What Are Your Financial Regrets?
|November 12, 2010||Posted by Roshawn Watson under Uncategorized|
By: Roshawn Watson
Reflection is mental concentration. Sometimes the insights one gains by reflecting can be the difference between obtaining your breakthrough and languishing in failure. It’s easy to continue repeating the same mistakes if you never learn from them. However, suppose you could turn back the years and were eighteen again. Would you leave everything the same or would you change things? Personally, I would correct some past mistakes. Here are four things that I would do differently.
Fact: After my first car died on me for the Xth time, it was time to replace it.
Fiction: I needed a major upgrade right then.
Oh how I regret ever getting a car note! Although I paid it off very rapidly, I realize getting this debt in the first place was one of the dumbest things I ever did by far. Oh how I wish I would have had more backbone and stood up to the salesperson. I wish I would have gone with something that I could have afforded right then instead of arrogantly assuming that everything would work out. Fortunately, I only made this mistake once.
One reason I regret this is that cars are rapidly depreciating assets: the average car loses 45% of its value in the first three years. However, the primary reason car debt is a big one for me is because of opportunity costs. If you just invest the typical car payment in North America (approximately $480) from age 20-70 (assuming 10% annual return), you would have a sweet $5 million. Even if I’m half wrong, you’re still in a great situation. Once I realized what I was giving up, I could no longer enjoy my car. Thus, I almost sold it but in the end I resolved to pay it off and count it as stupid tax…never to be repeated.
Student Loan Debt
I received plenty of scholarships, but the truth is I didn’t do everything to minimize my debt. For example, I could have worked more while in school, applied to more scholarships, or agreed to work for companies after graduation in exchange for tuition. I could have also chosen a less expensive school (although I love my alma mater greatly). There were some phenomenal other schools (very strong academics) that I was accepted to that would have cost a fraction of what I paid. Thus, I not only consider my student loan debt self-inflicted but also preventable.
While I am happy that this worked out too, I got the degrees and paid off those debts, I certainly wouldn’t call my decisions financially wise. Student loan debt has now surpassed credit card debt by $3 billion, and 43% of students don’t graduate. It’s bad enough to have the student loans, but to be indebted without earning your degree is akin to digging a hole without a shovel. I know it won’t be you or anyone that you know who doesn’t graduate, but I would suspect that close to 100% thought that they would graduate too, yet 43% didn’t. With student loan default rates now exceeding subprime mortgages, car loans, and credit cards, and the near impossibility of bankrupting them, student loans are far from innocuous. I’m sure we all know an educated indentured servant or two.
I wished I would have started investing earlier too. Although I started a few months after I began working full-time, there was no good reason I couldn’t have started while I was a teenager. I wish I would have learned about brokerage accounts instead of just savings accounts and c.d.s, even if the only obvious benefit I received was getting over my initial trepidation with respect to investing process.
I experienced some “growing pains” with respect to investing too. For example, I initially followed the asset allocation suggestions for my age group, but that didn’t fit my risk tolerance. Consequently, I was anxious and with good reason. Had I continued with that initial strategy, I would be very unsatisfied with investing today. From this experience I learned that one-size fits all advice makes great sound bites but can be misapplied due to the specifics of your situation. Just because your investment plan is unconventional doesn’t make it ineffective.
If you purpose to learn more about investing, consider subscribing to investing magazines and listen to investing greats, such as Warren Buffet. An insightful read is The Intelligent Investor by Benjamin Graham. Although I didn’t start investing at six, like my colleague Money Reasons, I am happy that I grabbed a hold of this lesson sooner rather than later and intend to be a life-long investor.
Delayed Grad School or At Least Been More Innovative
I also wish I would have trusted myself more with respect to going back to school. I was concerned that if I stopped, I might not return. In my situation, it would have been financially more prudent to have delayed grad school, even if it was for only six months. However, instead of working something out to minimize the financial implications of going to grad school, I blissfully ignored my mess initially. Although my decision was more palatable that way, I almost got burned…badly.
At the very least, I wish I had been more innovative. A few years ago, I read Campus CEO by Dr. Randall Pinkett (winner of The Apprentice Season 4). He wrote that he and his partners built a multimillion dollar business by compensating for their limited financial capital by using other resources that were readily available at their university. Unfortunately, this was not my experience, and to this day I fault myself for not applying myself more in this area. Let me paint an illustration of how being more innovative might have helped me. Depending on your sophistication, the same 10 lbs of iron can be used to create several different levels of income. For example, you could use it to make: (1) horse shoes (worth $30), (2) needles (worth $300), (3) watch springs (worth $3000). Too many times in life, we try to solve our financial problems with “horse shoe” level answers. I count my blessing that it worked out, that all is not lost, and that there is still time. (I did do some creative things to leverage my income, which I describe in an upcoming post).
Well, those are my missteps; do you want to share some of yours?
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Copyright 2012, Roshawn Watson, Pharm.D., Ph.D. All Rights Reserved.