This guest post comes from Darwin’s Finance, a blog focused on approaching personal finances from an innovative evolutionary standpoint, and ETFBase, which is focused solely on ETF strategies and news.
So Google coined “Don’t be Evil”. I’m not the first one to say “Don’t be Stupid” and I won’t be the last. But I see people doing stupid things with their money all the time. I see it even more now with personal finance blogs, TV shows and magazines gaining prominence. I’ve been stupid too – more on that later.
There are too many stupid things people do with their money to cover the full spectrum of stupidity in a single post. But for the most part, when that little voice in the back of your mind is saying “Am I being stupid right now?”… you probably are.
- Are you getting suckered with a high pressure exploding offer?
- Did you fail to properly prepare for an expensive negotiation like a new car or home purchase?
- Are you chasing investment returns that are outrageously too good to be true?
- Are you gambling again with fantasies of striking it rich?
- Are you continuing to try and keep up with your neighbors who, in turn are trying to keep up with their spendthrift neighbors?
- Are you carrying high interest debt and doing nothing to turn the situation around?
I’m Stupid Too – and I’ve Learned from My Mistakes
Lack of Investigation – I had always heard complaints about HMOs. I’d heard that the service was poor, the doctor you wanted often wasn’t in network and other horror stories. As such, I had always signed us up for 90/10-type plans where we end up paying 10% up to a certain threshold but have optimal flexibility in medical care. As it turns out, this lore is somewhat antiquated and inaccurate. When we had our first child, with the different costs, treatments for both child and mom, the 10% probably ended up running us about $1,500.
In the end, I kind of figured that’s the cost of having a kid and went along with it. Then comes kid #2 (he’s still our difficult one :>). Sparing you the details, it was a rather complicated and high risk premature delivery. After a prolonged hospital stay, the total bill was something like $50,000 to the insurer and our part ended up being about $3,000. If I recall, we had a $1,500 cap for mom and child which we maxed out immediately. Again, not catastrophic to our budget and a healthy (now) mom and baby are all that really matter, but in retrospect I was stupid.
I was stupid because I didn’t actually investigate the alternatives until AFTER $4,500 in maternity related expenses. By the time baby #3 rolled around, I found out that all our friends and co-workers would always switch into an HMO for the year because it was only a single one-time all-in fee of $250 for maternity. Well, there’s no way that plan would cover my wife’s doctor who we were unwilling to leave, right? Wrong. He was in that network all along. So, this year, I can confirm baby #3 had a $250 price-tag. It was that simple. By not properly researching alternatives, over the past 5 years, I’m responsible for probably $4000 in lost funds.
Laziness – While I work hard for my career, my blog, spending every moment I can with our kids, etc., I’m often lazy in aspects of life that are really inexcusable. For instance, after we moved, I still haven’t unpacked some boxes of my own personal items for 3 years now. I still can’t manage to put the lid down and I don’t get around to fixing things around the house as fast as I should. Some would say, “I don’t have the time” or that it’s a priority thing. If I’m being honest with myself, it’s just laziness. Where this really got me recently was financial laziness. When I started the blog, I was advised for tax and accounting purposes to have all the funds flow through a single account which was associated with my LLC. This would keep everything legit, easy to track, prove that I’m actually working under the auspices of an LLC should I ever face legal action, etc.
So, I’ve been doing that… for years. I’ve been letting money flow in to the same low-yielding now TDBank savings account for years. Needless to say, after a couple years of hard work first at an earlier blog and now at Darwin’s Finance, I’d amassed a 5 figure savings account. After some time, I said, “I’ve gotta move this money and get it into a more suitable asset class”. I had dilly-dallied with whether to use any of it for our personal budget, shove it all into the kids’ college funds, use it for IRAs, or what. Either way, in order to drain it down, I was going to start linking various accounts to it and dollar cost average out into various accounts until it maintained steady state at say, a thousand bucks. Well, as luck would have it, apparently, in order to get online access, there were all kinds of annoying procedures, including (this makes NO sense to me), you HAVE to have a debit card? Each time I’d try to sign up online, I’d get through the steps and realize I didn’t have this card, then I’d forget to go to the branch and get one (have to go in in person to do this).
Well, this whole ordeal played out across 2008 and 2009. When the market capitulated in March 2009, I said, “That’s it!” I started upping my 401k contributions even higher, making trades in my traditional broker account, and said, “I’m gonna get that TDBank money invested”. Well, while I’ve realized nice gains from my other actions, I still don’t have online banking access. I missed out on a 60% run from the month I totally planned on plowing it into the market. I left probably $6,000-$7,000 in investment returns on the table in exchange for a paltry 0.05% savings rate return. I did this because I was lazy. Now, in facing up to my laziness, I had been cashing some checks for the account and said, OK, transfer $5,000 to my business checking account, and I then wrote myself a check to my normal account to invest it. But that was in late 2009 when most of the gains had been realized already.
I’ve made other financial mistakes, but those are two recent ones that are prominent in my mind. I read about and hear about stupid moves people make daily. Sometimes, these stupid financial moves have life-long implications. There are millions of stupid things that seem even more stupid in retrospect. If you even have to question it today, it’s probably stupid and you’ll regret it later.
We’d Love to Hear Your Stupid Stories – So We May Learn From Them