Let me share with you some of my money confessions.
Everyone’s had their share of silly money mistakes in their lives. The web is full of such confessions, so I thought it’s about time I owned up to my own list. There were some moves I made that may only look bad in hindsight, of course — such as stock market based decisions and calculated investment maneuvers that have gone south. If these had turned out well for me, then I wouldn’t be thinking of them necessarily as mistakes, but rather as lucky or even smartly(!) performed strategies. So who knows how many successful investments I’ve made that could’ve turned sour instead and thus could’ve made it into this list?
How many of these lucky moves have we crowed about and claimed to be the consequence of a skillful hand or a sharp mind?
What I’m really trying to say is that a “mistake” is an action that goes against proper reasoning at a given point in time, and is not necessarily defined by its consequences or repercussions. Many times, I’ve done stupid and foolish things that have resulted in monetary gains, due to good fortune. And many other times, I’ve made what I believed were solid, well thought out decisions that have ended up in financial loss.
With these technical clarifications, I now present a few screw ups that have defined a few lives…mine and some of those close to me. What follows are some lessons that have come out of our lives… real stories of MY screw ups!
Financial Mistakes That Have Cost Me (Or Someone I Know) Over $1,000 Each
- Not diversifying a high valued portfolio
This is our biggest mistake to date. It’s very easy for greed to rise proportionately to confidence begotten from a rapidly rising highly concentrated stock portfolio. Once upon a time, we held onto a single stock that did incredibly well, and once upon a time, it was valued at levels I haven’t seen since. We had earmarked this position for our retirement needs. Unfortunately, for various reasons, we sold our position right when the stock dropped, and there went our glorious retirement. We’re now in a new chapter in our lives — no, still pre-retirement but trying out entrepreneurship — but with hopefully a better ending.
- Shorting on the way down
I was young, naive and emotional, and what a combustible combination that was! There I was trying to time the market during Iraq’s invasion of Kuwait in September of 1990. Earlier on, I had invested my entire savings of $10,000 on July 1990 into a single stock riding on the back and erstwhile popularity of its #1 celebrity endorser, Michael Jackson. How could I have known that a war was just around the corner? I sold the stock when the market tanked in the fall of 1990 for a 50% loss. With my net worth on the line, I reacted by promptly trying to salvage something by shorting the market. I lost more during the serious market swings that followed. Thank you L.A. Gear for teaching me a lesson and the value of risk management.
- Joining network marketing efforts
Heard of Amway? I heard of it everywhere. Everyone was in one MLM scheme or other. I didn’t want to be the odd person out so I joined Sprint’s direct marketing gang. I learned then that I was a lousy salesperson — that lesson set me back $300.00. At least, I got off easy compared to peers who hoarded Amway products to resell, who attended seminars and training sessions in far flung places and who purchased Amway motivational tapes to keep them going. Instead, they lost bucks in the thousands.
- Committing to huge expenses while our portfolio was rising
There was a time not too long ago that we were sitting pretty on a pile of dough when our highly concentrated stock position was peaking. That time, we did not necessarily feel it was peaking as it was simply rising in a straight up trajectory with no end in sight. While this was happening, we felt confident enough to embark on a house project which involved a room remodel. Though the price quote was steep (it was for this type of work), we signed the builder’s contract without hesitation knowing that we were flush. Our mistake was to psychologically consider our paper wealth as real. We did not redeem our position and instead rode the stock down, subsequently making us feel pretty pinched. Moral of the story: do not use imaginary wealth to fund your big purchases!
Real Estate Errors
- Not properly maintaining a house
Don’t let your house fall into too much disrepair before you start fixing things. When it comes to home maintenance, small problems grow larger quite easily when things are unattended. I had owned an old house in the past whose needs I had ignored indefinitely. I was a negligent homeowner. When I sold that thing, I had to spend around $10,000 just to get it into the shape required for buyers to become interested. My real estate agent told me that if I had properly cared for it throughout the years, I wouldn’t have had to fork out as much money on repairs when it came time to unload.
- Prepaying for house maintenance
After I learned my lesson about avoiding delayed home maintenance, I overcompensated. I was then convinced that the idea of hiring an outfit that does preventive and routine maintenance on houses was a good idea since it was meant to stave off bigger problems later. Also, some outfits do exist that claim that altogether, their one stop shop provides cheaper service than if you hired different service providers that are more specialized: such as a chimney sweep, a contractor, an inspector, etc. If you aren’t handy (and we definitely aren’t!), then this may sound attractive to you. By being overly conscientious, I went for the service and ended up being overcharged for the jobs that were performed. I guess there is such a thing as overkill. The key to maintaining a house is to do so in moderation — don’t wait too long for something to completely fall apart, but don’t anticipate too early that something will.
- Acting as my own general contractor
If you’re skilled in the home building arena, then by all means, be your own general contractor. There was one time when I tried to serve as the liaison between a designer and a builder while we were in the midst of a home project. I ended up in a dispute with the architect/designer because I had failed to communicate his important figures to the builder. This cost us $1,500. Now if instead I had made sure to hire someone who was both willing to stand as both a designer and contractor for the given project, then if communication problems arise, they would have accountability, while I would have a leg to stand on in small claims court. Even better, they would have known what they were doing.
- Landlording at a distance without a property management company to help
Goodness knows how many people are able to manage something like this. We’re just not able to. We lost money because we tried to be landlords for far flung properties without hiring a property management company to represent us locally. In the end, we were defrauded by some tenants who refused to pay the rent for a few months and who decided to trash our property before vanishing.
Money and Life Management Errors
- Lending money and expecting it to be returned
I have known for a long time that when I “lend” money to a friend or family member without virtue of a contract of any sort, I should just basically write it off and treat it as a gift. But silly me, still holding out on the hope that someone will pay me back the hundreds of dollars that I’ve spent on them. I’m talking about several hundred PER “borrower” here, so I’m out a good amount.
- Buying expensive items nobody uses
Whenever we buy something, it’s always under the guise of good intentions. For example, we bought a mountain bike so that the digerati spouse could use it for exercise. You can count in one hand the number of times that bike was used this winter. Or what about the wardrobe upgrade I underwent right before I got pregnant. Now since I have not gone back to my pre-pregnancy size, those lovely coats, shoes and suits have been abandoned, and given away. I was also dumb enough to buy a whole outfit for a sporting competition that I never joined. It cost me $750.00. What about those occasional fancy food ingredients you never get to use, but which you discover at the back of your fridge 6 months later?
- Disorganization with financial material
I have been quite disappointed in my recent efforts to be organized. I could definitely improve on this front. In the past, I have kicked myself in the behind for ridiculous memory lapses that have led to lost money:
- Forgetting or losing checks that are received
- Not tracking financial transactions properly
- Not paying bills on time
- Falling for scams
For this one, don’t look at me. I’m hard to scam. Or so I thought until I wrote up this list, and some memories came flooding back to me. But the sad thing is that my extended family has indeed suffered large financial losses through fraud perpetrated by individuals they’ve trusted. The losses were large, but not serious enough to affect their economic status. Because of such episodes, I’m learning to watch my transactions much more carefully and now I’m what you may call a queen of financial paranoia.
- Not backing up my computer
Again, inertia will come to claim your computer data if you’re not careful. Set up a backup and recovery service for your computer as insurance against data loss or you’ll be out something like the thousand plus dollars ($1,000+) I paid for restoring my disk drive.
All in all, I must have lost in the zillions of dollars due to these boo-boos that have happened throughout my life. Now take into consideration the opportunity cost and power of compounding that these dollars would have made me if properly invested and my losses would be in the gazillions. Gah!
Unfortunately, it’s not easy to learn from some of these mistakes. We end up committing the same errors over and over, just in a different form. At least I have — and yes, even at this age.
Human nature and its imperfections, greed and fear, can have such a resounding grip on us that we don’t very easily break out of behavioral patterns that have caused us grief in the past. But being aware of our follies should help us manage ourselves and financial situations better. At least it’s a good step in the right direction.
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