If you know anything about me, you know that I’m face-scrunchingly flawed perfect. What with my cringeworthy devilishly good looks, flabby muscular physique, fast rotting razor-sharp brain, and uncanny inability to see the forest for the trees and size things up accurately and comprehensively.
So, it may come as a surprise to you, Dear Reader, that I have in fact consistently occasionally demonstrated my own fallibility.
Before I discovered FIRE. On the path to FIRE. After I learned of FIRE. Since having FIREd.
Yikes!
In spite of it all, I’m (still) in a good place. And the future looks bright, even if not quite in complete focus. It goes to show that if you have a goodish plan, keep your head down and execute it, and are patient, you’ll likely see positive results. Outsized ones, too, if you also manage to avoid significant roadblocks.
Anyway, here are a few of my epic minor screw-ups mistakes which certainly set me back, but thankfully didn’t derail me. Hopefully, this offers some solace to Dear Readers on the way to FIRE who think either that their mistakes are too big to come back from, or that they need to be perfect in executing their plan.
Un-Refi’d Taste
During my law school years, I was . . . uuummm . . . dumb as paint no expert when it came to (personal) finances. Sure, I knew to keep my expenses low and earn some income, even though my living expenses were covered by loans. But as to the consequences of taking out tens of thousands of dollars in loans (which in and of itself was of questionable judgment), I was functionally oblivious. And as to interest rates? I hadn’t a clue.
This proved an eye-watering extremely costly combination of ignorance. First, because my loans were so high (even if I did keep the sum down from what it could have been). Also, because while I was in law school and for a few years after graduating, prevailing interest rates were pretty high, but were on a downward descent. Eventually, rates would drop several percentage points.
Had I known anything about anything, I’d have several times over the years taken steps to lower the interest rates on my loans as rates continued to fall. Alas, I was an idiot did not know to do that. It’s impossible to do the math to determine the exact figure, but I estimate that this mistake was in the five-figure range.
That’d be bad enough on its own. But the consequences were compounded. That’s because for several years after graduating, my salary barely covered my expenses, which included law school loan repayments. Had I refinanced, I’d have been able to create a bigger gap between income and expenses, which would have allowed me to use the extra money to: (1) pay off the loans faster; (2) build a larger emergency fund and save more generally; and/or (3) have a little fun.
Go your own way
As with a lot of people, we drank from a constantly filled glass of renting-is-throwing-money-away-so-you-need-to-own-your-home Kool-Aid. Seemed a sensible drink and delicious at the time. But I’m now living with the slightly bitter aftertaste.
Having since learned of and come to appreciate the fact that when it comes down to it, renting may make more sense from a purely mathematical/money-saving perspective than owning, I know that for the almost 20 years The Missus and I owned our residence, we likely would’ve saved money by renting.
In our defense, we were not stupid pretty smart in the properties (condos) we bought. Also, we lived in each for almost 10 years and sold for a bit more than we bought them for. But we paid annual property taxes, which marched up and up during this period. Ditto for homeowners association fees. Several special assessments nibbled away at our finances, too. Also, we spent a not insignificant chunk of change making improvements to our second condo. All in all, from a financial standpoint, I’m pretty sure we’d have saved money by renting.
Of course, when it comes to owning vs. renting, price is but one part of the equation. There are plenty of reasonable reasons to own, regardless of the finances. So, while I think we’d have saved money by renting comparable places, I’m not chalking up owning as a total loss. After all, we lived in and improved great places and mostly got to do with our place what we wanted. We also mostly had wonderful condo neighbors and made lifelong friends.
So, likely costly in dollars, but not otherwise.
Stock in the mud
Another mistake I made—from a financial standpoint, but not from an educational one—was my stupid, stupid, stupid decision to invest $750 in a single company’s stock. As I previously wrote, not long after I made this purchase (as to which I did no research), the company went bankrupt.
In terms of immediate financial consequences, this move was a colossal failure. Sure, it was only $750, so not a ton of money in the grand scheme of things. But, that $750 constituted the better part of my liquid net worth at the time. Discovering that my money had evaporated felt like a vicious gut punch. As brutal as any financial mistake I’d made previously, and have made since.
But, like I wrote in my previous post, it was among the best financial lessons I’d ever learn. I’ve never since invested in a single company’s stock. And I don’t fancy I ever will.
Creep show
Although it took a longish time to happen, I enthusiastically embraced for a few years experienced lifestyle creep. This took the form of spending on things we didn’t need and easily could have done without or substituted something free or less costly for. More (expensive) nights out. More (upgraded) nonessential possessions. More loose spending in general.
For a few years we probably spent a few hundred dollars more each month than we needed to. To be sure, this came nowhere close to financially breaking us. And we had a great time after having lived frugally for many years before. We also never spent with wild abandon either, and always lived well within our means. But from a purely financial standpoint, this was relatively costly.
Saving is bad
But my biggest financial mistakes—even if my at-the-time-ignorance was an excuse—are that for many years, we didn’t invest (enough). More specifically, of the money we didn’t spend on needs and wants, we saved most of it into a checking account earning essentially no interest. We did invest some of our income into retirement accounts, but far, far less than we could and should have. Worse, of the money we did invest, we sometimes didn’t invest enough to get full employer matches, and we invested in high-fee and underperforming actively managed funds.
In fairness to me and The Missus, in addition to our ignorance, we for many of these years were: (1) throwing (an increasing amount of) money at those high-interest law school loans that I discussed above, and which I abhorred with a burning passion, and (2) building up our emergency fund. But once we paid off the loans and built up our emergency fund, we should have shoveled all the money we’d otherwise have used for those goals (and the money we were generating from annually rising incomes) into investments rather than our checking account.
Thankfully, the period between when we finished off my loans and built our emergency fund, and when I discovered FIRE and did a massive overhaul of our finances, lasted only a few years. But those were bull market years. I estimate that not investing (as much as we could have) during those and previous years has cost us six-figures worth of money. Ouch!
Well, as they say, you don’t know what you don’t know. I’m using that as my reasonable excuse. . . . But I still wince when I look back at these mistakes.
And in the end . . .
So, there you have it Dear Reader. Some of my biggest mistakes. I’m all but certain I’ll make plenty more mistakes. Some maybe big, too. But we’ll come through and go on and on and on.
