3 Huge Mistakes I Made With Money

Currently, I feel that my wife and I do a pretty good job with our money. We invest in index fundsĀ for our retirement, we are close to paying off our house, and we have paid off all of our non-mortgage debt. We are even working together with our money to budget for our goals, values, and dreams.

Aren’t we just perfect with our money?

Of course not!

Although we do a great job with many financial things, there are many things that we can do better. Sometimes we blow through our budget or argue about how money should be spent. Other times, we don’t even talk about money and try to hide from the problems that money or shopping can cause. And even though we invest for our retirement, we didn’t start investing enough money until 6-8 years ago and only recently found out about index funds. Sure, we got rid of $383,530 in debt, but we had to accrue this debt before we could get rid of it.

We definitely aren’t perfect when it comes to money!

But this just makes us normal. Everyone is going to make money mistakes many times throughout their lives. The key is to learn from these mistakes so that we can always get better with our money.

Here are three big mistakes that I have made with my money along with the lessons that I have learned from each of them.

Mistake #1

The summer after I graduated from high school, I began to work for an elementary school. From 6:00 AM to 2:30 PM, I could be found polishing floors, cleaning and replacing lights, and doing other tasks to help make the school look great for the next school year.

Besides having to get up early, it was a pretty good job. I had a steady schedule, got paid well, and was able to listen to Drew and Mike on a rock station called WRIF while I worked. What could be better than that? Working 40 hours per week at this job combined with delivering pizzas in the evening allowed me to save up a bit of money for college and other spending. I also was able to work with a friend of mine, so I wasn’t just cleaning the school on my own.

However, my friend was the one who led me to making this first big mistake with money. One day, he told me about a business presentation that he was going to in a couple of days. At the presentation, he would look at a business opportunity and see if it might be a good fit for him. Since I was planning to study business in college (and since I was a nieve 17-year old), I decided to accompany him to the business presentation.

At the presentation, we were told all about a great business opportunity. It involved selling long-distance phone minutes for less than everyone else paid for them. We were also presented with images of successful people who currently work in this business. They were going on ski vacations, driving Ferraris, and relaxing in the Caribbean on their yachts.

They were living the good life. And, of course, their good life was a direct result of this business!

After selling us on the business opportunity some more, we were then given an opportunity to become owners in this business. Not only would we be able to sell long-distance phone minutes, but we would also get the chance to recruit other business owners to sell for us.

As you may have guessed, I was about to get involved in a multi-level marketing business.

It didn’t take much to convince me to write a check for $200 to get involved in this business. I was lured in by the promise of quick and easy money. I was also convinced that I would be able to become one of those rich yacht owners. Unfortunately, I didn’t think about if I wanted to actually sell long distance phone minutes and promote this business to my friends and family.

For the price of $200, I learned that I should always do something for the right reason. Instead of doing something just for money, I learned that my passions must play a role in every project and business pursuit that I pursue.

A multi-level marketing business can be good for some people. However, if what we are selling does not relate to our passions, then we won’t do a good job at this business. We also have to realize that the core component of multi-level marketing is building and training a team of people to help with our sales. When I was 17, this wasn’t something that I was good at or wanted to pursue.

Mistake #2

One thing that I really wanted to pursue when I was in college was learning about investing. As a corporate finance major, I loved finding out about stocks, bonds, and mutual funds. My favorite classes were ones that showed how investing actually worked in the real world.

In one of my classes during my senior year of college, we had the opportunity to compete against hundreds of other students from throughout the United States in a stock picking contest. Over a three-month period, we would get to build and maintain a portfolio of stocks and see how our investments would do if they were actually invested in the stock market.

After about a month, I had turned my pretend $500,000 into about $525,000. I was having a little bit of fun with the contest, but I still wasn’t investing a lot of time or thought into it.

But then, I found Jim Cramer.

Even back in 1999, Jim Cramer was a stock market guru. He was loud, obnoxious, and one of the biggest and best TV and Internet personalities when it came to choosing stocks.

And, back in 1999, Jim Cramer was very bullish about the market. Along with many other investors, he was riding the wave of easy money from technology companies as they were working to become the next Internet superpower. On his website, Jim listed 15-20 technology companies whose stock prices were growing rapidly.

Although I would like to say that I did a lot of research on companies before I bought them for my pretend portfolio, I mainly just chose the same companies that Jim did. And my portfolio began to grow. Over the span of three months, I turned $500,000 into just over $1,100,000.

I doubled my money in only a few months! Not only that, but I won the stock picking contest over more than 500 other students. Although we were investing with pretend money, I even won $500 in real money for winning to contest.

I thought that I was hot stuff when it came to picking stocks! And I also thought that choosing stocks was fairly easy. After all, despite my small amount of “research,” I doubled my money quite easily. So when I came home from college for Christmas break at the end of 1999, I took around $4,000 that I had saved up and I invested this money into the stock market. I invested most of it in the same companies that I used to win the stock contest and thought that easy money would soon be mine.

Unfortunately, this was not the case. As many of you may know, the end of 1999 signaled the end of making easy money through technology stocks. The NASDAQ Composite stock market index, which is heavily weighted towards technology companies, saw its high of nearly 7,000 points at the start of the year 2000. By the end of that year, its value had been nearly cut in half. And my stocks, which tended to rise the quickest, also fell the quickest and their value quickly evaporated.

The $4,000 that I saved throughout college vanished in a six-month time span.

Once again, I was lured in by the promise of quick and easy money and, just as I was taught a few years earlier, I found that making money wasn’t as quick and as easy as I had hoped. With the stock market, I found out that a long-term time horizon was the best way to make money.

I found out that the stock market isn’t a get rich quick scheme. It is an easy way to get rich, but it takes a long amount of time.

Kind of like a get rich very slowly scheme.

Mistake #3

By the time I was ready to make my third mistake, I had at least learned the lesson that it is tough to get rich quickly. However, I was still ready to get rich and, thanks to the teachings of Robert Kiyosaki and “Rich Dad Poor Dad”, I thought that real estate was my path to wealth.

Like the stock market, real estate has helped so many people become wealthy by investing in rental properties or just by fixing up and selling their primary residence. It really can be a great way to become wealthy, if it is done correctly.

I did not do it correctly!

My plan was to buy a small house, fix it up, and then flip it for a bit of profit. Over time, I would then be able to buy a bunch of houses that could all be sold after they were fixed up.

Sounds fool-proof, right?

I heard from many different resources that the profit is made when the house is purchased, instead of when it is sold. However, when it came time to actually purchase this house, I simply paid way too much money for it. I had seen many bad houses, so I was excited when I finally found one that was in decent shape and still somewhat inexpensive.

I should have realized that the housing market was greatly overvalued and that it would be almost impossible to make any money on this house. If I would have waited for just a couple of years until 2008, then I would have been able to choose any house that I wanted for a significant discount.

But I was ready to buy, so I purchased a house for way too much money at the end of 2006. This was right before the real estate market was set to crash in the United States.

I always seem to have great timing with these big financial decisions, right?

As you may have guessed, I was unable to sell the house for the price that I wanted. By default, I also ended up becoming a landlord until we were finally able to get rid of this house many years later.

Unfortunately, this became our biggest financial mistake, as we sold the house for around $38,000 less than we purchased it for.

What I Have Learned

I’m sure that you have also made some big financial mistakes, but hopefully they weren’t as big or as stupid as mine were. However, throughout life we are always bound to make some mistakes. But maybe we can use the lessons from these mistakes to be better and smarter in the future.

Some lessons that I learned are:

  1. There is no quick path to wealth. We should leave our money invested in index funds instead of trying to find the hottest company stock to buy right now.
  2. If something seems too good to be true, then it probably is. There may have been a few people who were getting rich from the multi level marketing company, but most people were not.
  3. Follow your passions. I was not excited to sell long-distance phone minutes, which meant that I should have never started a company that sells them.
  4. Avoid debt. When I purchased the house, I borrowed 97% of the money. This made is real difficult to sell the house when it began to fall in value.

Although life is often the best teacher, hopefully some of my financial mistakes will allow you to avoid making similar ones!


Please share some big mistakes that you have made in the comments below. This way, we can all learn from them together and maybe I won’t even feel so embarrassed about mine! Also, get notified when I write a new post by entering your email at the top of the page to subscribe.

And thanks for reading!

~Nathan


Letā€™s keep living a great life ā€¦ with the help of money. So whatā€™s next?

But no matter what you decide to do, letā€™s leave the ordinary behind and take action today!

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