What, Pray Tell, is Found Money
When I was about ten years old I was walking along the alley way behind our home and spied a twenty dollar bill at the edge of it. I looked around and didn't see anyone who might be the owner of this lonely bit of “green,” so I put it in my pocket and went home to show it to my mother. Wise woman that she was, she thought I ought to ask the neighbors if they'd lost it, so I did, cleverly NOT saying what the involved amount was. Turned out no one was missing any money, so I was richer by twenty bucks.
Found money is money that comes to you in some way other than through your regular paycheck. An inheritance or a Christmas bonus from your employer would be examples of “found” money. In my case in the story above, the twenty dollars was literally found money.
I can't remember what I did with the money, but I suppose my parents did what they always did when I earned a few dollars mowing lawns, which was to insist I put half in my savings account. My parents were wise people.
Unwise Use of Found Money
About a year or so ago I heard a story about someone who wasn't as wise as my parents and didn't consider found money as something to save. She saw it as something only to spend, and the situation involved a whole lot more than twenty bucks.
Seems this woman received an inheritance of around $150,000 upon the death of her mother. She then proceeded to buy a complete new wardrobe, refurnish her house even though what was in it was relatively new, bought a new and fairly expensive auto, purchased some jewelry, and took a number of her lady friends on all expense paid (by her) trips, including several months in Europe. To shorten a rather long story, within eighteen months her $150,000 potential nest egg was reduced to zero.
Well, it was her money and she certainly had the right to do with it what she wanted, but to spend the whole on a lot of things without lasting value and to not save or invest at least some of it seems to me to be less than clever.
By the way, this person just happened to be a woman and there is no implication that women can't handle money effectively. Had it been a man with the same short sighted perspective inheriting instead of a woman, the “toys” would've been cars, boats, and who knows what else, but the result would've been the same. Zero dollars remaining.
In the InvestmentTimingSoftware.com: FYI Page collection of articles is one about “Opportunity Loss” you might want to check out sometime. What was this woman's opportunity loss? What might have happened if the lady had viewed her “found money” as something to make her future brighter rather than something to simply blow?
Wise Use of Found Money
Well, she was about 40 years old at the time so she had a number of years to let investments work for her. Historically investments in common stocks have returned an average of ten percent a year, and at that return rate money doubles in seven and a half years. Had she continued living as she did before and invested the whole, at age 47 ½ she would have $300,000, at 55 years $600,000, at 62 ½ $1,200,000, and THAT would make for pretty comfortable “Golden Years.”
If she would've had the benefit of the early training my parents gave me and invested half while blowing the rest, she would arrive at age 62 ½ with $600,000 and that's not too bad either!
Conclusion
Wise people seem to have the capacity to learn from mistakes others make so they don't have to go through the negative experiences themselves. The main theme of this article is that found money doesn't happen to you very often in life, and when it does the best thing to do with it is to invest it for your future rather than spend it now for consumer goods that will disappear very quickly and leave no lasting value behind.
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