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 was 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.
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.
Free Vector Graphics by Vecteezy!
Good luck reaching your financial goals