I’ve made a number of dumb, bad, financial decisions over my 50+ years of life. But the single, dumbest, financial mistake EVER… was buying a set of encyclopedias. I know what you’re thinking. Oh, that’s not that bad. At least encyclopedias are educational and you can get a lot of use of them! Yes. Yes, but…
But… Except…
Except for the fact that I was in my early 20’s, newly married, we had NO other furniture except for a bed, and the rest of the apartment was 100% empty. Why did I buy them? Because it came with a “free” TV, and I didn’t have one. And I bought these from a door-to-door salesman at an apartment complex. I spent around $1000-$1500 for them.
How bad can it be?
$1000-$1500 is a lot of money all by itself. To make matters worse, had I invested that money in the S&P 500, and re-invested the dividends every year, that $1000-$1500 alone would have grown too… wait for it… $20,000-$30,000 today.
So in the end, as of today, I spent $20,000-$30,000 on a set of encyclopedias… and a TV.
A man must be big enough to admit his mistakes, smart enough to profit from them, and strong enough to correct them.
John C. Maxwell
Financial mistakes are dumb now. Compounding makes them worse.
Mr. Hobo Millionaire
Minimize the financial mistakes you make over your lifetime. Don’t beat yourself up, but understand, financial mistakes compound. The money you lose from a bad financial decision is gone forever, and so is the compounding of that money. You must limit these bad decisions.
One other tip
One other tip that will save you way more than it hurts you is don’t answer the door if you’re not expecting someone, and don’t pick up the phone if you don’t recognize who’s calling you. This one decision will save you more than any “missed” opportunities. Sometimes what you don’t know can’t hurt you.
What about you?
What was one of the dumbest financial decisions you ever made? I’ll be outlining my full list in a future post.
I could have sold $60,000 worth of company stock options in December 2015 but waited until January 2016 to get the sale into a lower income year since I was retiring. They went underwater before I could sell them, I lost $60,000 trying to save $4,000. A bird in the hand…
Hey Steve! Yikes. That’s a good (bad?) one. The only story I have close to that one is back in 2000, I opened a small recording studio. I ended up purchasing $50,000+ of studio/recording equipment. Along with some other things around that time, it did not go well, and I had to close the studio after a couple of years (and to be clear, I had no business trying that business – I had a negative net worth at the time). Well, instead of selling that equipment then, I stored it in a garage (actually multiple garages, because I moved a couple of times), and I never got it sold while it was still worth anything (most of the technology became severely outdated). In the end, I either gave away some of the old stuff or I sold a few items for may $3,000 total. I held on to the equipment for so long, because of the pain of what I invested and lost, and ended up losing even more in the end. 50K invested in the market would have grown to 200-300K+ at this point, and even selling the equipment for 25K, if that would have been invested, I’d have 150-200K+ from that. As the article points out, these types of decisions can kill your finances. You really have to minimize them over your lifetime. I know you are OK financially (I’ve read some of your other posts before), but these types of decisions are a real punch in the gut.