If I Could Have One Financial Do-Over…

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The following guest post was written by me back in June of this year and posted on Broke Professionals as a part of the Yakezie blog swap. In this monthly event, Yakezie participants pair up and exchange articles on a common topic.  


For June, we traded posts on the common topic of “if we could have one financial do-over, what would it be and why?” I wanted everyone to have a copy here as well for future reference. You can also view Broke Professional’s guest post on this site by clicking the following link – If We Could Have One Financial Do-Over – Broke Professionals 


Failures. Mistakes. I’m sure all of us have made numerous errors in our financial life that we wish we could take back. However, I don’t necessary think we should view failures as horrible things. They are only bad if we fail to learn from them. This, I believe, is key to success.


How Should We View Mistakes?

There are several quotes by basketball star, Michael Jordan, that I believe capture the essence of how we should all view failure in our lives. These are listed below:

I’ve failed over and over and over again in my life, and that is why I succeed.” – Michael Jordan

“I’ve missed more than 9000 shots in my career. I’ve lost almost 300 games. 26 times, I’ve been trusted to take the game winning shot and missed. I’ve failed over and over and over again in my life. And that is why I succeed.” – Michael Jordan

The One Mistake I Wish I Could Do-Over The Most

So, even though I’ve made some significant financial mistakes in my life and have learned from them, there are two in particular that I wish more than anything that I could take back/do-over. These are described below:

  • The first financial mistake I’ve made in my life is that on and off from 2005-2008 (when I was just starting to learn how to invest), I invested in penny stocks and individual stocks from the advice of two investing newsletters. 
    • For penny stocks, the newsletter I used was Pennystock.com (which, I can’t believe is still active and recommending stocks!). 
    • For regular mid and large-cap stocks, I used Winning Investing.com (with Harry Domash). 
    • While both of these newsletters weren’t particularly expensive (Pennystock was $80 for two years and Winning Investing was $15 per month), I still foolishly paid for stock advice that made me little to no money in the long run, especially after trading fees and newsletter costs are taken in to account.
    • Something you might be asking yourself is, “Why, Jacob, was following the advice of stock picking newsletters a financial mistake? After all, many people do this same thing.”
    • First of all, it is true that far too many individual investors follow the advice of stock newsletter analysts who claim to be experts (or may even be experts). Second, it is bad that many people act this way because numerous financial studies that I have read since my mistakes in the 2005-2008 time frame have proven that 70-80% of “professional” financial advisors fail to choose stocks that outperform the market.
    • Instead of investing foolishly in these individual stocks, what I should have been doing is investing in a broad range of asset classes through the use of index mutual funds, and using rebalancing to maintain a set asset allocation. This strategy is commonly known as passive investing.
    • The only money that I should have been investing in individual stocks is what I call “play money,” or small amounts of money (less than $500) that would be OK to lose.
  • The second financial mistake I’ve made in my life that I wish I could do-over is being scammed out of around $1,500 by a “fly-by-night” CCD video camera supplier during my eBay selling/business days.

Even though investing in individual stocks was foolish and I wish I could take it back, I only lost 10-20% of the money I initially invested maximum. So, especially since I am young and realized the mistake early, I was able to bounce back from the mistake quickly.

Since for this blog swap, we have to pick just one financial mistake that we could do-over, I would have to choose the CCD video camera eBay supplier scam as my top mulligan pick. Read on below to find out why!


The Scam

Background


From 2004-2007 (during my undergrad days with no income), eBay selling was a pretty big hobby and side-business of mine. I started out just selling random things around the house – DVDs, CDs, clothes, suitcoats, bike parts, etc. However, the venture grew in to me sourcing items for resale from second hand shops, thrift stores, Goodwill, Salvation Army stores, and garage sales.

Eventually, I obtained my state sales tax ID and was able to buy goods at wholesale prices for resell on eBay. Using this method, I sold anything for a profit that I could find, including iPods, bike equipment, and even Breathalyzer testers! I was even able to claim the self employment income on my taxes one year in order to start up and fund a Roth IRA.

The Trickery

After making several thousand Dollars from eBay selling, it is possible that I became a little too aggressive in looking for additional products to resell…

One day back in 2005-2006, I received an unsolicited email from a seemingly nice man representing a supplier that sells Canon CCD cameras to people with wholesale licenses (state sales tax IDs). His back-story, company description, and website all seemed to check out as being legit, so I began working through the details of a potential deal for him to sell me several CCD cameras that I would resell on eBay.

My contact was very responsive to any and all questions I had during the negotiations of price, delivery, etc, and we finally decided on the price of $1500 per camera. The only suspicion that I had during the negotiation was that he insisted on payment being made through Western Union, instead of using PayPal or a credit card like I would have preferred. He mentioned some technicality about how their company receives payment that I believed at the time (but looking back on it, I obviously shouldn’t have gone for it).

Anyhow, I agreed to send money to him for one camera via Western Union in advance of receiving the product. I went to the grocery store that afternoon to make the transfer, and it went through with no problems. I then rushed home to tell my contact to confirm receipt of the money.

Well, he received it all right! So much so that he felt that he never had to talk to me again! He disconnected the phone number I was using to reach him, didn’t answer any emails, and I never heard from him again. Now, granted that I was a little less Internet savvy back then than I am now, but I really didn’t do much to try to track him down. I remember thinking that I didn’t believe there was anything I could do. I looked around at Western Union’s website, and couldn’t see any refund policies like the ones that credit cards or PayPal has.

So, in fewer words, I was essentially screwed, scammed, and hoodwinked out of $1,500. 

I’m not very proud of it, but that’s exactly what happened. There’s a lot of “shoulda-woulda-coulda’s” I scold myself for looking back on this experience. But, needless to say, I wish I could do-over this financial mistake.


Lessoned Learned

As I mentioned previously, it’s all right to make mistakes, as everybody does throughout their life. However, the key to success (in my opinion) is that we learn from our mistakes.

So, what things did I learn from my Canon CCD scam artist fiasco here (and that you can learn too)? I’ve listed the key ones below:

  • Try harder to track down scam artists.
    • While the tools and resources that are present on the Internet today weren’t necessarily available when this experience happened to me back in 2005-2006, I definitely should have tried harder to track down the guy who ran off with my money. 
    • First, I should have tried to contact Western Union to see if there was any way to trace his whereabouts or get a refund. I didn’t bother to do any of that.
    • Second, I should have tried to track down his company’s information using domain registration information.

  • Unsolicited email deals are OK, as long as you pay with a guaranteed method.
    • I learned from this experience that any time you pay in advance for a product online with a client you don’t know, you should always pay using a medium that enables you to make appeals and refund your money. 
    • Good options for doing this are PayPal and credit cards. In fact, back when I was reselling items on eBay, I had to request a refund from a supplier through PayPal that didn’t come through with an order. Everything worked out smoothly getting my money back though.

  • Request verification credentials from a reputable rating agency about companies/clients you deal with.
    • Thinking back on my experience, I definitely should have done more research on the person/company I was working with before exposing myself to such a monetary risk. 
    • A good way to check a company’s reputability is through use of the Better Business Bureau’s website, BBB.org.

How about you all? What financial mistakes have you made in your life? What’s the one mistake you wish you could do-over? Have you ever been scammed out of money by anyone or any company? 


Share your experiences by commenting below!

    ***Photo courtesy of http://farm5.static.flickr.com/4024/4258179346_c3f12d9eb3.jpg

    Comments

    1. I wish that I had realized early in life that savings can be used to achieve financial freedom early in life, not only to finance an old-age retirement. I learned that by reading Your Money or Your Life and learning it turned me into an effective saver.

      Rob
      My recent post Beyond Buy-and-Hold #54 — Your Retirement Plan Is In More Trouble Than You Realize

    2. There are plenty of financial mistakes I have made in the past. I was doing really well right out of high school and then I spent too much too fast and got myself into some trouble. I have since cleaned up my act and am on a much better path, but if I could undo those mistakes I would be even better off. Lots of knowledge has been gained though so it is not all for loss.
      My recent post Flaky Accountability Partners

    3. I usually do not dwell on mistakes. I learn from them and move on. At one time I owned a lot of shares of Amgen. I bought it at $9 per share and sold it at $45. If I would have kept it, it split several times and returned to $50+. I did fine, however I could have made more.

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