I Picked My Financial Adviser By His Tie, And Other Financial Mistakes

I am old enough to have made quite a few dumb financial moves. It is a good thing to periodically review your decisions.  What follows is a description of my various financial follies, and some thoughts on why I do not view mistakes as all that bad.  This gave me a rueful laugh, and I hope I’m not the only one who has made each of these mistakes.

I Picked My Financial Institution Based On Apparel

My first job offered a great benefits package, including several investment accounts, 7% contribution (not matched – they just gave it to you), and full vestment after one year. It was a not-for-profit, so the actual salary was low, but I knew that this was a great deal for retirement. The only problem was I did not know anything about investing. We had a choice of two different financial institutions for our retirement savings, and in my first year, we enjoyed presentations by representatives (both male).

The first presenter was probably in his 30’s, very sharply dressed, with a salmon bow tie and light grey suit. I liked him a lot. The second presenter wore a dark suit, with a plain red tie, and was likely in his late 40’s. I thought his presentation was less enticing. Yet, I felt much more confident in the older, more boring representative, precisely because he seemed conservative, and I wanted someone conservative managing my money. That institution also had a fund that auto-distributed your investments based upon your projected retirement year, which was nice, because – as I mentioned – I didn’t know much about investing. But I’d be delusional to think I even knew enough to suggest that financial product was what sold me. What sold me was his tie. It was boring, and I felt boring and money were a good combination.

Take-away: I’m not nearly as rational as I’d like to think.

We Kept Two Health Insurance Plans When We Got Married

My husband and I were each working, and each had different health insurance plans when we got married. Once we were hitched, instead of picking a joint plan, we each kept our individuals plans. That move likely cost us a couple thousand dollars in additional premium costs. Further, I didn’t really take the time to research insurance plans, and I likely had a much more expensive plan than I needed. That move probably cost me another thousand. We did finally combine our plans after a few years. Truth be told, I spent more time deciding on whether I would change my maiden name from Schwarz to my current married name of Scheirer in our first year of marriage (which I did, on our first anniversary) than I did on changing to a more appropriate health plan.

Take-away: I didn’t understand, nor did I bother to take the time to learn, how to manage routine household expenses.

I Didn’t Save Anything Toward Retirement One Year

I switched jobs, and failed to sign up for the company 401k retirement plan. The company did a 6% match. That means, that not only did I fail to save a single penny in a tax-deferred retirement account, I literally turned down nearly $5,000 dollars from my employer. If I had saved $5,000, and my employer had matched $5,000, I would have invested $10,000. After 30 years, growing at a realistic rate of 6% (compounding annually), I would have $57,435. My failure to save $5,000, ultimately cost me over $50,000.

If you want to see how much I would have lost at 7% or 8%, just play around with the NerdWallet Compound Interest calculator. For me, it’s just too painful to go above 6%.

Take-away: I allowed my feeling that I might not stay in that job, to control my overall financial strategy. (By the way, I stayed with that job for over four years, which meant I was nearly vested upon my departure, so yes, I did indeed lose a lot of money.)

I Paid Off My Student Loan Instead of More Expensive Debt

One of my more recent financial escapades includes harping on my husband to let me pay off my federally subsidized student loan, with the mind-boggling low rate of about 2.3%. Now, I had really good intentions. We’d recently gotten through a difficult financial period, and I wanted to get rid of debt. Further, we had about $8,000 in cash on hand, and I was thinking of investing it in a CD, but the rates weren’t good enough to beat what I would receive from paying off my loan early. That was good logic.

The problem was that we had much more expensive debt. Our condo mortgage was about 5.8%. We should have kept the educational debt at 2.3% and put the money toward the more expensive debt at 5.8%, which would have saved us much more money in interest payments. However, I became fixated on the educational debt, simply because we had enough cash on hand to pay it off. Psychologically, there was something about eliminating a debt entirely that made me put our hard-earned cash on a debt that was tracking with the inflation rate.

Take-away: I liked the psychological “high” of paying off debt in entirety, more than the long-lasting satisfaction of saving money on interest payments.

I Didn’t Ask For A High Enough Salary

Of all my mistakes, this is possibly the most embarrassing. For my first job, I asked for a slightly higher salary, and was turned down flat. I needed a job, and I could make do with what was offered, so I took it. All told, it was a terrific place to work, and I learned a lot. The next three jobs that I held, I requested a salary, and received a prompt, “yes” each time.

Looking back now, two of those positions would certainly have paid me more, had I just asked for more. I was so afraid of sounding greedy, or of someone saying “no”, that I undervalued myself, and asked for something moderate. Now, there was another piece to this. Each time I made a career move, my salary increased on average by 25% (proof of the value of hard work, good education, and sound networking). Part of my struggle in asking for a higher salary, was that I was already asking for a number significantly higher than what I had previously. But at the end of the day, I was nervous, and low-balled myself. My estimate is that poor negotiation cost me at least $44,000. I don’t like to think what it cost me in missed employer match and forgoing investment opportunities.

Take-away: I thought that rejection of my offer reflected badly on me, instead of seeing the negotiation for what the back-and-forth that it actually is.

Reflections On Money Mistakes

There are some useful truths that my financial foibles reveal about me. Namely, I’m not as smart as I like to believe. But more importantly, I’ve learned a great deal of compassion for myself and others, by being honest about how I handle money. It is easy, now on this side of financial know-how and security, to lecture others on how to manage their money; how they aren’t giving, saving, investing, earning. I didn’t need a lecture on any of my screw-ups. I needed encouragement. My hope, in writing about some of my mistakes, is that you can enjoy some humor and, in a way, encouragement. Managing money will involve mistakes. The one vital component is you get up after a mistake, forgive yourself, and think about how to do better.

Photo by Ellie Adams on Unsplash