My 7 Biggest Financial Mistakes – Confessions

My 7 Biggest Financial Mistakes - Confessions

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.

  • Lesson Learned: Don’t try to make a quick buck…get rich schemes and bubbles are too good to be true.
  • Money lost: $15k

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.

  • Money lost: $5k

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: Buying a home isn’t for everyone. Renting is sometimes the smarter decision.
  • 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.

  • Money lost: $30k

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.

  • Money lost: $15k

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.

  • Money lost: Difficult to quantify

Selling My Apple Stock 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 decided to sell it because I was tired of the emotional roller coaster that came with the stock. I bought Apple stock at $10/share in 1999 and sold it for $100/share in 2008. The current price of the stock..$522/share.

  • Money lost: $20k

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?

About The Author

Edwin is a marketer, social media influencer and head writer here at I Am 1 Percent. He manages a large network of high quality finance blogs and social media accounts. You can connect with him via email here.


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28 Comments

  1. Bryan

    Thank you for the transparency. I too have made these same mistakes. Unfortunately I am a bit slower at learning from my mistakes, but I am finally hard core about getting on track and out of debt, etc. Thanks again.

    Reply
    1. iam1percent

      No problem…my hope is that people avoid these same mistakes before it happens to them.

      Reply
  2. Kari

    #7, ouch! I don’t invest in individuals stocks for exactly that reason, I’d always be tempted to pull out when I think I’m getting a good deal and don’t know enough about the market to actually make an educated decision. Like you said, too much of an emotional roller coaster.

    Reply
    1. iam1percent

      I stopped investing in individual stocks…I’ll leave those to the experts and to those who can dedicate time to do the research. Most of my money is now invested in ETF’s or mutual funds.

      Reply
  3. Money Infant

    I don’t think you lost money on the Apple stock, as far as I can tell you sold for a 1000% gain. What the stock did after you sold is irrelevant since you no longer owned it and so you couldn’t possibly lose money on it.

    Thanks for fessing up though. Just goes to show that no one is born knowing how to handle money, it is a skill to be learned over time.

    Reply
    1. iam1percent

      Thanks for seeing the positive! Its just hard to see that current share price knowing that I owned a few shares…

      Reply
  4. JB

    I am right there with you on #1,2,4,6. My #1 lesson was much more painful however. While I was not a daytrader, I was pretty close to it and got a little to confident. Early in the .com bust, I lost a large pile of money on 2 companies in 1 day. Wiped out almost all prior earnings for the year. I learned all about the flip side of leverage (and all about margin calls) that day…

    Reply
    1. iam1percent

      Yikes…I didn’t get into the whole margin call thing…looks like you’re doing okay now.

      Reply
  5. Michelle

    These are all very interesting. We definitely fell into the new car trap.

    Reply
  6. PK

    Would you say you’ve improved your negotiation skills since some of your examples? Particularly in compensation – how much of your rise in income is related to increased negotiating skills?

    I like ‘Difficult to Quantify’ with Politics, haha. Isn’t that what politicans are trying to do? Make it difficult to quantify where the money is ocming from while making sure they make it easy to quantify the benefits? Paging Frédéric Bastiat!

    Reply
    1. iam1percent

      I think I’ve gotten better, but still have a ways to go

      Reply
  7. Six figure investor

    Most of these really arent that bad…there are plenty of ways to go wrong that are much worse. The trick is to not make the same mistake twice. E.g., i invested too much money in the company i worked for(bad on mutiple fronts). The second time around , my VP said, “invest in the company, 15% discount, cant lose, etc. you can guess what happened, the company crashed. I didnt have any shares.

    Reply
    1. iam1percent

      Yikes..fool me twice

      Reply
  8. Jeffrey

    I think everyone is kicking themselves with Apple, but it’s always easy to do that looking back. These are all pretty common mistakes, but I’m glad to see that none of them have ruined you financially by any means.

    Reply
    1. iam1percent

      It can always be worse…that’s how I view life.

      Reply
  9. Lisa

    We bought a fitness franchise years ago. (I loved fitness and my husband got the crazy idea in his head that I would be good at it, love it, and we’d make a lot of money.) The franchise was $30,000 and it broke even a month or two but overall just drained us.

    What we lost –

    $30,000 for the franchise. And roughly $1,000- 1,800 for each month we were in business. Which was 2 years.

    What I learned –

    *Don’t make a commitment and sign up for something unless you really want it. (I didn’t want this business at all. But my husband was very aggressive in pushing for it, for some reason. I was newly married. I wanted to be a “good wife” and please him. I also felt very lost careerwise so since I didn’t have a better idea.)

    *Don’t hire the wrong people. (One employee didn’t want to go through the sales pitch or introduce people to the concept. I found out after she quit that she’d tell prospective people that she didn’t know how long we’d be in business because things were really bad and the workout was boring. I hired her within two months of opening. So she had started telling people this early on. I couldn’t understand WHY we weren’t getting any traffic or signups.)

    *Go with your gut. I didn’t trust the founder of the franchise. He was too “I’m a good person because I’m a Christian.” The man is one of the most unethical people I’ve ever met. And during the training sessions, made jokes about overweight women. (You know, the people who were the ones coming in and signing up.) Many promises were made on their part. None were delivered. And they became super slime balls toward the end when we told them we could no longer keep the franchise going because it was bleeding us dry.

    That was more than 10 years ago. It STILL raises my blood pressure to think about the whole ordeal. But that initial poor decision (to make someone else happy instead of myself) cost me so much. I hated the biz from the first day we opened. It failed and I felt very responsible. I lost a great deal of confidence in my ability to make business decisions. And I felt it was a black mark on my resume. It also affected my marriage. We should have been enjoying those early years. But we ended up fighting and resenting each other instead.

    Just saying that I appreciate you sharing your story. And some times it’s difficult to see how much money we end up losing. But for me, the most valuable thing I lost was the self-confidence.

    Reply
    1. iam1percent

      Lisa, thanks for sharing your story. Sounds like a painful ordeal that you went through with the business. I tend to think that things happen for a reason and to try to put it past me. I know how easy it is to still get furious thinking about it (i sometimes feel that way about my mistakes)..but what happened has already happened..nothing we can do to change it. let’s try to make the most of our future..something we can control!

      Reply
  10. Dollar D @ The Dollar Disciple

    I wouldn’t be too upset about #7. Put another way, you *only* made 10x your money.. 🙂

    Reply
  11. Nick

    Not bad considering these are you worst! Back when I was heavily investing in individual stocks I bought 100 shares of Apple at 87 and sold at 150 or so. Not looking back because it was a good gainer (plus I’ve had about 8% of my investments in Apple for a while, mostly through my mutual fund holdings) so I’ve been riding a bit of the ride up that way.

    Then again, I’d say your mistake with Apple is not that you sold, but that you got emotional. That’s the problem.

    I’ve had some pretty nuts financial blunders that cost me well over 100,000 so far (I’m still dealing with one of them). So don’t feel too bad… the key is really limiting the effect of the mistakes, which you obviously did well.

    Reply
  12. Monica

    Thank you for this post, it’s very difficult to share financial mistakes with other people, but so many of us have done the same things or worse! I think the best point that you made was that you identified your mistakes, learned from them, and developed strategies to avoid them in the future. I too believe that things happen for a reason, besides, life is a learning process and if we knew everything and made no mistakes, what would be the point?

    Reply
    1. iam1percent

      Thanks Monica! It was almost therapeutic to share them…

      Reply
  13. Well Heeled Blog

    Like most folks said, I’d chalk the Apple deal to an amazing WIN. Don’t beat yourself up.

    Reply
  14. Shilpan

    You really haven’t lost money with Apple. What you’ve lost is the loss of opportunity. 🙂

    Reply
    1. iam1percent

      True…I can’t get over the opportunity cost 🙂

      Reply
  15. Poor to Rich a Day at a Time

    Mistakes are part of winning 🙂

    We are all human and we all make our share of mistakes regardless of income brackets, the important thing is if we can learn and grow from them knowing with each mistake, the probability of success is just that much closer 🙂

    Reply
    1. iam1percent

      I agree! Thanks for visiting!

      Reply
  16. Terry

    Going to college was by far my worst financial decision. Not only did college leave me with a small amount of debt without enhancing my income one dime, the opportunity cost was enormous because it took me out of the real-job market precisely when my earning potential was greatest. (I graduated in the top 5 percent of my high school class at a time when there were many good jobs available to high school graduates, and I worked menial low-wage jobs while in school…and after school as well.

    Reply
    1. iam1percent

      Sorry to hear that. Hopefully you can put it behind you and focus on what you can control in the future!

      Reply

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