We’ve all heard the quotes on failure and how it’s only a failure if you don’t try, or it’s a lesson and not a failure, so don’t worry I’m not going to pump you up with feel-good vocab here. Wait, I’m here to talk about mistakes as well, darn too late to turn back now! I’ve thought about doing this post for some time because after a while you get tired of listening to people write about their success or how they saved up $100k in one year. It’s important to be authentic to your audience and to reinforce the fact that no one’s path in life is lined with silk and roses. Mistakes happen, but as I said about the quotes, they only set you back if you never learn anything about them, or fail to put into action the lesson you should have learned. Here I’m going to explain, with nothing held back or embellished, what I did wrong during my path to FI and what I would do differently.
1) Buy a Brand New Car - Before you jump down my throat and call me a hypocrite (since I write in my book and blog about the benefits of buying a used car), just know I did this before I even knew about the FIRE movement or becoming well versed in personal finance! Granted, it was a bucket list item for me. For some odd reason I couldn’t understand, I wanted to walk into a dealership, pick out a brand new car I wanted, and write a check then and there, just so I could say I did, all before the age of 25. At least I was smart enough to buy a Honda Accord, a car with strong resale value, so it’s not like I went out and bought a custom BMW M6 or something! I remember the moment I first saw the redesigned 2013 Honda Accord during the summer of that year, and I knew I just wanted it. It would be my 3rd Accord, and I was driving to and from work living at my parent's house, driving a thrilling yet gas-guzzling Infiniti G37. After driving it for a year, as I had done with my previous cars, I decided to sell it to get as much profit out of it as I could. I couldn’t believe my luck when a lady from San Diego responded to my ad, asking to come up and see the car, advertised at the SAME PRICE that I bought it for brand new just a year earlier. I was living in Orange County, CA at the time, and I know that when someone expresses interest in the car, doesn’t negotiate upfront, and is coming from a long distance to see it, they are not going to want to leave without that car. So, I didn’t budge on my price, and they bought it! I was only out about $1,500 because of the taxes and fees I paid when I bought it but overall made it out ok. Lesson learned, never buy a brand new car just because you think it’s cool, or you have the cash, or because it’s some weird bucket list item!
2) Let a Stranger Move-In as my Roommate - So as you’ll read in Financial Fives, house hacking is a major contributor to my savings strategies and path to FI. Housing is the largest part of most people's budget, and I’m no different. This was especially due to the fact that I wanted to live in a nice place that met my standards, meaning a newer and nicer building, walkable to downtown, or other amenities, and that has a pool, gym, rooftop, etc (yes, in this respect I am high maintenance, I mean who wants to live in a decaying, depressing and crappy apartment with low ceilings and a 70’s kitchen?). Now, I found all of my roommates on Craigslist, and 4 out of 5 of them were absolutely excellent. I’m still good friends with two of them today! I know what you’re thinking, that finding a random person to live with you on Craigslist is dangerous and unsettling, which is true. However, it’s a very dependable platform and free to find people, so why fix what isn’t broken? I screened people via email, and then met them when they came to see the place or when I came to see the place they had. One person, in particular, was found by my former roommate who had to move out during our lease due to a job loss. I never met the new guy before he even moved in, as I was in Spain on vacation! Talk about an eerie feeling coming back to my place and seeing some random person's stuff in my kitchen. I’m pretty picky about my living companions, so this individual wouldn’t have made the cut, but with a few months left of the lease, I thought why not. I charged him extra for staying in the larger room, and even had him sign a roommate agreement like I make all of my roommates do, which states how much of the rent they are responsible for (often I take the smaller room in the apartment to save money) for and any other costs like parking. Well, this loser moved out without even telling me, blamed it on a fake family emergency, and didn’t pay me a month’s worth of rent! It took me a few more weeks to find his replacement, so luckily I made it out ok. I also got $2,000 for referring someone to live in my building, so I used that to help keep my blood from boiling and not hiring a private investigator to track down the evasive roommate. I still plan to sue the guy for recovering the rent, once I find out where he lives and know he actually has money for me to recover! Lesson learned, Craigslist is still ok, but get a copy of the person’s ID, an emergency contact, forwarding address, and take a deposit!
3) Try to Time the Market - This wasn’t an isolated or one-time event, but I traded for fun in my early 20s’ to make money on trendy stocks at the time, including Michael Kors, FedEx, and Tesla. I blame the fact that since I made some good money trading, I got a false sense of confidence that I knew what I was doing, and then took it too far. Luckily, the risk-averse side in me didn’t allow me to make trades too big where I would lose a huge amount. I usually traded in 25-100 share increments at a time. After watching the stock go up just months or weeks after I traded it hoping to stem my losses, I swore off trading on emotion. I still trade for fun, or speculation as some might call it, but I’m not going to sell in a panic. If I want to buy a stock on my watchlist that I have done research on and believe in the company, I’ll wait for a pullback, or just buy it, and hold onto it until I feel like I’ve made a good profit. No rhyme or reason as to how much is enough, but if I can make a few hundred or few thousand, and don’t feel particularly attached to that company, I’ll sell. While I did lose money in trading, I made more, and the lesson learned from trying to time the market was “don’t do it!”. At least it made me pay more attention to financial news and the stock market in general I guess. Index fund investing and consistently dollar-cost averaging is the way to go, like so many other FI Bloggers point out.