A few years back, I did a wonderful trade with a mining stock and made around 300% gain, around $20,000 USD, in less than a week. I’d like to believe that I’m a genius day trader but really, I think I was just lucky that one time. Unlike what they do in LOM which is precise and educated guesses, I just had a gut feel about that stock and I traded it without looking at the chart.
Anyway, I’m not writing about how to win at mining stocks. This is about something else and that’s just the introduction.
My husband, my two kids and I – we rented an apartment in the central business district that time. We decided to live there so that we could just walk to our place of work. It was practical, convenient and saved us on time and transportation costs. The money we saved on transport, we instead allocated for the higher rent. At least, we saved on travel time – and we converted that to time which we could spend as a family.
Normally, we were prudent with our finances, trying to be as wise spenders as we could be. Looking back, however, I admit, making that $20K was bad for me. I felt “rich” when I made that money so quickly. And I was making more every day. Smaller gains, but almost every day I was winning at the game! It was a bull market that time. It felt good to be a day trader! I think if I threw a dart at a list of stocks pinned on our office wall and bought that stock where the dart landed, it would still have been a winner. I couldn’t believe how fast the money came.
Being the “prudent” woman that I was, I deposited my $20,000 check into our joint savings account. But here was the problem, the apartment we rented was right across the street from the most fabulous shopping destination in the city. All those restaurants to choose from! All those spas and salons! And so many shoes!
Since I thought I had a lot of money, a “few” fancy dinners out wouldn’t hurt, I said to myself. And of course, working so hard, I surely deserved to get the best hair keratin treatments money can buy, right? And let’s not forget, nice Italian shoes and bags are an “investment.”
This went on for a few months. All that time, I was thinking I “kept” my $20,000 gain safely in our savings account, while also saving up on my regular income. I was so sure I had money that I never bothered to check. My husband, he kept paying my credit card, getting the money from the bank. But I think he was also preoccupied with his work that time, so he didn’t bother to do a cash flow analysis either.
To this day, it remains a mystery were that $20,000 went. When we finally decided to take stock of our assets, my $20K was gone. Actually, I don’t know where my other earnings went as well during that bull market.
Ever since my $20K went “missing” I realized that having the “easy money”, working as a day trader distorted my thinking. It made me so ecstatic, like someone drunk in a party that I didn’t know I was actually already burning through all the money I earned. My thinking was, “I deserve this. What’s the use of earning money if you don’t enjoy a little of it?” But the “little” spending here and there was actually already a lot. I was celebrating the fact that I earned the money, but in celebrating, I used all of it up.
Fast forward to today, it’s been a horrible year for stocks. I still make commissions but I haven’t traded for a while. I’ve won some, lost some. Ironically, I have been able to save some money from the relatively smaller amounts I’ve earned.
Today, I just consider that missing $20K as cost of training. I learned the lesson that you can lose your money just as fast as you earn it if you don’t get a grip of your expenses.