Screw-ups up on My Way to a Million: Greed 13


You’ve probably heard it or seen it on a cheesy motivational poster: The road to success is paved with failure. I prefer to call them screw-ups as it seems to imply more of a duh!!-moment and lessons are learned.

For two years now I’ve been writing about how I made my way to a million and how that eventually resulted in early retirement at 43. In my book I write about the screw-ups, but on my blog I’ve not paid much attention to them.

Today I’ll start a series that focuses on the screw-ups on my way to a million. We all know we learn from our mistakes (or at least should) so before you make yours maybe mine will make you think twice before you act.

Early rise to riches

In an interview with the Debt Free Divas I made an off the cuff remark about how I lost $200,000.00 in my 401(k). It was actually more than that and it had happened to me 16 years earlier. I wasscrew-up on my way to a million long over it but nonetheless, probably not the way to draw the audience over to the fun world of personal finance (oops).

So what happened exactly? Your 401(k) is supposed to be safe, right? Well, they are as long as you don’t act stupid. I acted stupid, I got greedy.

The year was 1998 and we were partying like it was 1999. I had only recently arrived to America and was going to make it big and make it big fast. Some of you might be a bit young to remember but 1998 was somewhere near the height of the dot-com boom (we didn’t call it a bubble until after it burst). A perfect smorgasbord of good things was coming our way. The company I worked for was Platinum Technology and it was smack in the middle of everything dot-com.

At the time, I worked on a long term project in Montgomery, AL. We lived in a corporate furnished apartment (with weekly cleaning service), drove a company rental car and to top it off, a received $350.00 per week per Diem.

Put in place to make it cheaper for Platinum Technology, we soon figured, it could make it even cheaper for us. If we just moved from California, into that apartment, continued driving that rental car through the weekend and kept the per Diem. So that’s what we did; for more than a year we lived entirely on the company’s dime in balmy Montgomery, AL.

At the time, like many other companies, Platinum Tech had their own stock offering in the 401(k). So instead of investing in “steady” funds (nothing was really steady at the time), I invested my entire 401(k) into the company stock. It worked great. By March if 1999 I had a hefty $42,000.00 in my 401(k). Not bad for a 29 year old. The jackpot really hit when that month Computer Associates bought our company for $29.24 per share. In a single day my 401(k) tripled, my $42,000.00 thousand jumped to $129,000.00 over night.

This would be where any sane person would take their “winnings” and do something smart with it. Instead greed kicked in. Like with Platinum Tech, Computer Associates also allowed for buying CA stock with the 401(k) dollars. All my 401(k) was transferred to the CA stock ticker and the fun continued. I continued contributing to the 401(k) and by December of 1999 my 401(k) was up to $297,000.00.

How quickly I lost it again

Some of you may remember what happened next. In march of 2000 the dot-com bubble burst. It is a bit of a blur what happened all next but most of that 401(k) evaporated. I retreated from the market all together and by the time I started investing again, my total 401(k) contained a fraction of what it used to have, a mere $41,000.00.

401k

After going up, to almost $300,000.00, I was left with a little less than the amount I had before all this good fortune hit. Why?

I couldn’t have stopped the dot-com bust but like almost every other investor I got greedy. I tripled my Platinum Tech 401(k) overnight and instead of taking the gains, I went all-in again in the CA 401(k). When that reached astronomical levels, again I didn’t back down but stuck with it, wanting more. Plain and simple greed.

I could hit myself over the head for being so stupid, weren’t it for the fact that we were all doing it. Guess what, many of you did it again when the housing bubble grew out of control. It may very well be in human nature. Greed is what leads to every bubble and we seem to be creating bubbles over and over again.

Would a plan have changed things?

Today, I do wonder what would have happened, had I had a plan in place. A ten year plan to reach a million dollars, like the one I created some years later, may have kept me honest to myself. It may have allowed for throttling back a little when 30% of that plan was reached in 1 year. You kid yourself (as did I back then) to believe there is such a thing as get rich quick.

There is nothing wrong with wanting more but wanting it all at once is greed. Also getting it all at once seems to lead to greed. Don’t let it turn into that. Take a step back. If things look like they’re too good to be true, they probably are. Don’t immediately go for more, instead try to secure some of your gains. Maybe so you can use them for the day things get worse.

Don’t let greed get the best of you

Easier said than done I think. I don’t think those that act greedy are actually aware of set behavior. Unfortunately, when too-good-a-fortune comes your way, you wont think you’re being greedy. Like I said before it’s in our nature, you probably think you’re just on-a-roll, like everyone else is. Any on-a-roll  comes to an end.

Next time you’re on a roll, maybe you’ll remember my screw up on my way to a million, step back and take note.

 

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Good luck reaching your financial goals


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About Maarten van Lier

Maarten came to this country with a suitcase and a diploma. He created a financial plan and goal to become a millionaire in 10 years. He successfully turned his financial goals into reality, wrote a book about it and now blogs actively in hope of inspiring other to do the same.


13 thoughts on “Screw-ups up on My Way to a Million: Greed

  • Brad, helping Maximize Your Money

    “Don’t put all your eggs in one basket”

    I’m not a fan of putting 401k funds into company stock, but I’m also not a fan of individual stock-picking (anymore) either. I like the idea of picking a portfolio allocation then reviewing to rebalance it annually. That rebalance process in itself would have identified the overallocation and let you take some profits without getting into a timing-the-market situation (just do it annually, regardless of market conditions IMO).

    • Maarten van Lier Post author

      You are right. Unfortunately when times get crazy we sometimes loose sight of that. It’s easy to get caught up when the only way seems up. Nowadays I’m pretty much all ETF and spider tracking funds. Has worked well for me the last 8 years.

      The other problem with investing in the company you work for is that you get emotionally tied up. When the stock tanks you tend to take it personal and it could show in your work.

  • Steve

    Greed can make plenty of people do crazy things! You must have felt on top of the world on the ride up! I know I would’ve!

    I put all of my retirement into growth stock mutual funds but do have a little bit in a drip plan to buy a few single stocks to reinvest high dividends. Both plans have my family setup for a great future!

    It is easy to look at the lure of quick and easy wealth but I’m not really comfortable taking the risk. Slow and steady wins the race! When I find myself getting “greedy” I go back and read the tortoise and the hare, LOL

    • Maarten van Lier Post author

      Thx, tortoise and the hare is a good one. Yes, the ride was exciting (I’ll write about some more mistakes I made in the near future). Before I retired I still played a little with stock and options. Compared to the entire portfolio (mostly SPY and some other ETFs a drop in the bucket). Now that I’m retired I’ve somewhat lost my appetite for playing in stock all together. My investments are now my livelihood and no longer excess income. I do own some AAPL, AMZN and GOOG but purely for the long run.

  • Mrs Groovy

    “It’s easy to get caught up when the only way seems up” you said in your comment, above. How true. Fortunately you had the intelligence, motivation, and capacity for lifting yourself back up again. I’m glad you talk about the experience because I would bet you’ve made others think twice.

  • Apathy Ends

    Thanks for sharing this story, we have been lucky to only invest in a bull market (outside of a few corrections) but getting to read first person accounts of bursting bubbles helps us prepare mentally for a future one.

    I know it sucked for you, but I appreciate you sharing!

    • Maarten van Lier Post author

      Thank you. I was very young at the time and only really realize today how much I really lost. The loss absolutely sucks but I’m a little glad to have been in the midst of the entire run up.

      I just saw this documentary called boom bust boom. In it they explain you don’t your in a bubble until it has actually burst. That’s a little scary. I guess the lesson in that is, you get back on the horse and try again. We did and it worked out well.

  • Mr. Groovy

    Thank you, Maarten. Stories like these will hopefully have a sobering effect on the average investor’s mindset. I know I would have succumbed to “irrational exuberance” had I been in your situation. Would I behave differently today? I hope so. But you never know with that devilish greed gene. It has a knack for turning man, regardless of his financial savvy, into a drooling idiot.

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