Nobody’s Perfect: My 10 Dumbest Money Mistakes (Part 2)

This is the second part of my two-part article on the 10 dumbest money mistakes I have ever made. For Part 1 of this story, click this link.

As I mentioned earlier, this article is not addressing the little money mistakes we make from time to time, like going to the movies on a whim and finding out if you had gotten there 30 minutes earlier you could have taken advantage of the 50%-off matinee prices.

Instead, I’m talking about the type of money mistakes that really haunt some people — and by that I mean the really stupid stuff that occasionally gives folks nightmares and leaves them waking up in a cold sweat.

I know I’ve made at least ten stupid money mistakes over my lifetime. I revealed mistakes number six through ten in Part 1 of this story. Here now are the remaining five dumbest money mistakes I’ve ever made, ranked in reverse order.

Remember: do as I say, not as I, uh, did.

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 for 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. Really dumb move. 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 with respect to my salary in the years immediately following, I did not completely recover from that mistake (and then some) until I changed companies a decade 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 5 years I accumulated additional options. My stock options have 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 didn’t exercise a single one. My company was flying high, the long-term prospects were outstanding, and I expected the stock to continue to soar. Stupid, stupid, stupid. Now, roughly 15% of my options are set to expire at the end of June. The value of those expiring options if I cashed them today? Try $600 and change. The total value of all my accumulated options is a little over $3000. I now have an exit strategy for cashing out my options, but if I had been smart enough to build one when I first got them I’d be a lot happier today.

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 down payment for my first home. 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 and bought a house that, in retrospect, I really should taken more time to consider before committing. That was a dumb move. Soon thereafter, the aerospace industry in Southern California was hit hard and home prices plummeted. For seven long years I was upside down, owing more on the mortgage than the house was worth. As a result, I was stuck in a house in a less-than-desirable part of town, a mere 50 yards from a set of very busy railroad tracks. The freight trains would roll by every hour or so with horns blaring. It was really impossible to be truly happy there, but there was nothing I could do because I owed more than the house was worth and I wasn’t willing to wreck my credit by walking away.

2. Not allowing a single from our first album to be used by another artist.

In 1995 our band, The Relics, completed our first album. I am still very proud of that record, which I distributed through my own record label. One song on the album, Vancouver, was generating some real buzz locally and we got the opportunity of a lifetime when the song got the attention of an attorney in the music business who was based in downtown Los Angeles on Wilshire Blvd. The attorney loved the song so much and swore that it was a radio-ready hit single. The one catch was that he wanted the song for use by another artist and I was not willing to do that. I wanted to keep the song as leverage for getting a record deal for my band with a major record label. Dumb move. For several weeks, the attorney kept pushing me to change my mind. I was sure I had the upper hand — until he suddenly stopped calling. Then he wouldn’t return my calls. So I went to his swanky LA office where he basically told me to get lost. There were no more breaks after that. I ended up selling about 100 CDs out of the trunk of my car. I’ve given away close to 300 more. Fifteen years later I still believe that song is a hit. I know a friend of a friend who wrote a song that got on an album of one of those boy bands, I think it was N’Sync; the song has earned the guy over $80,000 in royalties — and it wasn’t even a hit single.

1. Not investing some of my early income as a teenager.

This is definitely the biggest mistake of them all, and one that most every person makes during their lifetime. As I mentioned in my post 24 (Financial) Things About Me…and One Confession Makes 25, I made some (relatively) big money as a teenager working for a grocery store. While I did use the money to pay for college, I also wasted a good chunk of my earnings on expensive audio equipment for my car and other frivolous items. Dumb. If I had invested even $4000 of that money back in 1981, it would be worth just over $94,000 by the time I turn 65 in 2029, assuming a return of 8%.

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