Big Financial Mistakes Edition

When it comes to money, no one has it completely figured out. We can learn a lot from our own failures and from the mistakes of others. Stories like the one shared by Kind Wealth founder David O’Leary – who filed for bankruptcy at age 25 – highlight the fact that no matter who we are, we’ve all made a mistake or two with our finances. There’s no shame in admitting it, and by sharing our financial failures we can help others avoid potential pitfalls in their own lives.

Humble Dollar blogger Richard Quinn fessed up to 10 big financial mistakes in a recent column, from betting on penny stocks in his late teens, to selling investments at a loss to buy an engagement ring, to borrowing from his retirement account to pay for his kids’ college education. Despite his many money failings, Mr. Quinn still managed to retire comfortably – something he attributes to working for the same company his entire career.

I’ve shared plenty of my own financial mistakes in this blog. I started investing in an RRSP at age 19 when I was earning less than $25,000 per year and still had student loan and credit card debt. I had to cash out my RRSP to pay off my maxed-out credit card. 

I got in over my head as a first time home buyer and needed a roommate to help pay the mortgage. When he moved out I once again turned to my credit card to cover my monthly shortfall. Not smart. 

I took out a second mortgage – basically a consolidation loan – to pay my high interest debt and clean up my act. Thankfully, it worked.

I bought mortgage life insurance once. Never again.

My investing journey began with high fee mutual funds (I’ll take a pass since it came with an employer-match), turned DIY when I decided to pick individual dividend stocks, before finally coming to my senses and switching to index investing.

I’m still making mistakes and learning as I go. I quit my job last December to focus full-time on writing and financial planning. It was the best decision I’ve ever made for my career and for my family, but now I regret not doing it sooner.

What are some of your financial mistakes? Share them in the comments below.

This Week’s Recap:

I managed one post this week, opening up the Money Bag to answer reader questions about bonds behaving badly, investing USD, active management in a market crash, and how I’m handling my credit card rewards and loyalty points.

In other news, I’ve opened a corporate investment account at Questrade. If you recall, I received an excess cash payout from my pension which means I won’t have to take out any money from our business this year. 

My plan is to keep a cash balance of six months worth of projected 2021 expenses (when we will resume paying ourselves), and then invest any remaining funds. 

Finally, many thanks to Rob Carrick for including my article on renewing your mortgage in his latest Carrick On Money newsletter.

Weekend Reading:

Credit Card Genius compares five digital wallets and explains why they’re safer than your physical wallet.

A Wealth of Common Sense blogger Ben Carlson describes the five types of investors in this market. Which one are you?

Warren Buffett says he’d disagree violently with the notion that passive investing is dead.

The federal government announced this week that seniors who qualify for OAS will be eligible for a one-time, tax-free payment of $300, and those eligible for the GIS will get an extra $200.

Rob Carrick says seniors deserve help with expenses in the pandemic, but investment losses is another matter:

“It’s not the job of government to backstop individual investing losses. If anyone loses money in the stock market, that’s on them.”

Meanwhile, parents are in financial limbo after spending thousands on sports, arts, and summer camps that have been derailed by COVID-19. Our kids are finishing up their ballet and piano lessons online with Zoom and Skype, respectively. We hadn’t committed to any summer camps because we thought we’d be travelling in the U.K.

Here’s a very good and relevant piece from Jonathan Chevreau on whether retirees should reduce their RRIF payments during COVID-19. The government gave RRIF holders the option to withdraw 25% less than their minimum mandatory withdrawal rate this year.

PWL Capital’s Ben Felix digs into the 4 percent rule in his latest video on how to retire early:

Millionaire Teacher Andrew Hallam shares a stellar post on why Canadians are wasting billions on currency-hedged ETFs.

Michael James reviews the financial documentary, Playing with F.I.R.E. I watched it last week and really enjoyed it as well.

Erica Alini of Global News looks at coronavirus and the housing market, and asks if it’s a good time to buy.

Finally, here’s travel expert Barry Choi on what the future of travel may look like

Have a great weekend, everyone!

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6 Comments

  1. Don on May 16, 2020 at 12:34 pm

    Selling RRSP funds to purchase a second property with 100% cash ~15 years ago, because I was so allergic to debt. It pains me to think of the value those RRSP funds would be worth now vs. the mortgage interest I would have paid, especially when my income levels were quite high at the time (thus paid a huge tax burden) and they increased substantially over the subsequent years, thus I would no doubt have been able to pay off the mortgage early quite easily with excess cash flow. 90% emotional; 10% rational decision.

  2. Brad S on May 16, 2020 at 1:13 pm

    Credit cards for me. Close to 15k debt when I was young. Got lucky with estate money and got out of it. Ironically I use credit cards exclusively now but always pay them off monthly. I suppose a second mistake is buying a home with less than 20% down and the HBP withdrawal and buying mortgage insurance.

  3. Shawn Vincent Benjamin on May 16, 2020 at 1:47 pm

    Purchasing a house with 5% down was no problems what so ever. What was smart was paying the mortgage off within 12 years. As mistakes, a line of credit and not investing in index funds. I am still in index funds as of Mar and I am up 20% as of May.

  4. Gert on May 16, 2020 at 4:31 pm

    Staying with the big banks and losing more than I can afford. When times are good earning seem good until I read blogs like this one and see others earning more and paying less fees. If I was a little financially smarter I’d fix this problem but just like those who try reading the market, I seem to be waiting for the right time??? You’d think now is the right time but no I still pay some 2% fees because I’m not sure…
    But my biggest mistake was not investing at younger age. I started at age 37 and now some 20 years later I wonder what retirement is going to look like!

  5. Bob Wen on May 18, 2020 at 7:46 am

    – I got married in a futile attempt to fix the relationship; got divorced because it didn’t fix it – hugely expensive on many levels. I’m glad this happened when I was young and stupid rather than old one a little less stupid!

    – I didn’t join my employer’s share ownership plan until after being with then for about five years, and even then, I didn’t put in as much as I could have for about another three years. Lot’s of missed employer match money.

    – Likewise, my [new] wife didn’t join her employer’s share ownership plan for about 10 years, and like me, didn’t contribute the max for a few years.

    – We leased a car for three years instead of buying it.

    – We bought several brand new cars, and new ones again after the dealership loans were paid off. We now have cars that we bought new 10 years ago, with no plans to upgrade.

    – We moved house way too many times; eight in total, but I have always done my own renovations and repairs, and never paid more than 2% in real estate agent fees, and I’ve sold several of them myself, saving thousands.

    – We could have budgeted our household expenses a little better, but not by much. Knowing what we know now, we could have cut some costs, and paid out less in interest on lines of credit.

    Still, with all that mess behind us, in January 2013 we got serious about our money situation, discovered indexing and the FIRE community, and have increased our net worth by over $1.2M, bringing us to $2M net worth today. We also have three kids, now grown up of course.

    We got there in the end.

  6. Peter O on May 19, 2020 at 5:03 am

    My biggest mistake was not selling my common share equity before March 2020 when I believed the risk was high that COVID may be worse than the GFC impact on equities. I listened to our federal government that risk was low. Never again not trusting my instincts. I dodged the the GFC in 2008 and sold everything 6 months before the crash. But I missed it this time. My next greater mistake may be not selling now down 20%. Trusting travel tour companies. I was booked to travel to Netherlands on a Liberation tour May 2020. The tour company initially requested we make a 100% claim with recommended insurance provider who has denied the claim and expecting the travel tour company to return a substantial portion if the fees.

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