

Now, the good (bad?) news is that there is a remedy. Today is a good day for a remedy. My NW just dropped over $10k today. Ouch! I have to remember the negative side too.

I'm not a gambler... But I think this is a glimpse into how gamblers go off the deep end.
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Old 06-24-2014, 05:29 PM   #2
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Remember, lots of dividend distributions going on this week.
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Old 06-24-2014, 05:37 PM   #3
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I can see how that would happen (the dangerous thinking). I have a pension so not as applicable but there is more money available now than ever before in our lives.

The answer is have a plan, a budget, and stick to both. Slight deviations from time to time are not deal-killers but there is a reason one has the plan and the budget.
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Old 06-24-2014, 05:40 PM   #4
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Anyone else experience this?
No, all I have to do is recall the dark days of late 2008 and early 2009. Easy come, easy go.
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Old 06-24-2014, 05:49 PM   #5
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It is nice to se the number go up.

I find it painful to spend unless it is via craigslist, ebay, goodwill or other cheap venue to get stuff I NEED at a few cents on the dollar.
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Old 06-24-2014, 06:00 PM   #6
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Not an issue for me. Been watching stock for decades and have been through many up and downs. My splurging habit don't correlate with how the stock market did today, this week, or this month.

( Just to spite a "bear" day, I may log into Ebay to buy a toy. LwellBYM has its advantages. )
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Old 06-24-2014, 06:21 PM   #7
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My solution to the problem is this; don't put them on quicken, or mint or anywhere else. Only open every third statement you receive. Or maybe only open the statements once a year. Honestly, I do the every three month open the statement plan, and I am pretty sure it saves me from all kinds of nutty behavior.
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Old 06-24-2014, 06:29 PM   #8
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I am allowed one new major toy per year that costs less than or equal to the largest one-day gain in my portfolio that year. Nothing dangerous about it.
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Old 06-24-2014, 06:31 PM   #9
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The described wealth effect is great for the economy. Go buy that toy, it's makes you a good American.
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Old 06-24-2014, 06:37 PM   #10
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My solution to the problem is this; don't put them on quicken, or mint or anywhere else. Only open every third statement you receive. Or maybe only open the statements once a year. Honestly, I do the every three month open the statement plan, and I am pretty sure it saves me from all kinds of nutty behavior.
+1

Before I was FIREd, I use to monitor often -- often to my emotional/financial distress.

Now that I am FIREd, and have essentially made it:

1) I switched my allocation to nice balanced funds (which will automatically balance for me during market swings)

2) I only look at the balance quarterly when I prepare a balance sheet for DW showing where everything is and what it is worth.

-gauss
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Old 06-24-2014, 06:41 PM   #11
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Originally Posted by JoeWras View Post

This sometimes causes me to have dangerous thoughts. You know: "Ah, I can afford that toy, I just made $10k last night!"

No, no, no! Stop it! This is a very dangerous way to think, but I have to admit it slips in every now and then.

Anyone else experience this?
No. The closest I have come is, after a very good year, to take a little extra out of the portfolio to fund home improvements.

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No, all I have to do is recall the dark days of late 2008 and early 2009. Easy come, easy go.
+1

It seems to go down more easily than it goes up...
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Old 06-24-2014, 06:46 PM   #12
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used to happen to me but not any more. Those two crashes of 2000 and 2008 brought me back out of dream world. There were days when my NW had gone down by 90K in a day.

I still have the headline from 9/29/2008 saved in my gmail archive:

>>>>>>>>
Stocks crushed

Approximately $1.2 trillion in market value is gone after the House rejects the $700 billion bank bailout plan.
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Old 06-24-2014, 06:47 PM   #13
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While my FI is largely due t Pensions and SS, we do have savings that among other things support LTC. However, we live now much like we lived getting here. We save for things we want. I don't look at what our IRA and long term saving are doing. I take out according to my withdrawal rate, and we spend or save some or all of it. So in essence we have a 'mad money' savings account. It is not dependent on what the market s doing.
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Old 06-24-2014, 06:57 PM   #14
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It is nice to se the number go up.

I find it painful to spend unless it is via craigslist, ebay, goodwill or other cheap venue to get stuff I NEED at a few cents on the dollar.
+1 (Were we separated at birth?)
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Old 06-24-2014, 07:07 PM   #15
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No, all I have to do is recall the dark days of late 2008 and early 2009. Easy come, easy go.
+1

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Originally Posted by robnplunder View Post
Not an issue for me. Been watching stock for decades and have been through many up and downs.
I have a diary logging the daily close of the Dow, S&P, Nasdaq, and my stash. It went back to Dec 13, 1999, when I decided to keep a permanent record.

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It seems to go down more easily than it goes up...
Actually, there are more up days than down days.

However, when it goes down, it goes down a lot more than it does going up.
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Old 06-24-2014, 07:28 PM   #16
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According to my records, there is no strong correlation between up markets and spending for us. But there is definitely a correlation between down markets and spending.
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Old 06-24-2014, 07:40 PM   #17
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OK, cool. So far, it has just been "thinking". I haven't acted yet.

This 5 years of recovery is going to my head a little. For sure, I remember 08, 09 (heck, even 87), but memory has faded a bit lately.
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Old 06-24-2014, 07:47 PM   #18
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... For sure, I remember 08, 09 (heck, even 87), but memory has faded a bit lately.
While I have longer memory than most, I am hoping that the population at large will forget, so they will keep on spending. That helps my stocks. Just today at market open, they said that home sales were up, as was consumer sentiment. Then, the market turned around because of some international bad news.

Will see what happens tomorrow.
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Old 06-24-2014, 07:56 PM   #19
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I have a budget for "luxuries" - $X per month - and if I want something, I have to "save" for it from this budget. In theory it doesn't matter how well or how badly the investments are doing but in practice it does - when the markets are down, I tend not to spend it.
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Old 06-24-2014, 08:07 PM   #20
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...
This sometimes causes me to have dangerous thoughts. You know: "Ah, I can afford that toy, I just made $10k last night!"

No, no, no! Stop it! This is a very dangerous way to think, but I have to admit it slips in every now and then....
Maybe you should give in. If the market drops 50%, wouldn't it feel good to know that you have the thing you wanted, but you would have had to sell 2x the stocks to buy it after the drop? Or that it was an X% hit to portfolio then, but it would be twice the hit now?

I thought about that in the 2000 crash - I said 'heck, a nice car does not depreciate as fast as my stocks just did!'

-ERD50
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