You know the old saying that the cobbler’s kids go barefoot? That applies to me at tax time – I hate getting my tax documents together! Being busy with other people’s taxes until April 15^th is the perfect excuse to file for an annual extension. And prepare my own return myself? You’re kidding, right? Bless my CPA team, they gets stuck with a bulging folder of forms and scraps of paper each year and patiently connects the dots for me. So I can truly relate to clients who would rather schedule a root canal than a tax appointment.

Here’s something else I can relate to: money mistakes. Nobody is immune, though you may assume I’ve always taken the advice I dispense on a daily basis. I’m a work in progress, just like most people, and there are plenty of lessons I had to learn the hard way. Here are a few that come to mind:

1. Spending an inheritance – when my grandparents died in the early 1990s, my sisters and I inherited some money, a first for me. I giddily spent some of it just because I could and it “felt” good at the time. However, the happy feelings quickly evaporated and I was ashamed that I had wasted part of the money that had been so carefully saved over a lifetime. The fire engine red Louis Vuitton purse (barely used) hanging in my closet is a constant reminder of my $1,500 lapse in judgment.
2. Investing in a friend’s business – the story sounded good and I had a chance to get in on the ground floor! What an opportunity! Unfortunately, investing in someone else’s good idea is rarely a good thing. There is much more to building a successful business than the eyes can see. Even if the venture succeeds, expect to say goodbye to your money for decades before you get a return on your investment. That is, unless you are buddies with the next Facebook genius. And I wasn’t.
3. Emotional investing – it was the next big thing: THE INTERNET! You had to be stupid not to see that – right? Even dot-coms that hadn’t turned a profit were going up. Until they were going down. WAY down. I’ll have to say that I lost money with some of the best and the brightest analysts in the industry (fortunately, I didn’t manage money back then). And the many lessons I learned from that experience continue to reap rewards.
4. Not diversifying –caught up in the internet frenzy, I would have been in much better shape when the market tanked had I owned a diversified portfolio of equity mutual funds.
5. Ignoring investment accounts – this was the finale to my 1999 and 2000 blunders. Few people have the stomach to look at their accounts during a bear market. You feel as if you’ve lost everything, and forget that all bear markets are temporary. I let my emotions get in the way of making sound decisions after the dot-com bubble burst and held onto some junk much longer than I should have. Maybe I didn’t sell at the bottom, but I still should have gotten out of the companies that were never coming back and bought into quality investments while their prices were in the basement.
6. Investing in stocks – I used to think Smart Money magazine was written just for me…Ms. Smart Investor. I followed Yahoo money blogs, listened to CNBC, bought The-10- Picks-You-Don’t-Want-To-Miss, and even used software that purported to have magical forecasting powers. Fortunately, I soon learned I’m simply not smart enough to beat the stock market. Buying individual stocks requires you to pick “winners” and “losers” by sifting through mountains of information and then analyze what it all means with a good measure of luck stirred in. I’m just not a gambler and I sure don’t want to gamble with clients’ savings. Today, all our clients’ money is invested in properly-balanced equity index mutual fund and ETF portfolios, rebalanced annually. Our own portfolios, including those of family members, are invested the same way. History proves that, over the long term, it’s a winning strategy.

I still wince when I think about these mistakes. However, they’ve helped me understand the issues our clients struggle with and I’m a better advisor for it. And I hope you’ll choose an IRA contribution or credit card payoff instead of “investing” in a designer purse should a windfall come your way!