30 Oct My Top 8 Biggest Financial Mistakes
In my lifetime, I’ve made LOADS of serious financial gaffes! Rather than beating myself up about how stupid I’ve been, I’ve tried to adopt a mistake-positive philosophy.
As I said, I’m not proud! So today I’m going to try to rectify things by showing you what a big idiot I’ve been with money in the past.
Without further ado, here are my Top 10 Biggest Financial Blunders:
1. Buying a new car with a loan
Fresh out of college in 2008, I landed what I thought at the time was my dream job. Great pay, “flexible” hours, interesting work, so I immediately wanted to upgrade my vehicle to match my status. My parents tried to set me up for success during my final year in college – we went to a used car dealer, picked a decent, affordable car, paid cash for it, and handed me the keys. Two years later, the car was perfectly fine, but my ego wanted a new, shiny car, that I could remove the plastic myself. After an hour of negotiations and paperwork, I walked out of the dealership with keys in my pocket and a $562.33 monthly payment. Yikes. After making the third payment on the car, I knew this was a dumb idea. I further got the hint that it was a dumb idea when I went to sell the car two years later and realized that my payments had not kept up with depreciation – it was worth less than what I owed on it.
Since that first financed car, my motto has been to buy a 3-5 year gently used car from a private party in cash, with no financing required. This option ensures that I only buy as much car as I can comfortably afford while allowing the first few years of depreciation to be absorbed by someone else.
2. Collecting things is a terrible idea
We came to the US in 1999, smack in the middle of the Pokemon era. I was 13 years old and easily influenced, so I started my Pokemon card collection, with the shiny Charizard card the one to have. In a time when my parents could barely make ends meet, I was spending their hard-earned money on collecting expensive toilet paper. I used to think that this collection would one day be worth a bunch of money, I just needed to ‘sit’ on them and find that elusive Charizard card. Needless to say, my collection was not worth anything but a learned lesson, and sometimes that’s good enough.
3. Upgrading tech is like throwing money in the trash
Do you like new technology? I sure did! In my life, I’ve owned all kinds of technology, from crude cassette tape recorders to computers and CD players. I’ve owned it all. And spent too much money on it! I used to upgrade to the latest computers, TVs and cell phones every couple of years. Each new generation, I’d have to get rid of the old technology just make room for the new.
It was always a financial disaster.
Do you know what I’ve learned? Paying to stay at the front of the technology curve is a total waste of money. There is always going to be some new technology or cool innovation you can upgrade to… and (I’ll admit), it’s always better than the old technology.
Paying to be at the technology front-line has a very high cost. It’s far better to be at the back of the technology curve, and only adopting new tech once everyone is willing to part with it for cheap. Usually, this means it’s at least 4 to 5 years old, and completely outdated by “modern” standards.
4. Carrying a balance on credit cards
When I started making some money after college, I opened up three credit cards to “build my credit” and “protect against theft” which was OK. The dumb financial mistake was carrying a balance on each of the cards and keeping money in my savings account. It was easy to spend on credit, almost like it wasn’t my money. But when it came time to pay, it was hard. I paid a chunk every month, but it felt like giving up my firstborn every time I made a payment.
It wasn’t until 2012 when I started tracking my expenses in Mint that I noticed interest payment of $1926 on an annual balance of $12000, a whopping 16%. I was furious for being so stupid and vowed to use credit cards sparingly and always pay the balance at the end of the month. Now I always carry cash with me and use credit for big purchases just to get the purchase protection.
5. I pissed away oodles of money on flavored water
People spend way too much money on flavored waters. Most people are hooked on the stuff. I used to be one of them. I used to buy all sorts of flavored waters — sodas, coffee, bottled teas, fruit juices, sparkling bottled water, you name it!
Really, you don’t need any of it. It just makes you fat and addicted. The only thing you really need is water.
This is literally where a ton of my money went. Pissed right down the drain.
I’ve said it once, but I’ll say it again: “Addiction, obesity, and financial dependence are frequently served in a cup (or a bottle).”
6. My experiments in penny stocks were a complete disaster
Yep, at one time I tried penny stocks. For some reason I thought it was a good idea…. but turned into a total disaster. This was part of my get rich quick plan, I would find that one stock, a 10 bagger, that would make me rich. I followed gurus on the web that were promoting penny stocks for 1000% gains, and I wanted a piece. What I got was a pump-and-dump narrative and got left holding an empty bag. I still own one stock today, LGTT, from 2012, which is worth $0, but I cannot sell due to some BS restrictions. It serves as a reminder of my financial stupidity in my younger days.
I lost around $15,000 on this gigantic blunder and learned a very valuable lesson about speculating (don’t). I no longer trade penny stocks as a result of this financial blooper.
7. Investing without due diligence
Similar to number 7, I invested in a startup in 2015 without understanding the basics of the business and doing my due diligence on the deal. The promise was to invest $XX and get a large sum of money paid monthly without having to do anything. I was lured in by the large returns and completely missed the big picture, or the potential risks, or the fact that the promised returns were not based on any real facts. In hindsight, if it sounds too good to be true, it’s too good to be true. I should have done my homework, calculated the risks and returns, and walked away from the deal. Today, I only invest in businesses that I can control, influence, and more importantly, understand. My investments circle around my own business, local real estate, and stock in established companies paying regular and increasing dividends.
8. We took too long to buy a house
After Mrs. and I got married, we decided to purchase a co-op apartment to start our life together. The apartment was very affordable and we bought all cash in 2012. Although we made some money at the time of sale in 2016, we would have made much more if we had leveraged a bit and bought a house with 20% down.
Fast forward to 2015, we took forever to find a house because we were super-picky. I wanted a multi-family as an investment, then we wanted a single-family but affordable, finally, we opted to get a fixer-upper in a nice neighborhood. It took 2.5 years in total. During that time, the average home price in our area rose from $350k to $500k.
For now, we are long the real estate game in our area and financed a comfortable mortgage with 25% down at 4% annual interest.