Friday, February 15, 2008

Getting Rid of Money Mistakes that Haunt You

We all make mistakes about money and a lot of other things that are related to money. Many of us are stubborn about our mistakes, too. We hang onto them long after we should have closed the books on them instead. Life’s tough enough without punishing ourselves with bad decisions that haunt us every day. So here are a few things to consider regarding financial mistakes:

1. If you bought the wrong stock, sell it now. Now I’m not a stockbroker and this isn’t stock purchase advice, so do not sue me. For specific market advice, talk to a broker and try to understand what the person is telling you. And then filter it through your personal truth-o-meter. Meanwhile, here is a basic rule of thumb about the market. If you are invested in a broad spectrum of stocks and bonds whose names you do not know because they’re part of a fund, and the market is down, you’re probably going to be fine and should just ignore the market and do nothing. If you are invested in specific stocks and take an active role in buying and selling them, remember that you haven’t suffered a loss until you sell at a loss. Find out which yours is. Your broker ought to be able to help you decide if a certain stock is heading straight for the toilet and you should get out now. Or if you should hold on and wait for that stock to recover. That’s what brokers get paid to do, give you investment advice. So find an honest, knowledgeable one, and pay attention to what is recommended. Don’t refuse to listen and stubbornly stand pat on a losing situation, or run around all panicky when a few months or years will bring a natural correction upwards. Still, despite your best efforts, sometimes you’re going to make the wrong choice anyway. Once the evidence is irrefutable that you’ve got the wrong stock, sell it and don’t look back.

2. If you buy a bad car and you realize it’s a bad car, dump it immediately. Insert any other big ticket consumer item, such as “exercise machine” or “lawn tractor” or “time share” or “plasma TV.” Sometimes an item is a lemon, or it’s totally wrong for you, which is essentially the same thing. It’s bad, and it’s only going to get worse, and you’ll be kicking yourself the entire time you own it. Yes, you might possibly lose some money when you get rid of it. Maybe a lot of money. Trust me, you’ll lose more by stubbornly holding onto the bad purchase. And meanwhile there’s all the negative emotion surrounding the mistake. As long as the bad item hangs around, it keeps reminding you of your mistake. If your spirit burns at the waste involved, pass the item on to someone who can use it. Something that doesn’t work for you might be fine for someone else. The bad car I’ll never know how to repair might be a bargain investment for a mechanic. The exercise machine you don’t use might be a wonderful thrift store purchase for someone else, or a thoughtful gift to a friend. The expensive time share that’s not worth all the fees could become a nice donation to a charity, and so on. In large cities, you can just put items on the sidewalk and within hours they’ll will be gone to a new owner. In other places, you can stick them on your front lawn with a “Free” sign with the same result. Or you can sell the items by any number of methods, Craigslist, personal ads in local newspapers, eBay or similar, and more. Plus, you can recycle through Freecycle. But you know all this. The point is to get rid of your mistake and move on.

3. Don’t let unfinished business fester; it’ll cost you more later. Whatever it is that you haven’t finished and you know you should, finish it. If it’s a will you haven’t bothered to make out, then download one off the net, or make an appointment with an attorney, and get it done. You’re going to die someday, so plan for it. If it’s income taxes you haven’t filed, then file them. Don’t pretend the IRS will go away if you don’t want to deal with the problem. Things could get ugly. If it’s the deck you need to power wash, then rent the tool and have at it, or hire someone. I promise you that you will waste more time and emotion being mad at yourself for not completing your unfinished business than it takes to just do the job. However rotten or complicated a job it may be. Not only will you feel bad about avoiding your unfinished business, and have nightmares about it, but you will lose money, too. Why? Because any service or product you buy is likely to cost more in the future than it does now. Any interest you owe now will only get worse the longer you drag your feet about paying it. And an ounce of prevention really is worth a pound of cure. Or in the case of a deck needing maintenance, a pound of nails for the repairs you could have avoided.

Adults have many responsibilities. We make lots of decisions. Some of them turn out to be mistakes. The best thing to do is own up to the mistakes quickly, deal with the situation, and cut your losses. At any given time we’re probably in the middle of at least one mistake that we’re riding out, waiting to see if it’s going to make us take the big fall. Why wait for it? Why not dump that mistake now, and sleep better at night? You can spend a lot of time and effort denying your mistakes, paying too high a price for them, or trying to run away from them. But guess what? It’s easier to do what needs to be done. Not pleasant, maybe. But easier. Whatever it is, however difficult you think it may be, in most cases facing up to your mistakes will be less expensive, less aggravating, and even less complicated than letting them hang around and haunt you day and night.

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