My challenge to you: List your top financial mistakes. Not sure you want to invite the ridicule of others? To make everybody a little more comfortable, I’ll go first. Here are my top six:
- When I started investing in the late 1980s and early 1990s, I bought individual stocks and actively managed mutual funds. Admittedly, I went this route because it allowed this cash-strapped investor to get started in the financial markets with a few hundred dollars, as I detailed in an earlier Forum post. Still, if I’d been a little more patient, I could soon have amassed the $3,000 needed to buy Vanguard Group’s S&P 500-index fund, which would have been far more sensible.
- Later, with an $8,000 gift from my father, I invested $2,000 each in four individual stocks. It was the late 1990s and I was no doubt imbued with a little bull market fever. I wasn’t buying crazy dot-com stocks, though one was viewed as a backdoor internet play and, sure enough, it crashed and burned. By the time I hit “sell,” I’d lost 80% of my initial investment. Fortunately, the other three stocks fared moderately well. This was the end of my individual stock days, except for modest holdings of the shares of two employers.
- Nervous that I wouldn’t qualify for a mortgage, I bought a starter home in 1992 that was, in retrospect, notably less expensive than I could afford. I lived in that house for almost two decades, allowing me to save great gobs of money. Trouble is, I never especially liked the house, even after spending significant sums to fix it up.
- Again out of nervousness, when applying for the mortgage to buy that first house, I agreed to pay the private mortgage insurance as a single upfront sum, with the amount involved added to the mortgage. The mortgage broker insisted that it was the better deal—I soon figured out it wasn’t—but I didn’t want to quibble, fearing it might imperil the closing on the house.
- When I bought an apartment in a New York co-op building in 2014, I never questioned the size of the monthly maintenance payment, which was high, though not outrageous by New York standards. That was a mistake. Because the apartment I bought was actually two apartments that had been combined more than half a century earlier, my maintenance was much higher than that of similar-sized apartments in the building, and that proved to be an obstacle when I went to sell.
- I spent a few years working on a technology startup. After countless meetings, I had little faith we were developing anything viable, and yet I still invested money to keep the project going. It wasn’t a huge sum—but it still stings when I think about it.
Were any of these mistakes financially devastating? Fortunately, not. Did I learn something from my mistakes? Yes. Still, I could have done without the tuition bills.
Did you just log in? If you don't see the commenting form, please refresh the page.
My dad gifted my daughters $5K each shortly after they were born, with instructions to use the money for their college education; which we did. I kind of wish I had disobeyed dad and kept the money invested for them.
Failure to sufficiently diversify. I kept buying Citrix as it went down until the bulk of my investment was in the company. Recovery did not appear to be likely at the time, so I ended up selling at a loss. It eventually did recover a couple years after I sold. If I had been diversified I probably would have not sold.
Two mistakes come immediately to mind..
Early in my investing, I bought two stocks for $3K that were recommended by a broker I never met. I sold them at a loss and kicked myself for a few years.
I passed on Apple, Tesla, and Amazon. I was investing in index ETFs. (My husband bought them and now he gets bragging rights!!)
I am sure there are more, but those are the fun ones.
It took a couple of years when I was in my early 30s, but I learned the way to make a small fortune. Commodities! OJ, Gold, Soy Beans, feeder cattle, etc. The secret was to start with a large fortune. Getting caught short OJ with a Florida freeze cured me. Mutual funds in the 80s and now ETFs have steadied the boat and I don’t have sleepless nights worrying about a freeze in Florida.
I think this topic is more complicated (for me) than Jonathan intended! So many things influence our relationship with money and I often think about how as an immigrant and the child of immigrants who had terrible difficulties they faced, my relationship with money was oxymoronic-hopeful yet fearful.
We bought our starter home (which I still love) in late 1992 and were only planning to stay in it for 3 years. The real estate market dropped precipitously and we were upside down with an interest rate of 8.5% (a really good rate for the time). When the house finally got sold for exactly what we paid for it 8 years prior we were relieved. Six months later the house went up $50k in value! I regret having sold it and it was fear that drove the intense desire to sell it. Unlike others who make money from their first house to invest in their move-up house, we did not experience that.
This mistake is one I hope others can benefit from. Most people are familiar with the step up basis but very few are well versed in the step down basis. My father was a brilliant man but he had lived through things that made him trust in precious metals as a hedge against uncertainty and the vagaries of governments. At one time he made a lot of money in silver (until the Hunt brothers destroyed the market) so had confidence in his ability to invest and make money in precious metals. In the mid 2000s he purchased $150,000 of platinum. You see platinum was typically more expensive than gold and it had an industrial purpose so he thought he was making a great investment. Well…because it was so expensive the commercial users found a substitute (palladium) and the price of platinum went from $1700+ an oz (what he purchased it for) down to as low as $750 per oz. I didn’t know that the unrealized loss would die with him. Even though he and Mom had owned it together, his death would precipitate the stepped down basis so she could not take it either. The way around this would have been if he had gifted it because that cost basis would have been transferred to the receiver of that gift. Neither his CPA or his UBS broker (both of whom had 30 years of experience) understood this concept and in fact when discussing it with his broker, he said “I’ve never thought about this before but I am going to contact my older clients, because this is important.” Wish he had shared that information with our family-but glad I can be of service to others.
*Two kids were born in that house and we figured out how to make it work. When the house finally got sold for exactly what we paid for it 8 years prior we were relieved. Six months later the house went up $50k in value! I regret having sold it and not making it a rental. Hindsight is 20/20 and at the time with 2 toddlers and a not very high income I was scared that we would not be able to swing our new house and the existing one, but knowing what I know now, things would have worked out just fine! Wisdom that comes with age.*
Wifey, I didn’t know you were a Humble Dollar fan! And going by Rachna is something I never expected.
I never realized you felt the same way I do and also regret selling the condo for $215k and then seeing it increase in value almost fourfold in 7 years!
And yes, we could have afforded the mortgage especially after seeing how much rent it could demand.
LOL! Glad to know we aren’t the only ones who made this decision!
Here are mine:
I am pleased that we were able to overcome our mistakes and retire with dignity. Thanks, everyone for being honest about your mistakes, it made me feel more brave to share. Chris
Here are two of mine, yes, even three:
1) I held onto MCI even when I realized it had shifted from being a fiber optic company to a media company, and sold it at close to zero.
2) I bought airline stocks after 911, confident that people would soon start flying again. I discovered there was a lot I didn’t know about how much debt airlines carry and how quickly people would resume their flying ways.
3) During my 15 years living internationally I did not convert all my traditional IRAs to roth IRAs, when I could have done so at very low tax rates.
Like others I start with the line, how much time do you have. I started investing in stocks as a teenager from a job as a grocery clerk that started at $1.65 hour. By my early twenties I had a portfolio of around $25,000. Recognizing my stock picking brilliance and with the full support of my stockbroker I jumped head first into options trading. This was before the time of discount brokers. Within two years my 25k turned into $600, but at least my broker did ok with all the commissions from my trades. The good that came from this was I realized investing is not to be treated like Vegas and I got serious about it. When I read stories about all the young people day trading on Robinhood I am not too critical of them. That was me a long time ago and hopefully they will learn the same lessons I did.
Like others I have an Apple story. I actually owned 500 shares for several years. Never made much from it and eventually sold it for around $12 a share. Oh well!
Where to begin? Here’s a few highlights.
I suppose the Dot-Com bust would qualify. After marrying, purchasing and renovating a house I finally had some free cash and so I began putting funds away for retirement. I let the financial advisor/broker make suggestions. When the Dot-Com bust occurred my portfolio value fell to about $8,600. Most of the stocks never recovered; I started over. This learning experience prepared me for the 2008-9 financial disaster, which I largely avoided.
I had married a few years earlier and that was probably one of my larger financial mistakes. After the marriage I discovered that she had unpaid college loans. We discussed and I decided to pay these off. I was the breadwinner. The spouse argued against this, preferring to spend the money elsewhere. These types of financial issues and arguments escalated and after about 18 years that marriage ended acrimoniously. I found myself with a car, a life insurance policy, the children’s college debts and little else. I was flat broke, but not bankrupt.
I had started a high- tech business in 1978. I expanded and acquired another business with the intention of growing the businesses. However, costs increased more rapidly and profitability declined. At one point my administrative assistant was earning more than I was. That business decision was a mistake that took 5+ years to correct.
Because of these earlier financial mistakes I found myself starting over at age 55. However, I had an unusual skill set and I used that, and the experiences gained from my previous mistakes to work for the next 20+ years. I decided upon a phased, incremental retirement to continue working and saving.
As I entered full retirement I was diagnosed with a rare, inoperable and deadly cancer. Was it a mistake to delay full retirement? That’s a matter of perspective. I don’t think so. One thing I won’t have to worry about is running out of money in my lifetime.
Norman, continue staying strong. You’ve already overcome so much.
And you’ve helped many today with your cautionary life experiences.
Quite the story too share, so sorry about your cancer.
Receiving a lump sum when valuations where hi and sitting on the cash. Then waiting for a dip to buy in. The dips never came.
Jonathan, we are going to miss your direct and honest reporting, and I so appreciate your sharing of your life. And your matter of fact observations of the future, so sorry you have a shorter time than expected.
Jonathan, we all make mistakes. I started buying shares of stocks at age 19 while in College, 1965. I picked some big losers one went to 0, others made some money, and somehow, I still finished college even though I put my tuition on the line. I worked my way through college. But just think, I did not buy McDonalds because the share price was too high, I should have bought 2 shares. Are you ready, 2 shares of McDonalds after 12 splits since 1965 would be worth $453,000+, for real. I bought some other restaurant maybe made a few bucks, but I should have purchased 2 shares of Big Mac!
By the way, if you do not make mistakes, I say you are not learning.
The lesson I have learned (and I thought I already had learned). Buying into hype.
Except for twice, I’ve always used boring Vanguard Index funds. They have low fees and they usually beat find managers.
Lesson # 1 ) Years back I jumped on the Ark Funds hype and lost 50% over the next six months.
Lesson # 2 ) This one hurts to admit because I admire you all and I am a faithful fan and follower of HD… I bought into the A.I. hype and bought Palantir on Tuesday of this past week. It immediately lost 10% on Wednesday and another 5% on Thursday when an announcement was made the the Defense Department budget is going to be cut. UGH 😫
Switching to a 60/40 about 8 years ago; wish I had stuck with 100% stock mutual funds, and then switched to 80/20 today.
When I was laid off in the 2009 recession I said I wanted to work for myself. I plunked down $40K in a financial services franchise and it was a disaster. Plus I wasted time. I did feel more grateful getting back to working in Fortune 500 businesses again.
Doug, if you don’t mind, what financial services franchise did you try? I’m curious because I looked at tax prep franchises (Liberty Tax) when I retired, along with one that provided factoring financing to small businesses. I never bought in to one because I could never see a clear path to success.
My late father told me often that “You’ll rarely regret the things you do in life, but it’s the things that you don’t do that will torment you”.
I’ve always been a big music collector. In December of 2001, I received a nifty Christmas gift from my employees: a 1st generation Apple iPod, which held 1000 mp3 songs…who knew such a thing was even possible?
I loved playing with the new iTunes music software on my wife’s Power Mac (she’s a graphic designer, and Macs back then were predominantly used by HS school kids and graphic designers). At that time, you had to insert CDs and manually convert / “burn” the contents into MP3 format within iTunes. I had an epiphany: what if this little iPod and the accompanying iTunes software someday makes the jump over to Windows-based operating systems?
I had earned a surprise $3,000 end-of-year bonus in 2001 just before the holidays. I had also recently opened my first brokerage account. My plan was to invest all of this windfall – and AAPL shares were my choice.
Shares of AAPL on 12/26/2001 were trading at $0.32 (this is today’s equivalent share price, adjusting for the multiple AAPL stock splits that have occurred since 2001).
My wife gently reminded me before I placed my BUY order that we had no porch or patio furniture for our new home yet, and that I had promised to having both purchased before spring arrived. I think you know how this movie ends.
The porch furniture (constructed of “durable” high quality synthetic wicker) lasted 3 seasons before falling apart. The patio furniture has been replaced 2x since then. Shares of AAPL closed yesterday @ $245.55.
Shortly before Jobs went back to Apple, or maybe just after but well before the iPod, Apple was trading at $12 a share with $10 a share net cash, no debt. But…..their computers weren’t that great, Windows 98 was out and I was sick of the Mac I had which ran very little of the latest software. So, I took a permanent pass on the stock. Ahhh….if only….
what is “IDS” that is mentioned by a few folks here? thanks!
i think i figured it out
IDS used to be part of American Express and is now known as Ameriprise Financial:
https://en.wikipedia.org/wiki/Ameriprise_Financial
As I near retirement (gulp), my wife and I generally have lived within our means, paid down the mortgage early, always put aside 15% in retirement with a gentle upward financial slope. I had two big bangs in my financial career, however, that taught me a lot: 1) I dripped money into a credit union for a college fund, the 2007-8 great recession struck and I used the college fund $ and bought two dozen small company stocks that had dropped 60-90%, but had good equity, like Huntsman and NVIDIA, I tripled my investment quickly, bought a BMW, replenished the college fund and got silly confident. I bought several MLP’s in Permian basin leasing companies and lost 1/4 of my previous gains when the industry briefly crashed and the MLPs went under. I then lost interest in investing as a time consuming analysis “game”; 2) I had one more teaching moment: I continued retirement investing in diversified Vanguard funds, but for a comparison of passive and active investing, I invested a family business/inheritance with a large bank’s wealth advisor. My Vanguard index equity funds beat the wealth advisor’s active trading by 3% a year for 3 consecutive years. There was also a 1% advisor fee plus a lot of poor advice such as recommending a hedge fund that went down, down and probably gave commissions for referrals (we declined that one). I fired the wealth advisor, moved the account to Vanguard with the 0.3% advisor service and am happily way past my retirement goal.
I can only think of three major financial mistakes.
Sticking to one wife, driving older cars and not panic-selling during the 2000-2002 and 2008-2009 crashes probably more than compensated for the mistakes.
Investing most of our net worth while in our early 40’s (and with young children) in a closely-held equipment leasing business whose audited financials showed annual gain of 24% – 28% or more over 5 – 6 years, only to learn as the Great Recession started to hit in late 2007 that the manager of our venture was a Bernie Madoff, Jr. He had not only been cooking the books, he was also stealing from the LLC. Perhaps most egregiously, he borrowed $1 million from the bank using the LLC’s credit, and used the funds for his personal purposes. We lost every penny that we had progressively added to this “investment,” whose high 20% annual returns were exactly as they appeared: “too good to be true.” At least he finally paid off the $1 million loan to our bank, although it took him 5 years. We should have prosecuted him criminally, or at least sued him for fraud, but my partners were unwilling to tarnish their own reputations by admitting they were duped by this fraudster.
I bought oil companies and utilities in the 1990s, when everyone else was betting on dot-com stocks. I did very well – I still have hundreds of thousands in unrealized capital gains, and have collected far more dividends than I spent on the stocks.
Here’s mine –
Three things immediately come to mind
Oh boy….I am only 41 and I have a great list lol. Way more than 6 lol.
1.) When I was 18, I got a small settlement from a car accident I was in when I was 7. $8200 after the lawyer took his cut. He advised me to invest it. I bought a $4900 ’94 Camaro with T-Tops and leather lol. I invested the rest….but still. The year….2002…would have bought the bottom lol. Today my little $4900 would be $38-41k lol.
2.) The little money I DID invest….grew a little….until….in 2007, in between my Junior and Senior year of college, I cashed it out to do a once-in-a-lifetime study abroad/backpacking trip through SE Asia. I’ll never, ever regret the trip, I only regret not working more before the trip and saving and financing it the right way.
3.) Not working more in college and running up some student loans. I thought I was so smart. I thought to myself if I got top grades from my state college, the regional banks would be tripping over to hire me as a financial analyst. I graduated in 200…they weren’t. So I went back for a masters immediately.
4.) Did a one-year master’s program right after undergrad. I thought it would make me more marketable and give me longer lifetime earnings. I did not. It got me an extra 30k in student loan debt. I love finance and learning….but I was wrong in thinking I could skip ahead to higher pay without first gaining experience.
5.) Not religiously maxing out my Roth starting in high school. It all felt insurmountable at the time. Looking back, it would have been modestly challenging at best.
6.) In 2014 I was self-employed and for 1-2 year, made a great amount of money. I decided I was too busy to manage my rental property that was 10 minutes away. It needed a roof and I didn’t want to bother. I should have bothered. It had great cash flow and would have smoothed out some big bumps I had later in my career(s). I was netting 15k a year in cash flow, it was definitely worth my time. I was just listening to business influences who advised to double down on myself and grow my main cash flow. Diversity of income would have served me better in hindsight.
7.) 2019….my self-employment had grown to a small business and the industry changed and I didn’t want to accept that. I kept going a year longer than I should have and keep paying people 8 -10 months longer than I should have. I knew it but didn’t want to admit defeat. The cost of dragging it out…40-60k.
8.) Because my family now had 40k in debt from me not closing shop sooner, it made sense to sell our other income property in 2020 when Covid hit. We weren’t ok with our kids in daycare (we lived in New York state, so all the deaths in NYC especially scared us in year 1 and 2). Our kids were 3 and 4 months when lockdowns started. Given our preference for our kids perceived safety, there was no way for me to work and we had a large interest payment every month. We were slowly sinking. Plus, just feeling spread thin and stressed from being a parents to small kids in a newly scarey world. So we sold to our tenant who we were friends with. Cut the price down by what we would have paid in commissions to an agent. It made a lot of sense at the time. We walked away with 60-70k net. Paid off our debt. Put some in retirement savings. Took a small amount (maybe 2k, so we could afford to go to a family reunion in 2022) and took 5k to upgrade our unreliable family car to a more reliable used mini-van. Had I not dug myself into debt though…and we kept the home. it was cashing flowing 1k a month net. If I had both rentals, I would have been making 27k a year (mostly tax-free in the years the income was made because of depreciation expenses), plus our networth on paper would be 225k-275k higher. The other failure here was not having a robust emergency fund to feel more secure.
9.) This one has become more apparent in the last few years but in 2017 we went under contract on a home to rehab. We had money from a HELOC for the down payment and the rehab. The rehab went mostly good and we ended u with a mostly lovely home. What we didn’t think through better was 1.) The real estate agent was advising us to spend a little more to be in a better school district. But this would have meant compromising on the projects and put us a little further away from family. 8 years later….we are trying to figure out how to move to those better school districts and should have listed more to the professional we were paying. 2.) The home had an old inground, gunite pool. We thought, how hard could it be….we weren’t pool people…never had a pool growing up. Low and behold…it stints.I spent 3k for all new equipment the second year we lived here. Untold amounts of wasted chemical and electricity the first few years … even AFTER paying a pool cleaner to educate me on the pool. And still pay 1k a year in electricity, equipment, and chemicals. Plus I have to spend an hour every week cleaning the thing. Kids are now 8 and 5…we use it more…but still It gets used maybe 6-7 times a summer. AND I have no gated in back yard for the kids to play safely. Its a mistake that keeps on costing us lol. I don’t event want to think about how much lower our property taxes would be….
10.) Being my own real estate agent on the sale of our 2nd income property. I made a mistake and didn’t fill things in correctly for the “sellers concessions,” which should have been added to the property value. Lost about 7k on that. We still made a good return AND saved on a real estate agent fee…so maybe it was a 1-3k mistake. Still stung.
11.) Not taking a more aggressive car maintenance routine from age 16-35. I did oil changes, sometimes late. I did not flush other fluids or change them. I didn’t buy higher-quality synthetic oils. In my teens to mid-twenties, I did not drive gently. I drive like I am 65 now. I didn’t fix things as soon as I should have, which likely led to problems elsewhere.
12.) Sitting on an inheritance. My father-in-law passed in January 2023. He left my wife about 60k. We cared for him in our home for about 6 months as he battled cancer, with a 5 and 2 year old. Also, 6 weeks before he passed I had 2 open heart surgeries. The next year after he passed….we were just mentally spent. I let my wife know her father’s inheritance was his legacy to her, and whatever she decided to do with is what we would do, 100% support from me. Given all the trauma from 2022-23, I didn’t bring up the money…we “lost” thousands in interest we would have brought in from at least putting it into CD’s. It took about 18 months and we finally got those funds in CD’s. It wasn’t until late last year she decided to put some in her Roth 401k/Roth IRA and still have a nice chunk in CDs fro a future home purchase in a better school district lol. I thought long and hard about suggesting to put some in the conservative equity investments after the 2022-23 pullback…but didn’t want to overstep the bounds I had set. That stings in hind site lol.
13.) Not refinancing my home in 2020 or 2021. I was considering taking out a cash out refi, 30 year fixed and adding money to our retirement accounts. My (very smart) wife hated the idea because it would have increased our mortgage payment, even with the lower rate because we were a few years into our current mortgage with a lot of equity in the home. We never got on the same page and thus, never refied. We have a nice 4.125% loan with 22 or 23 left now. In hind sight it would have worked out….but would have strained us even more and added unnecessary risk during some tough financial times….she was right. What I SHOULD have advocated for, was a 15 year refi that would only have made our payment go up $75 a month. We would be a in 1.875% loan now with only 10 or so years left and our networth would be 15k higher lol.
All my mistakes are normal mistakes…..mistakes from inexperience and youth. I have learned a lot. And through hard work, taking some calculated risks that did pay off, a lot of luck, a great spouse and a great family…we still have a comfortable existence, a cozy net worth for our age, a nice future projection of a security net for old age, have been blessed to travel a few little parts of the world, and spend lots of time with those I care for.
Even if I never made 1 of the above misteps…life wouldn’t be too different. We’d have maybe 400k more….would have done all the same trips. Maybe wed have a slightly nicer home, maybe would have a had a few less money scares along the way…..but all that wouldn’t have change my life trajectory much or at all.
Not realizing until I left my first husband in my late 30s that US pensions didn’t have COLAs, and I had better start saving seriously. UK pensions had COLAs, it had never occurred to me that US ones did not. I still find it astounding.
Listening to the “advisors” the megacorp paid for financial advice for employees and buying funds with loads and high expenses. Fortunately this didn’t last long. I don’t remember now whether it was Money magazine or Vanguard that explained my error.
Not listening to my interior designer and converting the downstairs half bath to full when I had my house renovated. I thought I was spending enough, and putting up with enough chaos, not to add anything, but the house would have sold more quickly and for more money if I had listened.
Probably not investing more in stocks, and not buying during draw downs. But at least I didn’t sell during draw downs, and it seems to have worked out OK. So far.
I take an ironic view of my mistakes, because my later life has been defined, in a positive way, by the dumbest things I have ever done. I foolishly put every dime I had, about $3500, into a stock I didn’t understand based solely on a news interview I did with the CEO. It went up, way up. I sold the stock at what turned out to be the peak to buy a house that was double what I could afford, to please a woman I should definitely not have married. The house went up, the woman went away, and all the best things in my current contented life have followed directly from those blunders.
I have no regrets about my mistakes because greater wisdom would have sent my life in a different direction, and I’m very, very happy with the way things turned out. So I wouldn’t change a thing.
Here are my six:
I’ll join the chorus with IDS Investments as a teen in the 1980s. I trusted my parents’ advice and their advisor. I liquidated my New Dimensions and Discovery funds as soon as my husband and I were engaged.
Recent blunders: buying fertilizer stocks.
Next mistakes: taking gains too soon on Visa & Nvidia. Thankfully we still have some shares, but the portfolio value of those two if we had not sold could have meant a very nice condo somewhere. I need to ignore my husband’s “take some gains off the table” mantra.
Improving our home beyond its suburban Chicago low-growth market value is our #4. We continue to enjoy the improvements and they will help sell it more quickly when the time comes. I’m looking at you Windows, Deck, and Basement!
As my biggest fan, my husband would disagree with this fifth one–I switched to part-time work once I became a mom in 1995, then also had a six-year gap once our third son arrived. I only regret it financially, I left a lot of benefits, namely 401k matches, on the table. To compensate I opened a SEP, so I would still have tax-deferred growth.
The biggest mistake was not plowing funds into a Roth during low income years. Now I’ve started a modest conversion plan. Ed Slott is dead on with his ticking time bomb line.
“I’m looking at you Windows, Deck, and Basement!”
My understanding is the best return on investment is with renovating kitchens and baths.
We did those when we bought our house. The 3 I mentioned have been done since covid. The kitchen still looks great! But our main floor bath need some help. Having a granite threshold/sweep under the shower door has turned out to be a bad idea.
Being far too conservative being the breadwinner and three kids and no stomach for losses. My kids assets now are 100% Total Stock in their late 30’s early 40’s. Think the 60/40 model is dead
All too easy for me to answer:
(1) Still single in my 30s with the bio clock ticking, I married someone who liked to spend and who figured he’d just earn more to pay for it — don’t ask me about the very used Greyhound-type bus he bought on a credit card — whereas I wanted to spend less and either pay cash or pay off any credit cards in full each month.
(2) To marry, I’d left teaching (all I’d ever wanted to do) and could find only lower-paying jobs in our rural locations. The marriage lasted just over 10 years*, after which in my 40s I was able to return to teaching and start saving for retirement. (3) My first investment at TIAA, though, was much too conservative.
As it turned out, I realized being introverted, single, and childfree suited me, and I liked being able to make decisions for myself. I set about learning and doing everything I could about investing for retirement: maximized catch-up and extra contributions in smarter choices at TIAA, *received 4 years of Social Security ex-spousal benefits while delaying my own to age 70, and switched everything to Vanguard index funds upon retirement at 70.
I, too, benefited from ex-spousal benefits. I stayed married longer than I should have, and the benefit was an unexpected pay off.
1) Buying or first house in the spring of ‘83. We were going to start a family while living in Pennsylvania after I graduated from graduate school, even though we were both from NH. We wanted to have our children grow up in a home with a yard like we did. Paid 13.5% interest. Daughter was born October of 85. Turned out I hated my job, and we decided to move back to NH in January of 86. The house sold that spring, but luckily housing prices increased enough in the interim that we broke even despite paying a commission. From a family standpoint we never regretted the decision however as my children and their cousins grew up in the same town and are more like siblings. (Oh yeah, we just bought a new car for what we paid for our first house)
2) In late 90s a coworker’s husband had a stock tip. A CEO had returned to a company he had founded previously and the husband was sure the CEO was going to turn the company around. I said no I’m an index investor and thus like to spread my “bets” around.
Have you guessed who the CEO and the company was?
Yeah, Steve Jobs, and Apple.
My indexing worked and were are financially set, but still…
My dad was solicited by a friend named Nat Lehrman to invest in a new publishing venture he was involved in with a buddy. My dad met the buddy, thought he was kind of a slickster, and passed on the investment.
The buddy was Hugh Hefner.
Lehrman became Playboy’s associate publisher and lived the life my dad would have loved to live.
My neighbor was approached by a young guy in 1975. The youngster had recently started a company and was looking for a CFO and early investor. My neighbor declined.
The young guy was Bill Gates.
I think some of those mistakes are within the norm. We started with IDS paying the AUM fee, plus ridiculous loads and ER fees. Pulled the plug on that, and branched out into lower cost funds that included both passive and actively managed mutual funds (thankfully two well known funds from Vanguard). I even managed to buy shares of a Japan fund from another fund company near the top of that market. Ouch!
Looking in the mirror with you Jonathan in terms of buying some individual stocks in the mid to late 90’s that took off to amazing heights, then endured quite a plunge during the dot-com bust and 9/11 selloff. A few of them even went bust. Lessons learned after that round trip from the mid 90’s to the bust led to choosing target date funds, and index funds in all of our retirement plans for the past 25 years.
I’m sure there were more mistakes that I have moved to the back of my consciousness, but in spite of the price of tuition try to take the past mistakes in stride.
My worst financial mistakes all involve investing.
1. Market timing
2. Market timing (for emphasis)
3. Small and unsuccessful attempt at investing in hedge funds.
4. “Hang on to your winners” – looking back, I never could. I have mostly invested in index funds since the early 2000’s. This has turned out well despite many failed efforts at market timing (if I didn’t mention it) lowering my returns. In addition to my index investing, early on I chose to allocate a small portion of my annual savings (up to 10%) to individual stocks. While I don’t have the specific percentages, my track record has been pretty good. Out of probably 100+ stocks, I can only remember a handful of stocks that went to zero. Alternatively, I remember a large number that have gone up over 1000% (sometimes well over) from my original purchase price. I owned CSCO, WMT, EOG, MSFT, BKNG, FAST, CMG, AMZN, NFLX, META and many more. My mistake? My typical gain realized in these stocks was 50-200%. I was always too quick to “lock in” gains fearing a drop and then move on to the next stock. (Another costly form of market timing.) Trying to calculate the opportunity cost $$ over the years would serve no purpose, but I know it’s a very large number.
In the late 90s, I invested in various Janus funds thinking I was getting diversification. I was new to investing and later figured out I was buying the same underlying investments under a different fund name. I lost some money there during the tech blowup. I considered it a lesson well learned, as going forward I only invested in Vanguard index funds and developed an asset allocation plan.
Those are the same funds that I owned. I thought I was genius, LOL!
Ugh, I bet I could come up with more than six, but here are a few:
Oh, here’s another one. My father-in-law and his wife wanted to unload their Kauai condo in the 90s when they moved to Florida. They thought we should buy it for $93K. Holy cow, I wish we’d done that!
“Buying cheap, crappy cars. We live in California”
We live in NH where because of salt the lifespan of a new car is about 10 years. My daughter lives in California and bought a new Hyundai before she left Connecticut. It’s 10 years old looks like a beater but runs fine. She could easily afford something new, but I secretly think she’s trying to beat my record of owning a stripped 2WD Toyota Tacoma for 18 years (with a warranty replaced frame at 9 years old).
If I lived in California I would buy a good quality vehicle and probably own it for 25 years.
For two decades, our strategy was to buy late-model, low miles used Toyotas, drive them until the wheels were falling off, and then get another one, rinse and repeat.
We’re at a different life stage now and treated ourselves to two new Audis in 2018 and 2020, a convertible (because California) and a small SUV—so the “fun” car and the “practical” car, but they’re both great. They’re both long paid for and still very low miles. We could be driving them until the kids take our keys away at this point!
As the owner of two Audis I would advise you not to keep them to the wheels fall off. In my experience, Audis are very expensive to maintain and repair. They are nice but I don’t think they are built to last.
“Regrets, I’ve had a few”, like investing in bottom feeder IDS funds in the 80s, relying on magazine articles to pick mutual funds, and some misguided real-estate ventures. The people that never made any mistakes are the ones who never tried. I suspect we HumbleDollar reading mistake makers are enjoying financially secure retirements compared to the average mistake free folk.
In the 1960s I was encouraged by a cigar, cigarette, pipe smoking broker to trade penny stocks- he always had another “good one.” I never seem to find that one. Not large sums because I didn’t have much money in any case.
Connie and I got engaged in 1968 while I was in the army. I came home in June on a pass to buy the stone. In anticipation I sold one of those stocks at the usual loss.
I paid $1500 for the stone, but the jeweler said don’t pay me now, wait until you come home again in the fall. By the time I paid for the ring, the stock I sold at a loss has risen and I could have paid the $1500 with the profit.
The good news is that ring is now worth many time the $1500.
Forget the money, the ring is still the best investment of my life. First date Feb 68, into army May 68, engaged June 68, married December 68. and shocked parents.
But 56 years of a compounding wonderful life.
Being a value investor in retirement (IRA for 20 years) and holding 50% of US equity portfolio in DFA US CORE EQUITY II (DFQTX).
55 years ago I sold a mutual fund of 8500 dollars to pay off credit card debt that had ballooned to over 8000 dollars. I know it was the right thing to do at the time, but I can’t help wondering what that mutual fund would have been worth today. My wife and I cut up the credit cards and buried them in my vegetable garden. It was a bonding moment for us and we never had to worry about credit card debt again.
You buried your credit cards in the garden and your net worth grew. What a great lesson.
I appreciate your honesty Jonathan. Thankfully, I don’t have much to contribute, but that’s not due to my financial savvy. Rather, it’s a combination of suspicion of the motives of others learned during my days as a salesman and stumbling on some good information from people like yourself.
One mistake I used to regret concerned my former business partner, before my present career. I knew he had several small ventures that he would shuffle money between to keep things going, but I didn’t think it would touch me. Toward the end of our relationship, however, I let him get into me for several thousand dollars. I was emotional at the time, and bitter for a while afterward, but it was part of the impetus that drove me to change careers and lead me to the life I now enjoy. It actually turned out to be a good thing.
The one that jumps out at me is one I wrote about previously. I bought a timeshare, at full price, 6000 miles away. The yearly maintenance fee was about 5% of the purchase price. We paid that every year, even thought we bought an every-other-year unit. Eleven years late I was able to sell it for about 20% of the purchase price.
My biggest financial mistake was not having the guts to break up with my financial advisor until I was 72 years old!