Mistake + Mistake + Mistake = Wrong Path

This month's newsletter covers the mistakes I have made with my money over time (in no particular order). The goal here is simple. I am sharing my mistakes so others don't have to repeat them. Don't learn the hard way. It sucks.

I spent most of my income soon after getting my paycheck and saved what was leftover. This caused me to own a lot of stuff that depreciated in value immediately upon receiving it. The stuff quickly became meaningless. I should have saved first before spending. I should have taken those savings and invested in no-load index stock mutual funds. My lack of knowledge and ignorance on the issue cost me a lot of money.

I purchased vehicles without knowing what the true value of the car I was buying was worth and what my vehicle was worth that I was trading in. I let the car dealer tell me (big mistake). I bought a new car when my used car was just fine, but I got sold by a good salesperson when I showed up on the lot. He sold me a crappy extended warranty as well. These mistakes cost me many thousands of dollars. Just plain dumb.

I went to a free dinner once because my boss recommended it as a way to understand how to invest my savings. It was a sales pitch, but I didn't know it. As the night went on, I got sold as did many others. The guy doing the talking was not an investment expert, but he was a very good salesman. In the end, the same problem occurred. Someone took advantage of my ignorance on how to manage money.

I bought a high fee load managed mutual fund following the "free" dinner. I paid over 1% per year with the expense ratio and 8.5% with the upfront load (commission). Why would I do such a foolish thing? I thought that was how it worked and my "smart" older boss was doing the same thing with her investments. Once again, my ignorance on investing cost me a great deal of money. I got sold a bad investment.

I bought a high fee whole life insurance policy. Every dollar of the first year's premium ended up going to the agent (he didn't tell me that, hmmm...). It sounded really good by owning a part life insurance, part investment policy that would make me rich down the road. It didn't. Why did I do it? The good salesman provided a good pitch that convinced me that I should buy it NOW. I got sold another bad investment.

I trusted far too many people when it came to investing my money. I read magazines and books written by people who predict the future and make money off of my ignorance. I didn't realize that the financial services industry puts themselves first in most cases instead of me. John Bogle (https://en.wikipedia.org/wiki/John_C._Bogle) taught me the right way to invest and the right people to trust. Independent teachers guided me down the right path.

I paid a lot more in taxes than was necessary to the federal, state and local governments based on how I invested, my spending habits, and basically, just how I lived my life. Why? I had no clue about taxes and therefore I did not have a plan on how to reduce my tax burden by behaving and living in a different way. I complained about taxes instead of educating myself and doing them myself.

I paid more for insurance policies than I needed to because I had stuff on my policy that I did not need (uninsured, underinsured, medical, tow, and rental). I also had low deductibles (under $1,000) that increased my premiums year after year. Did the insurance agent tell me to do things differently? Hell no! My lack of knowledge on the issue once again cost me plenty of money.

When I finally got smart on investments (just enough to make me dangerous), I invested in some individual stocks (I did not understand the risk) and some managed no-load mutual funds (I paid little attention to the fees and too much attention to past performance). Here is where I needed to learn more. With time, the education started sinking in, which of course led me to own a portfolio of low fee index funds.

I took way too long to reject materialism. Much of my life I compared what others had and found ways to acquire the same stuff in some weird way of living the good life. It didn't work. Gradually, I started to see through this lie of stuff bringing more happiness and thereby, started cutting my spending. This in turn helped me save more. Invest more. And ultimately, reach financial freedom.

I picked up more debt than I should have because I was brainwashed into thinking in monthly payment terms instead of the amount of debt I was taking on and the interest rate that went with that debt. The monthly payment mentality raised my bills up to my income, leading to living paycheck to paycheck. When I changed my thinking, my finances improved. The debt went down and the net worth went up.

I made the mistake of not becoming a reader until I was 25. I didn't realize just how much I was missing out on until I starting reading books from some amazing people. The mistake of not reading made my world very small and in some ways, it locked me inside a metaphorical prison. Becoming a reader provided me the key to unlock the door to that self-imposed prison and gain my freedom. It changed my life.

I believed the lie that a personal home is a good investment. I never actually ran the numbers on the yearly expenses of owning a home, which usually come in at around 8% or more. The yearly appreciation reduces how much I lost on my home, but I still lost. This mistake cost me thousands and thousands of dollars, but at least now I see through that lie. A home is a place to live, not a good investment.

The biggest mistake I made was not embracing unconditional giving at a young age. For many years, I thought I should receive something back when I helped others. Gandhi (https://en.wikipedia.org/wiki/Mahatma_Gandhi) taught me a better way. I embraced the idea of giving with no intentions of receiving, I ended up getting much more back in ways that are hard to explain, but are very real. This made my finances and my life better. It can do the same for you. Awake

Stuff the lawyer wants me to say: Investing outside a bank or a credit union is not FDIC insured. You may lose the value in the investments you select. All information provided here is for informational purposes only. It is not an offer to buy or sell any of the securities, insurance products, or other products named. Translated: I am not selling anything! Educate yourself, research the information that you learned and finally make the right decisions that will benefit you and your family going forward.

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