My biggest money mistake times three



I’ve made plenty of money mistakes over the years, but there’s one that has been a consistent, long-term issue for me. (But somehow I’ve only just NOW recognized that it’s been an issue.) What is it? Not paying attention to my money. Let me give you a few examples of how this has affected me.

1. It turns out that I took the examples of “if you had invested $10,000 in [x investment vehicle] in [insert year] and left it alone, it would have grown to [insert greatly increased amount] in 10 years” a little too literally. The result was that my money never really recovered from the 1987 stock market crash, and the events of 2001 didn’t help any either. When things went downhill fast I told myself “just ignore it, it’ll get better”. Things did recover somewhat, and I guess at least I didn’t make the mistake of panicking, but consistent, long-term underperformance and/or losses shouldn’t be ignored.

2. Not tracking profits, losses & expenses on a regular basis. That applies in so many areas, but I’m thinking mainly of small business. It may “feel” like you’re making money when the checks come in, but if you’ve spent more than that already on expenses & taxes, you’re losing money. Even if you aren’t, maybe ending up with the equivalent of $3.14 per hour for a 60-70 hour work week isn’t such a hot deal.

3. Not doing enough (or most times any!) research. I’ve taken other people’s investment advice without doing any research way too often. Sometimes this was because their investment advice also came along with a gift of money, and I figured they knew what they were doing. But many times it was just because I didn’t feel like doing any or was “too busy”. Laziness is not a good investment strategy. Neither is making generating money a low priority.

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Posted in Financial health on Oct 23, 2006

2 Responses to “ My biggest money mistake times three ”

  1. # 1 makingourway Says:
    October 31st, 2006 at 7:43 am

    I think the principles of the advice you accepted make sense, but they do require alot of dilligence.

    My recommendation:
    Take a passive approach to invest with a diversified portfolio of index funds that have minimal correlation – then rebalance every year or quarter.
    This gets you out of the investment advice problem right away – most is usually bad.
    Little financial research beats the market consistently – results tend to randomize.
    Check out William Bernstein’s Four Pillars or Rick Ferri’s Asset Allocation books.
    I review a few chapters of the Four Pillars at my blog http://www.makingourwayblog.com.
    Regards,
    makingourway

  2. # 2 » My Best and Worst Money Moves Ever (So Far!) on Blueprint for Financial Prosperity Says:
    November 8th, 2006 at 11:56 am

    [...] Blunt Money – Best Move, Worst Move [...]

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