Syd at Retirement: A Full Time Job wrote a great post last week about mistakes she made on her way to early retirement. Like me, she retired in her 40s and blogs about her experience getting to and enjoying early retirement.
I’ve been intending to write a post about some of the big mistakes I made along the way as well. I think it’s important to realize that we can make mistakes, really big mistakes even, and rebound from them. Did they cost me anything? Absolutely, some cost me big bucks and added to the years it took to get here. In fact I’m pretty sure that if I had started planning earlier and not made some of the big mistakes, I could have retired considerably sooner. But that is water under the bridge, and I’m here to admit some of what I did wrong so maybe you won’t have to.
I worry sometimes that, when I talk about personal finance, frugality, and early retirement, it could come across as preaching. I would hate to think that’s true; I respect the choices that others make, even if they are not mine. Many people ask me how I was able to retire at such a young age and I really like to share my thoughts and experience on the matter. My way is most definitely not the only way. Perhaps the most important message I can impart is this: it is your focus on the goal that matters most. Mistakes happen, and some may be costly ones. If you can stay focused and not let those big mistakes derail your dream, you can still get there (although you may have to make adjustments along the way).
So, here goes. Some of my big mistakes, although surely not the only ones:
1. I was heavily invested in individual tech stocks leading up to the tech bubble burst of 2000. I was foolish and proud and fancied myself a knowledgeable stock trader. I never added up exactly what I lost, but I think it was in the range of 1/3 of my invested assets. I don’t know what was more painful - learning that I really didn’t know what I was doing, or the years it added to my early retirement plan. So now, when I sing the praises of asset allocation, at least you know why.
2. Not even thinking about retirement until I was in my late 20s. I don’t remember how old I was when I first participated in a 401(k) or retirement plan, but it was not even on my radar until my late 20s. Of course I got serious about retiring when I was 32, but not investing in those early years really cost me.
3. While I was busy not investing for retirement in my 20s, I decided to become a homeowner by purchasing a condo. In addition to keeping me house-poor, it was not a good investment. I remember one of my friends looking at my budget and asking, “but how do you intend to clothe yourself?”! Stubbornly, I went ahead with it and while I was able to make ends meet, I saved no money and ultimately lost money when I was finally able to sell the place. I think I let the romantic notion of homeownership cloud my judgement on the value of the investment.
4. Leaving too much money “hanging out at the bank”. I am still a little guilty of this. Money that is not invested in stocks and bonds still needs to be put to work. I need to remain vigilant about evaluating (and regularly re-evaluating) good solutions for liquid/cash investments. I have to remember that money not earned is as costly as money spent.
And one more thing they we may not necessarily think of as a financial mistake, but was certainly a life-event that had financial ramifications, was a divorce in my early 30s. I was fortunate to be able to share in half the gain in the home we owned, but I have had friends who were unlucky in the timing of their homeownerships; they purchased a home at or near the peak of the market, then had to sell at significantly reduced prices. I know several who, while going through a divorce, had to come up with the funds needed to bring to settlement to make up a shortfall when selling their homes. Ouch. So why do I even bring this up? It may seem slightly off-topic, but making a mistake when choosing a partner can have huge financial implications, besides the obvious emotional ones. My ex-husband and I were in our 20s when we married and probably didn’t take the decision seriously enough.
So, maybe you feel better about some of your own mistakes now? I hope this list leaves you with the encouragement that what you need to succeed to early retirement is a goal, planning, and determination. Flawless execution is not required.
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Tags: money management, planning
September 19th, 2008 at 10:34 am
Nice writing. You are on my RSS reader now so I can read more from you down the road.
Allen Taylor
September 22nd, 2008 at 3:31 pm
You are obviously smart and savvy…For the mortals that we are..we need constant guidance…so this is excellent…author of For Kids 59.99 & Over
September 23rd, 2008 at 4:03 am
Hey, thanks for the link!
And yes, it was just the tip of the iceberg of mistakes for me too–just know that you were not alone on that whole technology stock bubble burst. I held many tech stocks that I ultimately sold for about 1/10 their highs–ouch!!!!!
Better I learned the lesson back then when I still had a job!