Twelve money mistakes to avoid

Posted Jul 16th 2007 3:40PM by Tom Barlow
Filed under: Consumer Experience, American Express (AXP)

SmartMoney recently ran an article about seven money mistakes to avoid:

Misidentified priorities. Clipping coupons to save a nickel while paying 15-20% interest on your American Express (NYSE: AXP) card.
Overly-cautious investing. The government appreciates you hoarding those 20-year old U.S. savings bonds.
Misunderstanding risk; e,g., buying asteroid insurance instead of long-term care.
Procrastination. Putting off funding that 401K, for example.
Throwing good money after bad. Perhaps the U.S. government should consider this one!
Letting your ego guide your decisions, e.g., "Who are you to tell me I should sell my Enron!"
Following the crowd, e.g. "I gotta get me some WorldCom."

I thought of a few money mistakes that I might add to such a list:

The drinking buddy illusion. If a friend's financial advice improves with each bottle of beer you consume, you might wait until sober before phoning your broker.
Baby-rattle investing. Just because the Wall Street Journal or Cramer shakes a stock in your face is no reason you have to instinctively reach for it.
(From the Washington Post's Mensa Invitational) -- Intaxication. The euphoria of receiving a tax refund, momentarily forgetting it was your money to begin with. Also see frequent flyer miles, Dell rebates, and credit card points.
Believing the investment tales of others. People don't brag about the money they lose, only the investments that paid off. Look at where they live, what they drive, what they wear, before you credit their market wisdom. Don't take stock advice from people who live in trailers.
Never-enough investing. I contend there are only two amounts of money you can have; enough, and not enough. At some point, more money does not equal a more satisfied life. If you have enough, and continue to worry over your investment, you've entered the play zone. You might look for another game that would enrich your life more.

Also read
26 reasons your stock picks suck

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Reader Comments (Page 1 of 1)

7-16-2007 @ 4:33PM

Warren said...

"People don't brag about the money they lose, only the investments that paid off. Look at where they live, what they drive, what they wear, before you credit their market wisdom. Don't take stock advice from people who live in trailers."

While I agree with the sentiment here, the book "The Millionaire Next Door" would disagree with you.

7-16-2007 @ 5:01PM

Lisa said...

I kind of agree with Warren: the flashy guy with "great investment advice" may have a negative net worth.

I also kind of agree with the advice given--chasing the next stock isn't likely to get you where you want to be.

I don't give my colleagues specific advice on stocks or mutual funds, because everyone has different needs and goals. I do tell them to choose things they will be comfortable with, and to use a buy-and-hold strategy. My colleagues ask me because I've gone from a net worth $25,000 in 2002 to $297,000 as of this morning.

You wouldn't know it to look at me, though--I'm a jeans-and-t-shirt gal, I ride the bus rather than own a car, and I don't live in a big house or a ritzy apartment.