Wednesday, October 27, 2010

My Dumbest Money Decision

"I've learned that mistakes can often be as good a teacher as success."
Jack Welch

Have you ever just wanted to slap yourself upside your head? I have, on more than one occasion to be honest, but I won't get into all of that detail.

This post is about my dumbest money decision.

I worked for 15 years before I became a mother. For 10 of those years, I socked away 10% of my income into my company's 401k. The company, at the time, offered a 5% match and profit sharing, so when I left in 2003 I had a sizable chunk in my account.

So where does 'dumb' enter into this story...

After I left my job to work at my husband's business, I handed a Certified Financial Planner my 401K money to handle the transfer to an IRA. I let this person distribute this money without researching the fund allocation, fees or the funds' performances for myself.

Had I done so, I would have noticed the high fees and sales charges for the actively managed funds he was recommending.

To be clear, I don't consider my dumbest money decision to be using a financial planner. I do consider my dumbest money decision to be that I didn't understand and research what exactly he was doing. I just blindly handed over my money. I trust this person and we use him for our business accounting. He was upfront about the funds we would be going to and we just nodded and said, "okay".

Over the years as I have become more interested in handling our investments, I realize how costly this money decision was for us. Had I simply taken some time to research our options and understand the difference between actively managed funds and index funds, I think I would have saved us a lot of money. I have since opened up a new IRA at an index fund company and I'm in the process of transferring the actively managed accounts over to the index funds. And I feel very confident with this decision, but I did a lot of reading to get to that point.

I could have the best financial planner in the world, but nobody is going to be as interested in our retirement planning as I am. Hiring a CFP to handle your finances might be the best decision for you, but you really need to understand what they are doing. Before you agree to anything, do the research, understand what they are recommending, ask the questions, and look at all of your options. Be an active participant in your financial planning, not a bystander.

What has been your dumbest money decision? Did you learn a lesson from it? Let us know in the comments.

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  1. I think it is so easy to just trust and not really look at what is being done with our money.

    I have learnt so much as well since taking mroe of an interest in finances.

    I have made quite a few money mistakes but the biggest one was not insisting we buy where I wanted to. My hubby didn't want to buy there. If we had the house we could have bought or any of the ones we looked at would be worth $100,000 more than what the house is we did buy.

    Oh, well. You live and learn. As long as you learn from it, not just dwell on it than it is a worthwhile experience.

  2. I think a lot of people do this without ever getting to the conclusion that you did.

    I think my dumbest money decision was my student loan.

    JR FrugalMom from
    Fantastic Frugal Fridays

  3. Thank you for your post. I will be leaving my job next August where I have worked for 10 years and put away 8% each year that has been matched equally with my employer. I will be in your position then, so thanks for sharing your experience.


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