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Fail Early Fail Small

The other day I was talking to co-worker about mistakes we’ve made with our finances. I was thinking about all the dumb stuff I did and how I feel so much more empowered and confident about my finances because of those failures. Failure is super important in everything we do and especially with finances. But the real key is to fail early and fail small when it comes to your finances. 

What can happen with some people is they are never that interested in their personal finances and maybe over time they accumulate some money, and start thinking, “Hey I have money now!” This either leads to overconfidence, where just because they were saving they think they have an in-depth knowledge of finance and investments, or they just realized now they can do something. That’s where the trouble comes in. Some poor 50 year old couple decides to pour their life savings into bitcoin when its $65,000 or try that sure fire trading method offered on an infomercial, and a sad story is born and becomes a financial catastrophe.

I have been lucky in the fact that I’ve been interested in how money works (and the rest of the world) since I was little. That meant as soon as I was old enough I had opened a brokerage account and my friend Benny and I traded stocks during the dot.com bubble, of course I made no money there :). Just before the Financial crisis or maybe right at the beginning I bought BofA because “BofA is so big and stable nothing could ever go wrong!”. I bought some of it on margin, which is a type of loan. So not only did I learn that the government and the market can wipe what you thought was a perfectly safe investment off a cliff, I also learned what it was to have leveraged my position up and lose even more. In addition, which I’ve shared before, my wife and I bought a condo at the top of the housing market, because “I can’t be renting and have kids.” LOL. So ya I’ve made lots of dumb financial mistakes, BUT…

The key to having made all those mistakes, lived through them and not have them crush me financially was because I was experimenting early and small. The stock brokerage account was literally $1000, well worth the lessons I learned about what stocks and options where and how they behaved. That BofA stock was substantial at the time and so was the loan but I was young and didn’t have all that much money to put at risk, at the time it hurt real bad, but now the loss is almost funny as compared to how bad it felt. And that condo was something that we could actually afford at the time, so we didn’t need to abandon it, we were able to buy a house when the market was at its bottom and we held on to it and after calculating the loss, it was the equivalent to renting for that period of time.

So my point is, if you’re young, start now! invest in things, learn about things, fail but gain the knowledge it will be so much more valuable when your resources are greater later. If you’re older and haven’t started, start now! But start small, don’t be over confident, always assume the worst but don’t let that stop you from trying. It is only a god, or a liar who learns by never failing. Embrace it!

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