As I mentioned in Part 1, this story is not about everyday money leaks or niggling oversights we all make from time to time, like leaving the lights on or buying a burger at a fast food joint and forgetting to use the 2-for-1 coupon in your wallet.
Instead, it’s about the type of money blunders that wake me up in the middle of the night and leave me covered in a cold sweat.
I’ve already covered my first five dumbest mistakes. Here, in reverse order, are the other five:
5. Not holding out for a higher starting salary out of college.
As a newly-minted engineer out of college I had competing job offers from two companies. The starting salary offers were identical, but I really wanted the job that was based in southern California very badly so I accepted the position without making a counter proposal. Dumb. After talking with several colleagues some years later it was apparent to me that the company would have most likely accepted a counter proposal of up to 10% over their original offer. Although I did make up some ground in the years immediately following, I didn’t recover from that blunder — and then some — until I changed employers ten years later.
4. Not having an exit strategy with respect to my stock options.
I got my first set of stock options in 1999. Over the next five years I accumulated additional options. Those stock options had to be exercised within 10 years of their issuance. In mid-2008 the value of all of those options was over $30,000, and I hadn’t exercised a single one. Stupid. I expected the stock to continue to soar — but it took a huge hit after the market crashed a short time later. If I had established an exit strategy for cashing out my options when I got them I’d be a lot happier today — and a bit wealthier too.
3. Buying near the top of the housing market in 1990.
In 1990 the housing market in Southern California was fevered and rising at a spectacular pace. I was a young engineer still living with my folks and saving money for a house down payment. But home prices were rising so fast that it looked like I was going to be completely priced out of the market. Thinking that it was now or never, I jumped into the market. Bad idea. Soon thereafter, the aerospace industry in Southern California was hit hard and home prices plummeted. For seven long years I owed more on the mortgage than the house was worth. Making matters worse, my home was in a less-than-desirable part of town — and it sat 50 yards from a set of very busy railroad tracks. I know. It was really impossible to be truly happy there, but I wasn’t willing to wreck my credit by walking away.
2. Not allowing a song I wrote to be used by another artist.
Remember that I mentioned in Part 1 that my band had an album that didn’t go anywhere? Well, one song on the album, Vancouver, was generating some real buzz locally. We soon got the opportunity of a lifetime when the song got the attention of a Hollywood music business attorney. The guy loved the song. In fact, he swore that it was a radio-ready hit single — but he wanted the song for use by another artist, and I wasn’t willing to do that. Crazy. For several weeks, the attorney tried to convince me to change my mind. Then he just stopped calling. He wouldn’t return my calls either. So I went to his swanky office in downtown L.A. and he basically told me to get lost. There were no more breaks after that. I still think that song can be a hit for someone. I know a friend of a friend who co-wrote a song that got on an album by one of those boy bands, I think it was N’Sync; he’s supposedly received more than $80,000 in royalties — and it wasn’t even a hit single.
1. Not investing some of my early income as a teenager.
I made some (relatively) big money as a teenager working for a grocery store. I earned $14,000 in 1983 alone — that’s equivalent to more than $30,000 today. While I did use the money I earned as a teenager to help pay for college, I also wasted a chunk of my earnings on expensive audio equipment for my car and other goodies. If I had invested even $4000 of that money back in 1983, it would be worth just over $37,000 by the time I reach 65 in 2029, assuming a return of 5%. Dumb.
Photo Credit: Pic 2 Fly