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10 money mistakes I have made

Financial mistakes cost money

I am not a standard personal finance blogger. Many of my peers only fixed their finances after first running up huge debts or losing their jobs. But I’ve never been in debt and I’ve never claimed a penny in welfare or benefits.

The closest I’ve got to the D-word was in my second year at university, when I borrowed money from a friend between grant cheques to buy a stereo.

In mitigation, I was still using that system a decade later – I bought well – and when I left college I had money in the bank, despite only ever receiving the standard student grant.

(Specifically, I took out a student loan, but only to put the money into a high interest savings account, then arbitraged the difference between the rates!)

Anyway, for me that stereo purchase was my wild moment – the equivalent of a week-long cocaine binge with dwarf waiters, fire-eaters and loose women on stilts. (I presume that’s what debt-fueled decadence looks like?)

Am I perfect then? I wish. I have financial blindspots just like anyone else – but maybe not the same ones.

While I can’t really match other blogs with their confessions of “I replied to a nice email from a gentleman in Nigeria” or “I drank 20 expensive grande triple-lattes a day and then had a heart attack and couldn’t afford the medical bills”, I have done the dumb stuff listed below.

Let us know in the comments below of any unusual ways in which you’ve lost money.

1. I rediscovered shares late (part one)

I used to study share prices on the Teletex TV service at 6.30am every morning before my paper delivery round.

I’d try to guess trends. The next day I’d check to see which shares had risen and which had fallen, and whether I was right.

Not the most advanced trading strategy, but I was 13-years old. If I’d kept it up, a lucrative career as a city broker or money manager might have beckoned.

Instead I grew my hair long and discovered poetry, music and girls, pretty much in that order.

I didn’t rediscover shares properly until my late 20s, by which time Cityboys my age were already burning out and getting divorced. I’d missed my moment.

2. I never bought a house

Probably my single worst call ever.

It would be less painful if I was oblivious to the value of owning your own home, but I wasn’t. I urged friends to buy throughout the mid-90s slump, right up until they nearly all had bought and I was still renting.

Why didn’t I buy? At first I was moving around a lot. Later I was snobbish and wanted a great place for my money. Finally I thought the market was over-valued (which it was, but for years prices went up anyway).

Every time I renew my rental contract, I ponder how much this failure has cost me. I estimate something like £200,000, assuming I’d stayed in just the small two-bed property I almost bought in 1996.

In reality, I’d have traded up and made more.

3. I read too much Jack Kerouac as a teenager

If you want your kids to end up rich, don’t let them read On The Road.

Or else let them read it, but then take them to see some real dropouts. Point out the damp living conditions, the poor hair, the questionable taste in music and the seemingly essential need to pretend none of it is happening via a drug habit. Hopefully they’ll get the picture.

At key points in life, my left-field youth has risen up to stop me doing things that ultimately might have made me money. Buying a boring but sensible house, for instance, or sticking to the fast track in my early career instead of going for freelance freedom.

Arguably I might even have got married by now, which can save on some costs (although it can usher in plenty of others if you’re not careful!)

4. I developed a tropical fish habit

I mean keeping fish as pets, not eating them. And not just any old tropical fish either, but coral reef fish. Corals too, in fact.

Do you know that you can break a bit of coral off a friend’s own specimen, put it in your own aquarium, and watch it grow?

It might sound cheap – like taking cuttings of herbs – and it would be if that aquarium didn’t cost £2,000 to set up first.

And don’t even ask about the price of the fish. Loose women on stilts are cheaper.

5. I never traveled when I was poor

One thing I plan to do when I achieve financial freedom by replacing my salary with investment income is travel the world.

Nothing unusual in that, except to say that I’ve now traveled a fair bit with work and stayed in some truly excellent five-star hotels.

I’m sure dorm rooms in Thailand have a certain charm, but when you’ve been lucky enough to stay in Shutters on the Beach in Santa Monica for three weeks on somebody else’s account, you’re going to have to hold your nose back in a budget bungalow.

Don’t take this too seriously – I don’t, and I’m sure I’ll be okay. But nevertheless, I think I should have done the dollar-a-day thing when I actually only had a dollar-a-day to spend.

6. I keep buying multi-trip travel insurance

Vaguely related, I keep intending to do some travel now, rather than wait until I’m too old or fussy to enjoy it.

This is Tim Ferris’ mini-retirement concept, and it’s a good one.

Unfortunately, I keep getting drawn out of mini-retirement to do one extra bit of work or to simply avoid air travel (which hasn’t been fun since the 1950s – and no, I wasn’t alive to see it!)

Thinking I’m going to travel more than I do costs me, because I buy annual multi-trip travel insurance as a saving and incentive, and then only take the initial trip I bought the coverage for.

I guess it’s the equivalent of the gym membership some people buy with good intentions and poor consequences. But at least they get a sexy membership badge.

7. I started a business with friends

I’ve written before about the risks of starting your own business.

I’ve been self-employed for many years and generally I love it, but starting and running a company with other people is an entirely different affair.

Our company wasn’t 100% successful, and while I theoretically broke even on my investment in it, the opportunity cost was a couple of years worth of salary.

I’d possibly do it again, perhaps, but I’d be damn sure I was doing it for me next time, and I’d run the show.

If you’re going to be paying, you might as well enjoy the ride.

8. I rediscovered shares late (part two)

I didn’t invest in the late 1990s, even though I had cash available and there was a raging bull market going on.

Perhaps I was still over-influenced by Jack Kerouac.

Admittedly I might have lost all my money in the dotcom crash. But I like to think I’d have seen the over-valuation that was evident to me even as a non-investor. (High yield dividend paying shares were going cheap even as tech shares boomed, for instance). We shall never know.

9. I over-traded and over-obsessed

The first couple of years of share investing saw me buying and selling shares on a weekly if not a daily basis, and most of the rest of the time I sweated over whether or not to buy or sell even more.

It was a huge waste of money (when I worked out the dealing fees and taxes I’d paid in that first year I felt physically sick) but even worse was the distraction from my proper employment that staring at my portfolio and pondering took up.

I learned the hard way that share trading should be boring.

I’m still losing money because of my fascination with investing, though: I’ll never get rich by writing this blog!

10. I forgot what money was for

A few years ago I lost sight of why I was saving and investing money. I put more money into the markets than I needed to, and spent too much time that I’ll never get back obsessing over different investment possibilities.

Don’t get me wrong – I love investing, shares, and the intellectual thrill of following companies.

But you can become a miser if you’re not careful. Nobody likes a Mr Scrooge. Not even yourself, eventually. Remember, money can’t buy you love.

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{ 11 comments… add one }
  • 1 Dan Gravell July 25, 2009, 11:05 am

    Ha! As soon as I read that title I started thinking of my own mistakes… let’s see…

    * Too little diversification in my early share buying days *
    One of my investments early on was in a unit trust ‘Framlington Health’. This must’ve accounted for about 30% of my portfolio. I bought in about 2000 and it bombed from there, I think I lost half my money.

    Then, just last year, I invested in the New Star Heart of Africa fund. Lost 60% on that one, but it was more like 10% of my portfolio.

    That was the only major mistake I made during the 2008 market collapse though; overall I only lost around 10% of my holdings, thanks mainly to having a good deal in cash.

    I learnt lessons about diversification within assets but also of asset classes.

    * Buying expensive investments and thinking I can beat the market *
    I don’t mean buying at the top of the market; I mean paying too much in charges for funds with wizzo words like ‘alpha’ in them. I had great successes with some funds (Fidelity Special Situations) and others have just bombed, no matter how many ‘A’s S&P can put on them.

    * Buying too much wine *
    I think men often develop nerdy collector obsessions, and mine’s with wine. It could’ve been mousemats or beer coasters or whatever, but I chose one of the most expensive hobbies going. I started small, began finding great value at the £10 and then £15/bottle price ranges, but it just grew from there and at one stage I was routinely spending ~£50 per bottle, picking up a bottle or week or so. All this, of course, not even for drinking, all for ‘lying down’.

    The one upside is that it can be quite easy to sell even single bottle quantities of quality wine, if you know the places to go (online forums are a good bet).

    My mistakes seem to mirror the original author’s in some ways: early investment mistakes and spending too much on hobbies.

  • 2 The Investor July 25, 2009, 11:33 am

    Great feedback Dan, thanks. I almost put my money into the New Star Tech Fund out of sheer despair in 2000, despite thinking tech stocks were wildly overvalued. (I’d seen friends run up paper fortunes working for dotcoms, and I feared I’d soon be on the streets). I didn’t, but I took the lesson to heart.

    Africa was very hyped in the last two years as everywhere else looked crazily expensive. I can see how it happened.

    Wine is interesting. I’ve no facilities to lay it down, but I’ve thought about investing in some in a warehouse for pure diversification. You seem to need to know your stuff though (e.g. buying the right age between young and close to moving towards undrinkable, etc).

    Potentially a little toppy though?

  • 3 David July 25, 2009, 1:59 pm

    My biggest mistake was at the age of 15, buying Rage Software at 5 pence a share. I soon found out from my parents that my internet call charges that quarter mounted to hundreds of pounds. The shares had risen to 7.5 pence. I sold, paid off my parents and then found out 6/12 months latter that the share price was around 50 pence!

    God bless hindisght

  • 4 The Investor July 25, 2009, 11:59 pm

    @David – Funny story! 🙂 Better to regret the shares that got away than the ones that tanked completely. In terms of individual shares I’ve had one total wipeout, and one near total wipeout (Jarvis a few years ago)… plus some terrible performers in recent times, of course. (A Japanese REIT investment trust springs to mind… it wasn’t entirely luck though that I only had about 0.25% of my portfolio in it before the crash…)

  • 5 Mark July 26, 2009, 7:11 am

    My biggest financial mistake….. setting up my own blog.

    Fortunately I had several succesful websites which covered all the hosting costs etc, but the amount of time that I have spent on my blog must run into hundreds of hours. I dread to think what else I could have achieved in that time!

    I’m currently taking some time out to make sure I enjoy the summer (even if it is raining all the time) and that has made me realise that you have to run a blog, not let it run you. I had got to the stage where I felt I had to write something every couple of days, and putting that pressure on myself led to me writing posts for the sake of it, rather than writing about topics I enjoyed.

    I guess this is similar to over-trading shares, often people believe their shares can continue to rise but feel they should buy/sell all the time so carry on trading. Not only is this costly in a financial sense, but as you mention it takes up a lot of your time.

    The lesson learnt…. money is valuable, but isn’t quite the scarce resource we sometimes think it is. Time however is more limited in supply and thus far more valuable than money.

  • 6 The Investor July 26, 2009, 8:57 am

    @Mark – Amen to that! If I’d sold the bigger articles on Monevator after a bit of tidying up, I’m certain I’d have made at least 50 times the income I’ve been granted by Adsense. Let’s not even imagine how much money the hours might have made if they’d gone into a genuinely good business model…

    The only reason to blog is because you enjoy owning a blog, as you say – not to let it rule your thinking. Blogging to make money is undoubtedly a mug’s game for nearly everyone. In case you never read my thoughts:
    http://monevator.com/2008/11/18/blogging-for-money/

    Thanks for the comments!

  • 7 Daniel M. Ryan August 3, 2009, 3:24 am

    I can identify with a few of those items.

    Regarding the Jack Kerouac bit: it’s a lot harder to shake off when it’s tied to a cause.

    Regarding the overtrading: it usually doesn’t make money, but it can give an education. The best things you can get out of a sustained spurt of overtrading, I found, are:

    a) The ability to fight one’s excitement and one’s panic when a stock’s shooting up and/or plummeting. This habit, if acquired and kept, helps a lot in buying good issues that go “on sale.”
    b) The experience of lobbing off a holding for a quick profit, only to see it go much higher. I’ve experienced it at least twice. If self-castigation and self-pity are avoided, it encourages the cultivation of patience.
    c) There’s no better way to learn that you usually think you’re a better punter than you are. This kind of disillusionment is good for the long run.
    d) Finding out your trading patterns and mistakes. Perhaps sadly, the only way to find it out is through making a lot of trades. Making a lot of trades quickly assembles a database that’s still fresh in mind.
    e) Treading the path of some great value investors, who themselves have dabbled in short-term trading. Doing so makes the “don’ts” you read from them more meaningful. They resonate.

  • 8 Shirley February 13, 2010, 7:13 pm

    The most disastrous financial mistake of my life.
    My total IRA was transferred to Fidelity, after a long conversation with one of their advisers about “diversification”. That total has decreased by $50K.
    My plans are to transfer the total account to USAA and file for return of the charges by Fidelity to close my IRA in Small Claims Court.

  • 9 The Investor February 14, 2010, 3:00 pm

    @Shirley – Thanks for stopping by and sharing. I’m not sure what the precedents are for getting charges refunded for poor performance, be interested to hear how you get on.

  • 10 Anne July 30, 2010, 1:34 am

    Ten years’ savings lost in Fidelity Funds.
    My disastrous mistake was transferring my IRA to Fidelity.

  • 11 Esporta October 3, 2010, 7:41 am

    i am paying 26.50 a month for a gym & swim membership at my local school/community centre in Edinburgh, pay by direct debit but can cancel any time. The council memberships are pretty good too with access to about 11 pools and 18 gyms city wide IIRC.

    Have been told the big named places close to me are about 75 a month and you need to sign up for a year.

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