At the time I am writing this, my meagre little investment account (started about seven months ago) has been in the red for a while, ever since the market took a bit of a dive about a month ago.
Mr. E’s account has been the same. A small, initial fall, and then a steady walk downwards.
There was one full month where my investments increased as much as my student loan interest per month. That was a good one. A net-zero, if only for a little while.
But now we watch the red, and I am happy that I not only transfer automatically, but recently also started telling the website we use (Nordic Nordnet) what % of my automatic withdrawal I want invested in which index funds.
All right, I’ll be perfectly honest, I have not actually, physically written out an investment policy yet. But it was after this post by Liz, the amazing Chief Mom Officer that I finally stopped allocating money manually every single month.
While allocating manually was sort of fun for my budding investment mind, it also meant I had to think about how and where to allocate every single month, draining on my limited decision making potential.
Instead I opted to do that thinking once, tell the system, and then reassess in a year or so. The only “work” left for me is to log in to update my net worth every month, and perhaps, if I am feeling extra crazy, up my monthly automatic transfer once I’ve filled up my tax advantaged mortgage savings account and stocked up our emergency fund.
I will admit, I do feel tempted to add extra funds now that the market is in the red (woo, sale!). But although I have not fleshed out a full investment policy, I did take the time to write a seven step priority list for the year.
Sadly for my investment eager brain, there are other priorities higher up on the list before I am allowed to increase my monthly contributions. Boo.
The way I calculated these goals at the beginning of the year, I should not hit the last one until the very end of November/December.
To my checklist-happy brain, that means I get to put goals that are not as mathematically sound, but emotionally rewarding (paying back student loan debt at 2% interest, when market returns are historically much higher), but I do not actually get to spend that much money on them, because I will not get there until the very end of the year.
Although this list is not a complete strategy or policy, I cannot begin to tell you how much it helped to write out my priorities like that.
In January, before writing the above, I received my annual student loan statement. I was exasperated to see that over 30% of my payments in 2017 were interest payments, even at my measly 2% total interest.
In the heat of the moment, I scheduled twice my regular monthly payment to my student loan. And while it felt emotionally rewarding and didn’t really hurt me to pay more, it was not the best use of my money.
Far better would have been to put that money into filling the mortgage savings account earlier, enjoying that yummy 3.2% interest on an increased principal amount all the sooner. Not to mention that every penny I put in savings and investments goes towards closing the gap between the interest I pay and the interest I earn.
Back to the market for a second. Is it crashing yet?
I have no idea, and I have no basis of telling you whether it is or isn’t.
I can tell you what I will do though. I will continue letting my automatic transfers invest my money for me, just in case I get bitten by the “perhaps I should wait” tic. Like many these days, I look at how long ago the 2008 recession was, and am starting to feel like there might just be another one on the horizon.
That means stocking up on the emergency fund, ensuring we have no high interest debt and doing our best to diversify our income. Being in the biggest university cities in Norway, the housing market is hot and not something I want to touch at the moment. Renting is good for me and less maintenance, thank you. Especially with this awesome place where we get a porch with a tiny garden spot on top.
Do you have a plan for where your money is going in turn? Or is it all so automated that you don’t even have to think about it any more?
I will admit, I started allocating a little bit to each goal, in such a way that I would hit all of them by the end of the year. But to be honest, I really like reaching goals and ticking them off. I realised it gave me extra pleasure to target each goal in turn and smash them, one at a time.
What does your strategy look like? Do you have your priorities firmly in hand or do you play it by the ear? Do you make detailed strategies and multi-page documents, or do you scribble it down on a napkin and call it a day?