When it comes to money and finances, I’ve got a lifetime of learning to share.
Haven’t you heard that you learn mostly from your mistakes? I’ve made my share of them, some real doozies. Here are several, in the order they occurred:
– Falling for the spiel. As a college student, I fell for the persuasive pitch of a life insurance agent who convinced me I needed insurance, even though nobody depended financially on me.
Buy the insurance now, she told me, so you don’t have to pay higher premiums later on. See how quickly the cash value will grow.
What she didn’t say is that my entire first-year premium, most of the second and a sizable chunk of the rest would go to pay her commission. Or that the projected cash values were based on overly optimistic interest-rate assumptions that never came to pass.
I eventually exchanged the policy for a much better one 17 years later, at least $12,000 poorer than if I had taken the money for the premiums and invested it on my own. Today in all my cash-value policies I know what I didn’t know then: how much of my money goes to pay for the actual insurance, how much is invested and what is my rate of return.
– Acting without thinking. I can still picture the moment, almost midnight New Year’s Eve 1967 on a brutally cold night in Kansas City. I had finished my rookie reporter shift at the Kansas City Star and was fumbling for the car keys in the open-air parking lot, my fingers numb from a biting wind.
The heck with this, I said, I’m moving to Florida.
Ah, the impetuosity of youth. I quit a great job without having another one. I got rejected by three newspapers in Florida, including a small weekly. I had to live in a $10-a-week rented porch until the paper for which I work now hired me in May 1968.
Whenever I am tempted to act on impulse, I think of those four months looking for work, and pause.
– Not learning about financial matters. I was married and our daughter was in middle school and still I knew nothing about managing money. Every single cent Georgina and I had was in the bank while the bull market of the early ’80s was passing us by.
A chance remark by a co-worker acquainted me with a financial magazine and I began reading up on personal finance.
Thinking back, I find I had been irresponsible, not learning how to manage money better for the well-being of my family. Personal finance gets so much coverage in the media today that there’s no excuse not to try to learn.
– Blindly following investment tips. As I began to read about personal finance, I invested a big part of my IRA money in a couple of stocks touted in a magazine. There was no rhyme or reason to what I did; I just picked the two with the most alluring write-up.
The stocks went down. I lost $1,000, but I learned to never invest in anything without knowing why.
– Blowing money on impulse purchases. I was taken by the color ads for the new, “state-of-the-art” $1,000 chess computer. Had to have it. Once it got home, I realized I don’t enjoy playing against a machine. By the time I donated it to a school, stronger computers were selling for much less.
– Not being realistic. We listed our house for sale in 1985 because we wanted to move to a bigger home in a better neighborhood. But we asked $9,000 too much, looking at our house emotionally instead of through the eyes of a potential buyer. So it just sat there for six months, what is known in the trade as a “tired listing.” Three months later, we listed it again, asked a realistic price based on sales in the neighborhood. We sold it in 16 days.
– Giving up too soon. By 1990, I felt a lot more comfortable about investing. I bought an excellent mutual fund in 1990, one I had researched well. But 1990 turned out to be a bad year for the stock market and even worse for the fund, which lost more than 10 percent–its only yearly loss ever. Much too impatient, I sold at a loss, giving up returns of 21 percent and more in five of the next six years.
– Not seizing the opportunity. After a new job assignment made it necessary for me to move, Georgina and I looked at many model homes and found the type we wanted at a great pre-construction price. The builder needed at least four months to deliver the house, but I dilly-dallied in making up my mind.
And dilly-dallied long enough to see Hurricane Andrew blow through South Florida in August 1992, causing long construction delays and pushing home prices up. We ended up paying $6,000 more for the house and waiting more than a year to get it built.
– Falling prey to “information paralysis.” The glut of information about personal finance often confuses more than illuminates. As a personal finance journalist, I am bombarded with this information and with conflicting advice. The result is that I’ve tended to neglect my own finances because there’s always another choice to consider.
But enough should be enough. Far better to make a good or even fair decision than to agonize endlessly over making the “best,” and in the end make none.
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For a copy of Mr. Cruz’s newsletter, “Winning at the Savings Game with Humberto Cruz,” mail $19.95 to Tribune Media Services, P.O. Box 4410, Chicago, Ill. 60680-4410 or call 800-788-1225.
