Even folks who seem to have All of Their Stuff Together will admit, if you perhaps ask them in a weak moment, that they’ve made their fair share of mistakes.
Many of us stand on the piles of bad ideas, mistimed investments, and ill-informed purchasing decisions, and it hasn’t brought us down yet.
This post, originally published by Wealthy Doc, walks through a variety of financial mistakes and shows that one can come out the other side – successful, wealthy, and happy.
These are my money mistakes: the adventures of a tax-ignorant, overconfident, fickle financial fool.
Despite what some of my audience thinks, I don’t have all the answers. Nor did I do everything right. I have made dozens of blunders along the way. Here I’m airing some dirty laundry and revealing some of my money mistakes.
Debt, Leverage, and Credit
- I used credit cards irresponsibly.
- I borrowed an above-average amount of student debt.
- I went into over $500,000 of debt.
- In residency, I ran up credit card debt. It was so bad that I needed a credit card counseling service to help structure my debt.
- My credit card misbehavior trashed my credit. That ruined my credit rating for many years due to the “charge-offs” on my report. I couldn’t get a credit card, car loan, or mortgage for many years.
- I took out a car loan.
I created a business model for a profitable physician finance business. But I failed to put it in place. I started a new medical clinic for my employer instead. This was before Jim Dahle created his White Coat Investor empire.
- I took a gap year after college. That year of minimum-wage work delayed the start of my six-figure income later.
- I deferred my MBA. That decision postponed the start of my better business and investing decisions.
I learned this term from Matt Manero. It implies letting your foot off the gas pedal too soon.
- I cut back to part-time work at age 50. I decreased my hours even further at age 55. Each change required pay cuts.
- I left a private practice, at which I earned a top 1% income, to join academia. This required an initial 80% pay cut that later leveled out to about a 60% cut. This came with a loss of investment and equity ownership.
- I stopped my lucrative medico-legal work.
- I dropped a spasticity clinic directorship.
- I dropped multiple medical directorships.
- I cut back to even fewer hours.
- I didn’t use free time or days off to make money.
- I spent money helping relatives.
- I paid rent for my adult brother for two years.
- I set up a REIT to pay my father instead of me, or reinvesting.
- I paid living expenses for my aging parent.
- I cut out high-paying work-comp.
Not Boosting Income
- I was accepted into an interventional fellowship after residency, but I declined it. That would have boosted my annual income for the following two decades. After a few years, the country’s most competitive fellowship program accepted me. Again, I declined. This angered the fellowship director, burned bridges, and reduced my future earning opportunities.
- I spent time teaching and writing.
- I haven’t monetized my blog.
- I declined profitable private practice in Chicago.
- I encouraged the spouse to stay home.
- I didn’t lease equipment to an employer.
- I continued life and disability insurance long past when I reached financial independence. Even the insurance salesman recommended I drop the coverage.
- I continued paying for many disability policies after reaching FI.
- I continued to max life insurance policies after FI.
I didn’t buy life insurance when I was healthy in my early 30s. This put my family’s finances in jeopardy, especially since I became uninsurable after being diagnosed with cancer at age 34.
- I have owned a large portion of bonds in my portfolio my entire investing career. I owned conservative government bonds in the 1980s and 1990s when I was young and stocks were booming.
- I have invested too conservatively. I would be much richer now if I had owned more equity than bonds, especially from 2009-2022 when I invested 40% to 50% in bonds.
- I have had too much cash drag.
- I sold all my gold and precious metals in 2001. That was immediately before 9/11/2001, after which gold prices began their upward ascent.
- I sold stocks after market declines in 2008. I sold individual stocks. I also reduced my allocation to stocks at exactly the wrong time. In 2009 my business school economics professor recommended I buy stocks immediately. I ignored his excellent advice.
- I avoided Microsoft, Amazon, and Tesla.
- I bought real estate in 2007.
- I listed my house for sale in 2009.
- I sold cash-flow-positive rental houses.
- I bought Bitcoin late.
- I didn’t buy commodities.
- I sold stocks at the wrong time and then paid a capital gains tax.
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I didn’t buy I-bonds for family members.
I paid off all debt at the first opportunity, even my mortgage, and real estate debt. I would have many more millions with even a tiny amount of prudent leverage.
- I bought and sold countless individual stocks over the years. Some went bankrupt. I sold some at a loss. Others returned a profit that lagged their low-cost index.
- I stopped buying I-bonds.
- I declined to purchase Bitcoin.
- I signed worse contracts.
- I agreed to yet another pay cut.
- I didn’t insist on a raise, bonus, or even a cost-of-living adjustment.
- I owned equipment but allowed employers to bill the facility fee.
- I accepted all payers for decades.
- I was fearful and anxious in the market crashes of 1987, 2000, 2008, and 2020. I let my emotions get out of control. It made me grumpy, anxious, and fearful. I acted on emotions and tried to time the market at the wrong time.
- I avoided real estate in 2009. I experienced declines in value and was afraid of further losses.
I created complicated and suboptimal portfolios and asset allocation. They satisfied my complex theoretical thinking but prevented me from simple, effective investing.
- I have not been steadfast in my investing. Successful investors like Warren Buffett Jack Bogle exhibit that trait in spades. Instead, I moved in and out of funds.
- I have not followed my plan.
- I change investments after reading almost every finance book.
- I changed asset allocation often.
Poor Planning and Lack of Discipline
- I lacked a written plan.
- I never had a budget.
- I don’t track expenses.
- I didn’t apply for the Medicaid waiver.
- I used too many financial advisors.
- I didn’t get, and follow, enough solid professional advice.
I chose a low-paying specialty.
- I put bonds in Taxable accounts.
- I put stocks in retirement accounts.
- I didn’t take advantage of tax loss harvesting.
- I used a SEP IRA and then needed to convert to a Roth IRA.
- I avoided a solo 401(k).
- I bought a new car.
- I paid over $80,000 for school for my daughter.