From getting takeout one too many times in the same week to saying “yes” to the bachelor party that ended up costing thousands per person, we’ve all done things with our money we wish we hadn’t. In fact, according to a Student Loan Hero survey, more than 75 percent of us are living with major financial regrets.
These four people, whose investing mistakes wound up costing them thousands, can relate.
The good news is that it's never too late to course-correct, as their stories of bouncing back prove. Better yet, you can learn from their mistakes and avoid making them altogether.
“I got burned from putting most of my faith—and money—in individual stocks.”
Jon Dulin, 39, blogger in Philadelphia, Pa.
For example, back in 2000, I invested $2,500 in a technology-focused mutual fund, only for the tech bubble to burst shortly after—taking down 60 percent of my investment. Unfortunately, that wasn’t the only time I got burned. I’ve also invested in various individual stocks, hoping to ride a hot pick all the way to the top. In one instance, I lost $3,000 when a much-buzzed-about company filed for bankruptcy and their stock plummeted.
Luckily, I wised up in 2005 and transitioned to low-cost index funds, like an exchange-traded fund (ETF) that tracks the S&P 500 index—a cheaper and much less time-consuming approach that’s paid off both financially and mentally. Not only do my current investments provide broad diversification (which protects from a single stock’s price swings), but I’m no longer having to rack my brain over the next hot stock.”
“I drained my 401(K) on a whim.”
Bhavini Naik, 38, project director and blogger in Brooklyn, NY
“Eleven years ago, I had $70,000 in student loan debt, an empty savings account and no job. I did, however, have a 401(k) from a previous employer. My plan was to roll the $10,000 balance into an Individual Retirement Account, but it didn’t quite work out that way.
Instead of requesting a direct rollover, where my old employer would send a check directly to the new bank handling my IRA, I must’ve accidentally opted for an indirect rollover. Essentially, I had 60 days to deposit the check, which was made out to me, into my IRA, or else I’d owe taxes and a 10-percent early withdrawal penalty.
After feeling that check in my hands, and considering my dire financial situation, I kept the money and used it for everyday living expenses and student loan payments instead. While that’s not exactly frivolous spending, it turned out to be a big mistake I wish I’d worked harder to avoid. Not only did I not get to keep the full amount, thanks to those early-withdrawal fees, I missed out on a lot of growth.
[Editor’s note: From January 2007 through August 2018, the S&P 500-stock index has returned a whopping 98 percent, or more than 150 percent when dividends are reinvested. That means Naik’s $10,000 balance would be worth almost $20,000 today at a minimum, even if she never contributed another dime.]
The upside is that I landed a new job shortly after draining that account. I opened a new 401(k) and automated my contributions. (I snagged an employer match to boot.) I also began kicking in money to a regular brokerage account and a traditional IRA.
Today, I've got a fully loaded emergency fund and a healthy nest egg, thanks to some financial discipline and good, old-fashioned hard work. Most importantly, I’ve learned a valuable lesson about not tapping my long-term investments early, so I can enjoy the fruits of that hard work down the road.”
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“I got spooked by market fluctuations.”
Rocky Lalvani, 52, sales professional in Harrisburg, Pa.
I started investing relatively early in my career, and wanted to save as much as possible. While that’s a good goal, without much of a strategy, I became a slave to watching market movements and analyzing industry chatter. Whenever my investments dipped, I’d panic and sell—always for a loss.
The years after the 2008 financial crisis hit me hardest. I sold about half of my stocks when the market bottomed out, and I’m still kicking myself. Had I kept fear out of the equation and rode out the storm, I would have crossed the million-dollar mark years earlier (though I did eventually get there).
My story does have a happy ending, though. With a better education on market fluctuations and help from a financial advisor, I’ve rebounded with an emotion-free investment strategy that keeps my feet planted in good times and bad. My portfolio has grown fourfold since 2008, thanks to steady investing and an iron stomach.”
“I didn’t start investing until my late 20s, losing out on years of compounding returns.”
Chris Peach, 35, firefighter and blogger in Phoenix, Ariz.
“Back in 2011, my wife Andrea and I were buried under $52,000 of debt and living paycheck to paycheck, despite a six-figure combined income. After Andrea suffered the embarrassment of having all her cards declined at the grocery store, we got serious about our finances. We took a hard look at our spending, cut up the plastic, picked up some side gigs and clawed ourselves out of the red in under a year.
By the time I finally got my financial act together, I was 28. While I was debt-free and had my spending under control, there was still one wealth-building tool I had yet to leverage—time. I came across a compound interest chart that showed the numbers in black and white: Had I started investing in low-cost index funds at 18, I would have already been well on my way to joining the millionaire’s club. Instead, I was a decade behind and frantic to catch up.
We mapped out a long-term investment strategy and got the ball rolling. The first order of business was maxing out our retirement accounts: Roth IRAs, Andrea’s 401(k) and my 457 plan. We also began automating all our contributions so that we were never tempted to spend it. I may have come late to the investing game, but I’m definitely doing my best to make up for lost time!”