Why my W-2 Makes me Cry
Posted on February 6, 2009 20 Comments
It’s tax time, and those pesky W-2 and 1090 (or is it 1099?) forms are slowly finding their way into my mailbox. Yesterday, frustration and anger set in immediately after opening my W-2. I’m not being overly dramatic; I wanted to throw something. Hard. And scream. And cry.
I have been doing my best to keep contributing to my 401k while avoiding looking at it, as is the advice most personal finance gurus share. But when my W-2 informed me, like a gossipy schoolgirl, that I had plunked $7,500 of my salary into my retirement fund last year, my stomach dropped. I knew that my fund had not grown much in the past year. And so, I went online to check out what happened to my $7,500 in savings from the year.
And here’s the answer: it’s gone. For now.
On January 1, 2008, my 401k was $19,101.60. During the following 12 months, I contributed $7,359.99. My employer contributed $3,359.99. Yet on December 31, 2008, my 401K’s official balance was $19,978.78. My personal rate of return on the account was -38.8 percent for the year.
I felt like someone punched me in the gut.
Do you know what else I could have done with $7,359.99? I do. In fact, it makes my heart ache to think about all the things I could have done with that money — hard-earned compensation that caused me to work late nights and weekends and sacrafice personal relationships. Here are a few ways I could have spent the money:
- Put it into my downpayment fund and been that much closer to buying a home
- Taken a month-long vacation to several foreign countries
- Upgraded my apartment
- Given my mom and dad their long-awaited vacation to Italy or Alaska
- Gone back to school
- Sent my younger brothers to study abroad
- Used it to buy a car
- Created a scholarship fund
- Held a wedding for me and Brian (or at least half of one)
The list goes on, and on, and on. While I know it’s important to stay positive, is it OK if I tear up for a while at how right now it feels like I threw $7,000 out the window, and how far away I feel from my financial goals?
Category: Money
Tags: Retirement
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20 Responses to “Why my W-2 Makes me Cry”
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February 6th, 2009 @ 1:15 am
Ooo that hurts. At least you got tax deduction on the portion of salary that you deferred into the 401K. I’m watching my Roth slide like no tomorrow, and every penny of that is after-tax money.
If there are things you really want to do (i.e. travel, get married, etc), you should probably just do them. You’re financially responsible, I’m sure you’ll find ways to make it work.
You already have a great saving habit and the market will recover… eventually. Just believe in that.
February 6th, 2009 @ 1:16 am
i only just started contributing to a 403(b) about 6 months ago but it lost 30% of it’s value already (about 700 dollars loss). nothing the size of your loss, but i’m just starting out so i feel it too.
but everyone’s been telling me that it’s a great time to be buying, and that the natural cycle of things is that they go down, but they ultimately go up. realistically you’re buying lots and lots of shares of your funds and when the market recovers, you’ll see all of those lost contributions realized and then some.
February 6th, 2009 @ 3:18 am
Don’t forget you have a lot more shares of whatever you’re invested in. When the market rebounds, and it will, you’ll seem to be making money hand over fist.
At least that’s what I tell myself for comfort over my -38% return for the year.
February 6th, 2009 @ 6:31 am
Sorry for the typos. i’ll fix them tomorrow. Was trying to do too much at once when I wrote this.
February 6th, 2009 @ 12:04 pm
People need to stop looking at prices and start looking at the free cash flow generating from the businesses they own. This is the only logical thing to do. If you owned a pizza shop and paid $7500 for it last year, who cares what some palooka is offering to buy you out at. You only care how much is left in the cash register at the end of the day after all your bills are paid. Luckily, you probably don’t own just one business but several hundred. And if you looked closely, you might find that for each share you own, you’re generating $.25 in free cash flow. Well, what if you want more cash, you need to own more shares. How much do you want to pay for those…$10…$5…$1? If you focus on the cash flow AND the number of shares you own and ignore the stock prices, you’ll be a much better investor.
February 6th, 2009 @ 1:16 pm
This is why i dont play the stock market -
To money man – all very well, stock market goes up and down yes we get it but can you guarantee the stock market will be up when you need to take your money out of it?
February 6th, 2009 @ 1:27 pm
Very good point Anonymous. You can’t and thus you shouldn’t have any money in stocks that you may need in they next five-seven years. You never know what Mr. Market will offer to buy you out at that time. But some people still don’t care because they end up changing the businesses they own by owning higher dividend paying companies (i.e. companies who are paying out some or most of that free cash flow). And thus they still never need to sell because they are just using the dividends.
February 6th, 2009 @ 1:30 pm
Also, why don’t people just do what the great investors do? Warren Buffett once said, “I don’t attempt to make money on the stock market. I buy with on the assumption that they could close it the next day and not reopen it for the next five years.”
No one should “play the stock market”. That is for speculators not investors.
February 6th, 2009 @ 3:20 pm
I know exactly what you mean. I lost over a third of my 401k this year. That’s a couple years worth of contributions. They keep reassuring me that I am young, have a lot of time before I retire, etc. but that doesn’t make it feel any better. I guess I have to realize that if that money had been in my take home pay, I wouldn’t have saved it anyway. We just gotta keep on!
February 6th, 2009 @ 6:24 pm
Perhaps you should consider some less risky investments. For the first time in my life, I’m buying bonds. I put in about $7-8K into my 401k last year and lost about 40% like everyone else. My rollover IRA also lost about 25%. So to preserve what I’ve got, I am buying in on the low prices to existing funds, but I have also started buying ‘safer’ investments in hopes of losing less.
Just something to think about.
February 7th, 2009 @ 12:10 pm
the thing is money man (7.16 am annoymous again) i want to retire early, or at least downsize – im 35 now and would like to achieve this within the next 5 years, i dont want to work for the man for the next 25 years – so i think stock market def not for me – i need my cash liquid or semi liquid – at moment have it in bonds – would these dividends you speak of help?
February 7th, 2009 @ 1:39 pm
take heart. I’m in the same boat.
Jane
February 8th, 2009 @ 7:16 pm
Thanks for reminding me
Put $5,000 in my Roth and ended up a few dollars below last year’s ending balance. In the 3 years I’ve been contributing, it’s done nothing but go down. I just tell myself I would’ve lost the 5 grand whether or not I’d added more. And that I don’t get back the chance to contribute that money, but I have plenty of time to add more. I’m just going to put my head down and keep DCAing.
February 10th, 2009 @ 3:07 pm
I know how you feel. I opened a Roth less than a year ago and it’s already down 47%… moved the money to a more stable bond fund today to try to ride out the storm, but it hurts to see the loss. The good news is that what goes down must go up, even if it takes time. Hang in there!
February 11th, 2009 @ 6:22 pm
I keep telling myself investments are being sold at a discount. =) In the market, if you choose correctly, you can really get more bang for your buck. You just have to be patient. It’s understandably frustrating!
February 12th, 2009 @ 2:56 am
Elizabeth,
The problem with selling is that it’ll go up, but you won’t be able to profit when it does.
February 12th, 2009 @ 6:18 pm
I know. I’m not worried about it. Thanks for the comment, though.
February 14th, 2009 @ 12:36 am
After thinking about your post, I became mildly irritated. You have a blog read by tons of people and that has, I believe, been featured in articles and magazines. A finanical babe right?
Yet, computer savy as you are, you have not been following your 401K declines on the that company’s website? I check mine at least weekly and once it began to drop I decreased my contribution. Sure I lost alot and you may end up ahead of me when the market recovers but I knew what to expect on my W-2
Come on
February 15th, 2009 @ 5:21 am
That is exactly why most people say not to watch your 401K too closely!
Even though you lost money – look at it this way, your SHARES are not lost. They only went down is value. When (and it will happen eventually) the economy swings up again, you will own a lot of shares and you’ll even out again.
Remember you probably can’t touch the money for more than 30 years, so don’t beat yourself up too much! You’re doing the right thing in the long run
February 16th, 2009 @ 7:10 am
Mely5862…
I used to check my 401k once per month online, but stopped when things got bad on the advice of some folks who know finance better than me. They’re right. I just freak out when I see the ups and downs. I know a lot of people who have contemplated decreasing their 401K contributions – like I have – during this time despite their better judgement. In creating this post I want to share with other financial newbies that I understand the frustration, and offer a place to dialogue about why it’s a bad idea.. or is it. I also want people to know that it’s OK to be frustrated and scared right now. There’s an emotional reaction that’s not addressed when financial gurus say “just don’t look at it,” and I think there’s some release in talking about those emotions. I’m not the only one feeling it, nor is the girl in the cube next to me. It’s important to talk about it. Or cry about it. Or freak out about it… whether you’re paying attention to your monthly statements or not.