She Strengthens

Financial Faux Pas: Lessons Learned from a Seasoned Pro

As a seasoned financial planner with a decade of experience, I’ve helped countless individuals make informed financial decisions. But, I’m not immune to making mistakes myself. In fact, I’ve made some costly errors in my twenties that I’d like to share with you, so you can avoid repeating them.

Mistake #1: Rushing into Homeownership

It was 2009, and the housing market had just crashed. I was recently married, and my lease was up. It seemed like the perfect time to buy a house. But, I didn’t do my due diligence. I didn’t have a 20% down payment, which meant paying Private Mortgage Insurance (PMI). I also didn’t take the time to maximize my credit score, resulting in a higher interest rate. To make matters worse, I invested the down payment in the market and had to sell at a low point. The biggest mistake, however, was buying the wrong house. It wasn’t suitable for our long-term needs, and we ended up selling it three years later.

Red Flags I Ignored

There were two significant warning signs I should have heeded:

• The house’s proximity to Chicago limited our future opportunities.
• Our friends and family were not within a 20-mile radius.

Mistake #2: Misjudging a Money Manager

After college, I had some money saved and wanted to invest. I sought advice from a business mentor, who referred me to his money manager. The office was impressive, and the sales pitch was convincing. But, I soon realized that I had made a mistake. The fees were extremely high, and I was limited to mutual funds selected by the money manager. Investing in a tax-deferred account, like a Roth IRA, was never discussed. It took me a year to realize my mistake and switch to Vanguard, where I invested in a Target Date Retirement Fund. This passive approach has been much more suitable for me.

Mistake #3: Holding On to a Stock for Too Long

After my grandfather passed away, he left me shares of stock as an inheritance. The stock was at an all-time high, and I assumed it was a good investment. However, it started to decline, and I refused to sell, waiting for it to bounce back. But, it never did. I eventually sold it at an all-time low, about 10% of its original value. In hindsight, I didn’t know much about the company or the economy, and I shouldn’t have held on to the stock. I also viewed the inherited money differently, when I should have treated it like any other dollar I’ve earned.

The Importance of Learning from Mistakes

While it’s difficult to acknowledge mistakes, it’s crucial to learn from them to avoid repeating them. I’m still making decisions that might seem wise now but could turn out to be mistakes in the future. The key is to recognize them and adjust course accordingly. By sharing my financial faux pas, I hope to spare you the same pain and help you make more informed decisions.