This is The Money Viking Greg, and I have made a few financial mistakes in my approximate 40 years! Well, I have been working since I was 15, so I guess you could say I made some mistakes in the last 25 years. The first 15 years of my life were all about school, Boy Scouts, Garbage Pail Kids, comics, skateboards, Dungeon’s and Dragons, baseball, drama class, drawing super heroes and being a kid, etc. A rather carefree existence, like our family dog. Not much investing or money management happening. Not much in the way of building a career and attempting to build some assets in this world. I have made some good financial decisions, many of which I chronicle on this site! But, some of the best teachers have come from my mistakes.
In Hamlet, Shakespeare says “Every dog will have his day!” Each of us has our fair share of mistakes and successes in life. So here are 3 failures that I am trying to forget but learn from. Hopefully you learn from my pain. The funny thing about mistakes in life, is that in some ways we need to make them, they are a great teacher. In fact, some new schools of thought in terms of learning are emphasizing the importance of trying and failing in order to promote true growth and skills. They encourage failure and celebrate it as a way to truly learn and grow. In other words, maybe we should encourage our kids to fail sometimes. This builds grit, knowledge and emotional intelligence. Folks that never fail probably do not try doing new things or challenge themselves very much.
A few of my big money mistakes:
ONE: Purchased a Condo in 2003
This was both a mistake and a great decision. This seemed brilliant for the first couple of years. The price was going up and up, it’s like the price went up $10k each month. I thought, this must be what real estate does, everyone is saying so. Wrong! I bought it for $220k. At one point they were selling for $300k. After the real estate crash it was worth about $160k! I was caught up in the subprime mortgage mess, easy money for everyone because real estate never goes down, the “experts” said it always goes up and everyone was getting rich. It took many years for the value of the property to slowly climb back up before I sold it.
I had to rent it out and wait a very long time for the price to recover. It was what it was, but it is just a strong reminder that real estate does go down sometimes. This is something we have all probably forgotten at this point, with so many years of price appreciation and sky high values. Wait until interest rates start ticking up and we hit a speed bump in the economy. At one point I started renting this property out, which taught me a lot about managing investment properties. So, painful lesson to go through, but I am much wiser for it now.
TWO: Bought “Webvan” Stock at the height of the “Dot Com” bubble!
I was in college during the dot com bubble and had very little money and no assets. I thought it would be cool to own a slice of the future. I bought $300 worth of a company called “Webvan” formerly “HomeGrocer.com”. I had heard stories and myths about people becoming millionaires on paper over night with dot com stocks. Webvan was going to revolutionize the delivery of groceries straight to people’s doors. About 6 months after I bought the stock the whole operation failed. I lost every penny, and back then that was a lot of money to me!
I should have placed the money in a low cost index fund and forgotten about it. My $300 would have been worth $2,000 plus today, maybe more with dividend reinvestment.
THREE: Bought a new Car in the early 2000’s
My old Ford Ranger had finally died. I really loved that truck. I drove it all over the place. It was a stick shift, it was paid for, it was great. But, I ran it into the ground. The cost of replacing the transmission and other issues was going to run into the $3k plus range. So I thought, time to buy a NEW car. Well, I should have bought a USED car.
So when it died I ran over to the Ford dealership to buy something new. I bought a brand new Ford Explorer. What was I thinking? I was naive. I did not know anything about negotiating although I thought I did. I had no leverage, I did not think about walking away. I rationalized every step of my decision and before you know it I was paying a hefty car payment each month on a depreciating asset.
In conclusion, it may be beneficial to reflect on some of our financial mistakes. What did you learn from them? How were they beneficial to you in some ways? The good news is that Shakespeare was right, “every dog will have his day,” therefore we can recover from our inevitable “mistakes” and become stronger. We will each have our combination of successes and failures, but the failures are excellent teachers.