If anybody tells you that they have never made a mistake, they are either too young to have made one yet (think, really young), or they are lying. Everybody makes mistakes- it’s part of being human. What you do with those mistakes is what sets you apart from others- if you just discard them, or do you learn from them?
Reading about other peoples experiences & mistakes can help you to avoid making the same mistakes, prehaps. So, these are some of the F.I.R.E mistakes that I have made in my life (so far, I’m sure there are more to come) .
Start as early as you can
Well, this is rather an obvious one, but with compound interest working best over the longest timescales- starting early makes a huge difference. It’s not like I hadn’t thought about saving for the future very early in my life, but I hadn’t quite realised that there was the option not to work for my entire life. Starting even a couple of years earlier on this journey can really save you 5 years at the end- and the earlier you retire, the more likely you are going to still be in good health etc.
Buying a house isn’t a short term purchase
We bought our first house in 2007, just before, you guessed it- quite a large recession. That was fine, I wasn’t expecting to want to move after a couple of years- so I wasn’t totally silly about this. But, after 5/6 years, I did want to move, we got the house revalued and….. it was still down about 20% odd. Now, I hadn’t made the best deal at the time (mainly due to other circumstance) – as it was totally refurbished and ready to move in- now we were selling it with 5 years worth of wear/tear etc. It made moving house get put off for a few more years until we were back in positive equity.
Saving is not investing
Until I’m come across the F.I.R.E movement (see above)- I was already saving for the future, having been brought up to always save more than I earnt and never the other way around. But saving is not investing- it’s just money that basically sits in your bank account(s) just about keeping up with inflation, but not much else. Investing on the other hand, is putting money in companies which (hopefully) grow, super-charging your money and giving you a much better return.
Don’t be scared of the stock market
Very similar to the point above, I was “scared” of the stock market for sometime, it just seemed to “unstable” to put money into. And yet, that’s exactly why you get a risk premium for investing your money into it- because it’s risky. As long as you don’t want the money out at an exact time/timeframe, then the stock market is one beast that’s quite easy to tame. This gets a little more difficult when planning your pension, but that’s where bonds come in. For years I didn’t want to put money here in case I “lost it all”- and this was just a plain mis-understanding of how index funds work. The possibility of losing “everything” when you are invested in an entire index (like the Vanguard global index) is just about 0, whilst in my head it was much higher than that. This has cost me years and years of gains (but least I avoided the losses right?)
Treat yourself more
This is a bit of a strange one within a F.I.R.E mistake list- but it’s definitely one for me. I’ve said before that I want to F.I.R.E as early as I can– but without making sacrifices that I regret in later life- sometimes there is only one chance to do something (attend a wedding, see something on holiday). I got this one wrong when I was younger- saying no, and instead, focusing on the saving that I made. So, sometimes, within reason (and budget) you should treat yourself- on whatever that is for you.
P2P investing is a dangerous game
It looked so good- websites giving 6-10% returns, diversification across many loans- so if one or two went wrong, you would still get a very good return. IFISAs even allowed you to invest within a tax-free wrapper, so you could avoid tax on all gains/returns as well. It all sounded really good. Until it wasn’t. To be honest, I wish I could go back and stop myself from any P2P investing, as I’ve ended up getting about 2-3% return, something I could probably have got with a fixed term savings account. Now I have 5+ P2P accounts with various amounts in that I’m slowly withdrawing from. So, my opinion? Avoid it all, the risk just isn’t worth the rates on offer.
So, they are my mistakes, what are yours? Have you learnt from them? Would you just do the same all over again?