My 7 Biggest Financial Mistakes: Confessions of a 1 Percenter
I’m the type of person who tends not to regret anything in life. I have a strong faith, so I truly believe that everything happens for a reason, even if I don’t understand it. I do my best to learn from my mistakes so that I won’t make them again. But, there were a few financial mistakes that I have made that were utterly stupid or not well thought out. These mistakes cost me tens of thousands of dollars while hindered my goal of being a 1 percenter for a long time. So, I bring you my confessions:
- Investing in bubbles: You would think I would’ve learned this the first time around, but I did this twice. In the late 90′s, I was in my early 20′s, working, and going to school. I earned a decent income, but had virtually no expenses because I lived at home. So, what’s a man to do with his money when everyone around him is making a killing investing in technology stocks? I threw in approximately $20k of my money into the market at lost about 80% of it in a matter of 1 year. I then did the same thing during the real estate bubble, but thankfully, it didn’t hit me as hard. The rental property I purchased in 2007 was purchased at a reasonable price in a market that has not been affected by the decline in real estate prices.
Buying new cars: I’m not too worried about this one, but we probably didn’t need to buy new cars. As everyone knows most of the depreciation occurs within the first year so its best to buy used and have someone else pay for the depreciation. We did this twice so far, so I’m glad I caught this early on. Moving forward, we will likely buy used.
Buying a home knowing that we’d live in it for <5 years: This one has a lot to do with the real estate bubble at the time, but we moved to Delaware in 2006 knowing that we would only be there for 3 years (wife was in a temporary work program there). But, everyone was making a killing on real estate, so buying real estate was a no brainer at the time. Fast forward to 2009 when we had to sell. We lost approximately $40k in value of the house ($25k was recouped through a generous relocation program).
- Lesson Learned: don’t try to make a quick buck…get rich schemes and bubbles are too good to be true.
- Money lost: $15k
Negotiate harder on homes and cars: I’m not a strong negotiator and have been working on my negotiation techniques. I have gotten a lot better, but I could still improve. That said, I did negotiate on my homes, rentals, and cars, but early on, I probably could have negotiated harder.
Showing my salary card first: I was young and naive when I first started at my company 7 years ago. During salary negotiations, they asked me what I was currently earning. I told them, and they came back with a really low offer. I should have been firm in telling, that I don’t think that is relevant and that I expect a salary that would commensurate with my background, education, and experience. Since then, I have been firm in negotiating new job opportunities at the same company. I was able to achieve this by taking on new roles and responsibilities and negotiating subsequent salary and merit increases.
Not being educated in politics: I was never into politics, until the recent 2008 election. But there are implications, particularly tax implications, to who we put into office. For example, there is a push now to raise income tax rates on the wealthiest Americans, and Congress passed Obamacare which includes a 3.8% rental income tax for high income earners. I know that 1 vote may not make a difference, but the power to vote is something we should all exercise.
- Lesson learned: Buying a home isn’t for everyone. Renting is sometimes the smarter decision.
- Money lost: $15k
Buying 50 shares of Apple Stock at $10/share in 1999 then selling it $100/share in 2008: Yes, you read that correctly. I was a huge Apple fan and bought Apple at a time when no one believed in them. Through the years, however, and particularly in 2008, the share price fluctuated so much. I remember telling myself that Apple can’t stay on top forever. I also remember asking myself, how high could this actually go? I sold it because I was tired of the emotional roller coaster that came with the stock. Current price of the stock..$522/share.
- Money lost: Difficult to quantify
Total money forgone: $100,000
I put these out on the table for the sole purpose that anyone reading this will not make the same mistakes. It was humbling writing this article, because I have never sat down and quantified all the mistakes. It’s difficult to see the amount of money that was forgone, but as I stated earlier, I’ve learned a lot through the process. I also put this out there to show that becoming a 1 percenter was not easy for me. I did make mistakes throughout the process, but learned from them.
What about you? What mistakes have you made that others can learn from?
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