After my most recentNet Worth update, where I showed some serious losses in the stock market last month, a reader shot me the following email…
As someone who calculates his net worth and asset changes on a monthly basis, I am wondering how you personally react to wild market changes such as what has happened in the recent month of May.
Going into May for the year 2012, I had approx. an 11.2% return on my 401K. I logged in today and saw that it hit negative returns for the first time. Should I hit the panic button and sell as much as possible, throw money into cash because I cannot find a decent return, or increase 401K contributions because the price is cheaper?
I know of at least one reader, possibly others, who would tell you to get out of the market. Not necessarily because of the recent declines, but because they believe the stock market in general is just a big Ponzi scheme.
While I guess one could try to make that argument, the fact of the matter is that for decades (centuries?) nothing has proven to be a better long-term investment than stocks. Nothing. That’s all the information I need to decide where I am going to put my money. The past is the best indicator of the future, and while there will definitely be days, weeks, months, and even years of negative returns, ultimately the trend has always been upwards.
I personally have no plans to get out of the market. Right now, last month’s losses are paper losses, not REALIZED losses. If you are expecting positive returns each month, then perhaps you should question why you are even investing in the first place? The worst thing I could do is buy in when times are good (at high prices) and sell everything when times are bad (low prices). Would you buy a house in 2006 that’s way overpriced and sell it for a 50% loss in 2012 if you didn’t have to? Probably not, unless of course you like overpaying for things and getting bad deals. Then by all means, sell everything!
I posed the question at the end of my net worth update “How do homeowners stomach making payments each month on a depreciating asset?” Stupid question really when you think about it. A house is a home first, an investment second. It makes sense that people will pay their mortgage even if the value drops because they obviously want to keep a roof over their head. Same goes for my retirement. I will still contribute to my retirement even during the “doom and gloom” because I want to be well taken care of in my days of gray hair and adult diapers.
Are you riding the market out or selling everything?
I was checking my twitter stream yesterday when I stumbled on an article by my girl Sandy titled “I Bought A Rental Home With My 401K“. If you’re too lazy to click-through and read the article the gist is Sandy took out a $40,000 401K loan to pay cash on a $38,000 investment property (I didn’t know places that cheap existed…haha). If you want more details you’ll have to read the article.
Contrary to what you might be thinking, I’m not actually here to discuss Sandy’s situation. Instead I thought we could focus on the bigger picture and talk about borrowing from retirement in general. Would you do it?
I’d be lying if I said the thought of pulling a little bit out of retirement hadn’t crossed my mind. I have a goal to reach $100,000 in savings before Girl Ninja and I buy a house. If I liquidated my Roth IRA (which I can do penalty free on my contributions) we’d be at that $100K threshold.
Maybe I’m stubborn, but when I put that money in to a retirement account, I put it in to a RETIREMENT account. Ya know, for when I retire. This is non-negotiable. Compound interest is a freakin’ miracle. The earlier I invest, the longer I have to let compound interest work to my favor. If I pulled all my money from my Roth IRA, or 401K, I’d lose out on five years of compound interest. The first five years. The most important five years. I ran the numbers, if I took $30,000 out of my Roth IRA today (and then resumed maxing out contributions until I was 65) I would lose $419,000 in earnings.
So yeah, an extra $30,000 would be sweet to have in the ol bank account. But an extra $419,000 in my retirement accounts sounds a heck of a lot better.
For this Ninja, my retirement accounts are a one-way relationship for the next 40 years. I’ll be putting money in, but wont be taking any out. How about you? Would you borrow from your retirement accounts for a house? A new kitchen? Facebook stock?
Two thousand eleven was a great year for Punch Debt In The Face. I broke all sorts of traffic records, was fortunate enough to be featured in some pretty stellar articles, and was even able to turn $100 of expenses in to a $13,000 business. Not a bad return on investment eh?
This year, however, it appears as though I will be yet again, setting another record. Unfortunately, it’s not a record I necessarily want to set. I don’t know if it’s just my blog or what, but it seems advertising opportunities have pretty much dried up over the last two or three months. January and February started out strong, but since then things have taken a sharp decline. Google did some serious algorithm tweaking and instead of companies asking to advertise with me, they were requesting that I remove the ads they had already paid for (note to people who care, my PageRank actually went up during the recent change). Legitimate ad deals are few and far between now. It seems like the only opportunities I’m being pitched are crappy guest post submissions from people I’ve never heard of.
And that my friends brings us to today’s lesson: You need to diversify your income. This can all be broken down by an uber simple math formula I worked up last night…
You see how that works? The more income streams you have, the less devastating a loss of one income is. Last year, Girl Ninja and I were rocking Triple Income No Kid status, this year, looks like we will have to settle for being DINKs.
“But Ninja, I only have the ability to work one job, and I don’t have a significant other to support me through tougher times.” So the heck what! You ever heard of an Emergency fund? That straight up works like a second source of income in the event you get canned. Booya grandma, problem solved!
We hear people say all the time, “Don’t put all your eggs in one basket.” I’ll take it a step further, “Don’t settle on having just one egg.”
How diversified is your income? If you lost your job, how long could you get by without that income? For my fellow bloggers, have your advertisement opportunities been as limited as mine recently?
I’ve asked the question before “What would you do if you got fired tomorrow?“. Most of you responded with some lame answer like “I’d go get a job doing exactly what I’m already doing, just with a different company.” That’s the most boring response ever. If I wanted my blog to be boring I would have titled it Punch Exciting People In The Face. Let’s stop being boring, and start being hypothetical…
What would you do if you got fired tomorrow AND had to completely change career fields?
If you’re like me, you sometimes dream about what life would be like doing something new, starting with a blank slate. I talked with a good friend about this yesterday and he said he would make the jump from insurance agent to general contractor since he loves working on his house and building things.
If I was to get fired tomorrow, I would probably look for a job in sales. Medical sales has always appealed to me. I like medicine (actually volunteered in the ER in college and put a dead guy in a body bag on my first shift ever) and think that a sales position fits my personality well.
What’s more, I like the game of trying to convince people that what I have to say is worth listening to. This shouldn’t be too surprising considering this is probably the very reason I blog. And obviously I created MANteresting hoping it would succeed, and at only two months old I feel like we have shattered every goal I could have possibly had for it. So yeah, I may have never worked a sales job in my life, but I think many of the skills required for the position are part of who I am.
The other attractive thing about sales is the insecurity of it. I know, you’re thinking I’m crazy. My life, post-college, has been for the most part safe and predictable. A sales job is anything but. Some months you can bring home big bucks, while others you could take home pennies. The idea of being responsible for my own income (as opposed to having congress decide it) is both incredibly scary and extremely exciting.
In your fantasy world, what would your NEW career change be?(make sure you say what you do now as well so we can see just how significant a jump it is). What’s keeping you from making the change?
You know the popular YouTube video “David after Dentist“? The one with the kid that is so drugged up from the dentist that he has no idea what is going on and in a fit of confusion asks “Is this real life?” Well that’s exactly how I feel right now. MANteresting has turned in to something bigger than I could have ever anticipated. I was originally only planning on writing one post about the site this Friday, since that is when we will officially be one month old. I planned to share with you some pretty incredible statistics about our growth as well as provide a laundry list of websites that have featured us.
But yesterday, at about 4:30 in the afternoon, Jesse and I got an email from a VC group based in San Francisco saying our website was “growing rapidly” and had “piqued” their interest. One of the founders of the VC was “impressed by the site and wanted to find out more about the team behind it and the company’s financing plans.”
At first I was absolutely pumped. I literally threw my fists in the air and let out a triumphant scream. “We have people who might want to give us money”, I thought to myself. I started clapping hysterically with excitement. Girl Ninja begged me to stop because my claps were so loud. After a minute or two of absolute joy, my excitement quickly turned to skepticism.
Truth is, this is not the first entity to reach out to us and ask if we were interested in taking on partners. We’ve had some offer their skills, some offer their connections, and others offer their money; all so they could get a stake in MANteresting. We’ve turned them down every time.
So I hopped on Google and researched the VC to check out their credibility. I was pleased to find Groupon and a few other major players in their portfolio. What’s more, they seem to always pour $1MM or more in to each company they partner with. Needless to say, these guys don’t mess around.
I have a phone call with someone at the VC today and should have a better understanding of their level of interest after it. They could very well be data mining, just trying to learn about us without any actual intention of partnering. They could also send this email to 1,000’s of other start-ups each year, seeing who bites. They could also think we are cash poor and are in need of financing from outside sources, Simply trying to take advantage of a struggling company.
But….what if they really are interested and see the potential behind MANteresting? What if they have a six or seven-figure partnership in mind? Could you imagine? I’m not putting all my eggs in one basket and expecting this to be the case, but even getting to contemplate the possibility is absolutely incredible.
If anyone out there has any insight in to what this call might entail or suggestions as to important questions I should ask them, I’d love any insight/knowledge/help you could offer up. It has to be a good sign that they emailed us right?
Alright Ninja, play it cool, don’t act as excited as you are 🙂
There are (at least) three things I know I want in my life, but am in no way, shape, or form currently ready for. They probably wont be a shock to you. It’s still funny, though, to think about things you want so bad, but know you aren’t ready for. Guess it’s kinda like wanting to drive a car when you are 12. Driving would be awesome, but reality is you better wait a couple more years.
Girl Ninja and I are playing grown-ups this weekend and we are going open-housing with some close friends. But wanna know something? We still don’t want to buy a house. We know eventually we do. Like real bad, just not yet. We like our cozy apartment. We like our hectic lifestyle. And we like knowing we can move somewhere else tomorrow. The stability and sense of ownership will be awesome, but is not something we need at this stage of life.
Of course babies. Thousands and thousands of babies. Or one. Haha. In reality GN wants four, I want two. But we have both agreed we will start with the first and take it from there. Most of our Seattle friends are parents now. It’s so awesome getting to see them be all responsible and change diapers and stuff. Sometimes Girl Ninja and I get baby eyes. Something tells me within a year GN will start getting pretty antsy. I’m hoping for more like 2015 🙂
Holy crap, more than anything I desperately want a dog. Like real, real, real bad. Unfortunately, or fortunately depending on how you look at it, our landlord has a “no pets” policy in place. This is probably for the good since our lifestyles are not really conducive to being puppy parents. We are gone too many weekends, out too late at night, and just terribly selfish with our time right now. A dog would bring immense happiness in to our life, but probably bring an equal amount of frustration. For this reason, we probably wont get a puppy til we have a kid.
What are some things in your life you desperately want, but just know would not be a smart decision for you at this point? Things like buying a new car, when your current one works just fine. Or maybe playing the stock market, before you’ve paid off high interest debt.
Alright, time to go put on my Spongebob underwear and make some Kraft macaroni and cheese 🙂
Warning this is the longest post I’ve ever written. Hopefully it doesn’t bore you to death. If it does, I’m not apologizing because apologizing to a dead person would be weird.
Holy crap yesterday was exciting. I published the blog post at 6:45am yesterday (midnight my time) and for the next six hours I watched magic happen. I think we may have exploded twitter, or at the very least made a bunch of people angry because all they saw for a good 30-60 minutes were tweets about MANteresting. It was seriously insane how much you guys hyped it. So insane I took a screenshot showing as many tweets as my tiny little computer screen could fit…
I was incredibly exhausted, essentially pulling an all nighter watching the personal finance community go to work and help promote this new venture, but boy oh boy was it worth it. I could say Thank you a million times and it still wouldn’t be enough. Since you all were such huge helps, I figure it’s only fair to give a little more insight in to the business that MANteresting will hopefully become.
Why you copy them for:
This is a legitimate question that we will likely be asked many more times. There’s no denying; Pinterest was absolutely the motivation for this venture. They have grown like crazy over the last two years and have been valued at $200MM. But even with their insane growth, the market is not saturated. No one in yesterday’s comments said “What’s Facebook or what’s twitter?” Everyone knows those two are the standard in social networking. But Pinterest isn’t there yet. A handful of you yesterday had no idea what any of this was. While I obviously don’t think we can even come close to Pinterest, I do think there is potential to ride the wave UPWARDS with their successes. Social image sharing is still relatively new to the world and we have serious potential to gain a solid user base if we get in front of the right people before it’s too late.
The other reason I decided to go with this idea is simple. It is ultimately a user based service. This blog is the exact opposite. If something is on here it’s cause I sat down in front of my computer and took the time to produce something. MANteresting however, works when I’m not. It’s definitely not passive income by any means, there’s a lot of work behind the scenes, but ultimately it’s the user that provides the site’s true value. I like the idea of having someone else do the busy work for me. Thanks users 🙂
I don’t get it:
This one of my favorite things people say, “Sorry, I just don’t get it. Pinterest (or similar site has) no appeal to me.” That’s fine. We know we wont be for everyone. In fact, our URL alone automatically, at least some what, alienates half the human population (sorry ladies). We aren’t trying to be a website every person in the world uses. We just want enough users to make us feel like we did something significant.
So if you don’t know website stuff, I’ll break this down for you real quick. On February 15th we had approximately 0 visits. On February 16th we had 4,203 visits from 3,615 different people. Over 17,622 different pages on MANteresting.com were viewed yesterday, and the average user spent about 4 minutes on our site. Those are REALLY encouraging numbers. This blog only got around 1,300 unique visitors yesterday. We got triple that to MANteresting, which can only mean one thing; people that I shared this with, then shared it with other people, who then shared it with other people, yadda yadda yadda. More people visited the website than I am capable of reaching and that is an EPIC start to building a successful website. I really couldn’t have asked for anything more than what happened yesterday.
The week ahead:
I’m not stupid though. I know today’s numbers will likely be MUCH lower than those above. The initial MANteresting pandemonium has worn off and people are going back to their normal routines. Today (and really this week) will be the true test of our ability to grow the website. If we can retain a decent percentage of yesterday’s traffic for the next few days, then that means people are interested in what we have. If numbers continue on a downward trend, that means we were nothing more than a flavor of the week.
What we need from people who still want to support/promote us:
Yesterday was all about spamming twitter and Facebook with our website. We wanted to reach as many people as humanly possible in a very short period of time. We were successful at that. But now comes the tricky part; continuing to promote without being annoying. The best way to do this, if you feel so inclined, is to make things more personal. Instead of posting a mass Facebook message, write on specific people’s walls who you think might really enjoy the site. You can also tweet or status update specific nails that made you laugh or that you found interesting.
But even these methods will not bring us to Internet: Level Awesome. For us to really step it up a notch we pretty much have to get mentioned on some semi-massive media outlet. Techcrunch, Gizmodo, Mashable, NYT, WSJ, MSN, etc. Problem is, when you don’t “know someone who knows someone”, it’s tough to stand out. You can’t just send an email to them and expect to get featured. It’s kinda like applying for a job I guess, we need someone to help us get a foot in the door. Anyone out there have some hookups, if so send ’em my way and I’ll buy you a virtual beer 🙂
How are you going to control content:
This was a major concern for us as we worked out our business plan. How do we run a business that allows users to nail content freely, while not turning in to a porn site. Legitimate question, and one we are still digging through. Before launch we nailed almost 600 pictures on our own to give you peeps an idea of what the site should be like. Fortunately, that subliminal messaging worked as the 300+ nails added yesterday were very similar in nature to the content we pushed. There was, however, one douche bag that posted up a naked dude. Fortunately, I caught it and had it removed in less than 2 minutes. That users account has been deactivated. We say very clearly in our Terms of Service (which I’m sure every single one of you read right :)) that the website is intended for use by anyone over the age of 13. Porn, or even semi porn, has no place on our site and we will fight every incident that comes up.
But, it gets a little better. As I’m typing this, our developer is putting the finishing touches on a “report” button that will allow any user to flag an image they deem inappropriate. If an image is flagged, the picture will be immediately hidden from the general population and held in a queue for Jesse and I to either republish or trash. There is really nothing else we can do about it. The same is true for Facebook. You could publish a naked pic on FB right now without anyone stopping you, but the FB users wont stand for that crap and they will have it flagged just as quick as you put it up. We expect the same of our users. If you see something objectionable, don’t click away or ignore it. Flag the bajeezus out of it and help keep our site classy.
How will you make money?
We wont. Ha! How’s that for a business plan? Aside from very brief discussions we haven’t talked about monetizing the site yet. Right now we are completely focused on implementing new features and gaining more users. If we allow even a second of our focus to shift towards $$ we will have failed as founders. Do you know of a Mega blog that doesn’t make a ton of money? No, you don’t, cause they don’t exist. If we get substantial user interest, people will throw money at us and we will never even have to think about such silly things as Google Adsense.
Are you going to blog about this all the time now?
Let me be clear. No! This is still a personal finance blog. I will still talk about money in just about every post I write. But to think that MANteresting wont come up at least semi frequently would be naive. It’s a significant part of my life right now. When I was in debt, I blogged about debt. When I was getting married I blogged about weddings. So now you’ll have to suffer through some of my thoughts about business. Running a startup. Working with a business partner (who is awesome by the way), and other things that come with the site. If you don’t like it, too bad. Go read someone else’s lame blog about “10 ways to refinance your home.”
Alright, I’ve been up for 25 hours now so I’m going to crash, but I’ll do my best to respond (when I wake up) to any questions you leave in the comments. You know me I’m an open book baby 🙂
Thanks again ya’ll. I heart you very much. If you didn’t have a chance yesterday, Like us on facebook (less than 50 likes away from passing my PDITF likes) and follow us on twitter.Have a good weekend!