what is your worst money mistake?
For those of you that haven’t come across my blog – which I’m assuming is most of you – I should start by saying that my financial struggles and moronic financial mistakes is what led me to become a Dave Ramsey-trained Counselor and an Investment Advisor.
So, as I discuss my biggest money mistake(s), I will preface with: I realize that these are extremely dumb decisions. However, I made them, I learned from them, and ultimately they helped me grow into the person I am today.
Who Wants to Trade Penny Stocks?
Despite knowing the topic we were writing about today, I couldn’t only limit my response to ONE financial mistake because I have two that are pretty brutal.
The first involves trading penny stocks and losing $30,000!
Ever since I was in high school I remember LOVING the concept of the stock market and investing money. I don’t know what it was but it just fascinated me.
So, a few years ago I worked with some friends and one of our usual conversations revolved around investments. It was right around the time that Apple started to boom and my co-workers would always bounce ideas off of me and prod me for my input.
Well, one of these co-workers ended up telling me about this “hot” penny stock. You know…he heard about from a friend whose sister’s brother’s nephew worked for the company.
Anyway, he was told about this great new technology that was going to change the oil industry, and apparently this company had a patent on the technology that was going to make it happen! Cha-ching!
As with all penny stocks, this one was a sure thing!
After many hours of research and digging into the company and their product, I went ahead and invested all of my IRA into the stock. Please know that I would not recommend this for any of you.
Considering that I was young (and dumb), I figured I could afford to lose the small retirement savings that I had earned in my first year of employment after school. It was indeed a whopping $3,000 that I was putting at risk; what’s the big deal, right?
Well, after much speculation (which most penny stocks are surrounded by) the stock, and my portfolio, continued to go UP and UP over the course of a few weeks.
Instead of being a prudent investor (which investing in penny stocks throws that notion out the window) and selling off some of my shares to lock in the gains, I got greedy and thought that the stock would continue to rise.
I mean seriously, the rise was all based on speculation and the company hadn’t even landed a big contract yet. ‘Just think how much the stock could be worth when it lands with one of the big oil companies!’
Despite my IRA being worth $30,000 (yes, up from the $3,000 that I started with) I decided to stay put.
It’s needless to say considering this is a post about one of the worst financial mistakes I’ve made but I’ll say it: the value of the stock plumeted the two weeks that followed as the speculation dwindled and my “hot” penny stock turned ice cold.
I know…I know…I was pretty (extremely) dumb and got greedy. I gambled and I lost.
I wanted the get-rich-quick scheme and ignored all sound investing advice.
Attending an Out-of-State College
My wife and I were actually talking about this a few weeks ago, but I have come to learn to view my past differently than some.
While I could beat myself up over all of the ignorant decisions I’ve made over my life, I’ve realized that I wouldn’t be the person I am today without them. I wouldn’t be married to my wonderful wife, I wouldn’t work a job that I love, and overall I just wouldn’t be who I am today.
So, even though this post is about past mistakes I’ve made, I encourage everybody reading out there to embrace your failures, learn from them, and ultimately be thankful for them.
Life has a weird way of teaching us things and the reality of our world is that most of us learn from mistakes; we as stubborn people love to learn things the hard way!
Despite saying that, I acknowledge that my second biggest financial mistake was going to an out-of-state school and going into debt for all of it.
I know that my decisions were made in pure ignorance as I was never really taught anything about managing money growing up as a kid.
Nobody ever stopped to tell me that I was making a huge mistake by going $20,000/year into debt each year for college, and instead explained to me that I could choose to attend an in-state school and only pay half or a quarter of that!
Who am I kidding though?
Knowing me back then I’m not sure it would have mattered. I didn’t understand wise financial principles. I was ready to leave and have fun. I was ready to finance my lifestyle by taking on as many student loans that the lenders would give me!
…and I’m still paying for it today (literally).
Applied Knowledge is Power
Speaking from experience both personally and from what I’ve gained in coaching hundreds of invididuals over the past few years, writing this post about my moronic financial decisions will prove meaningless at the end of the day unless those that reading this will learn from the mistakes of others and not make the same mistakes themselves.
If you have children, I’d encourage you to teach them sound financial principles at a young age (or as soon as you can). Teach them about debt, living on less than they make, the principles of budgeting, investing and how to retire comfortably, and making smart decisions when they’re getting prepared for college.
Where most of us fall short in our personal development is that we don’t apply what we learn. Sure, we learn (as evidence that you’re reading this article) but what you do with the information is ultimately what will set you a part.
I feel like Jason’s groupie….
Was the out of state school KU? If so, it was completely worth it, right? 😉
I made your penny stock move with XM Radio….but it gets worse. I DID diversify but moved the excess to….wait for it…..Sirius Satellite radio. Yeah….they merged and the stock plummetted. I knew better.
Great stories! Thanks for sharing.
I agree 100% on in-state education. I went to school in my home state and have a hard time feeling bad for people who came here from elsewhere.
Out of state is very expensive. It could be justifiable in a few cases but I think most cases an in state school will do just as well. Hopefully if you ever have kids they’ll understand, especially if you’re helping pay!
Sharing your mistakes helped to boost my self-confidence and think positively. Anyway, talking about state education here’s my point of view: Non-state education is good to those students who have educational plans but if your parents can’t afford it, better go for in-state education.
Hi Jason,
It’s stories like these that help others who have gone the same way or made the same mistakes feel that they are not alone and that there’s hope still.
My biggest financial mistake was in the use of credit cards. When I was temporarily out of a job, I maxed out my credit cards, was late in payments, and they accumulated huge interest.
These mistakes certainly make us wiser and I hope to be able to share valuable lessons to my kids from my experience so they’ll make better decisions.
Great article. It amazes me how many parents simply send their kids to whatever colleges the kid wants, regardless of cost, major, distance, etc.
Don’t get me wrong, I value education, but not the thoughts of parents spending thousands (sometimes hundreds of thousands) dollars on “extra” costs that are not necessary. But unless your child is looking for a very specific major, available only at certain colleges, most states have some pretty good in-state schools.
AH sounds like a typical pump and dump. Nothing is a sure thing (and not just in life…I’m sure we all know this first hand). I had the Air Force reserve pay for my in-state school, but even then college is SO expensive. I still went into about $8,000 worth of debt.