Just about everybody makes mistakes from time to time when it comes to their money, and I’m no different. However, one mistake stands out in particular…buying a home. It wasn’t that the purchase of a home itself was necessarily a poor decision, it was more the timing. Either way though, this financial mistake cost us a lot of money.
The important side of mistakes is that often we can learn something from them. And from my housing market debacle, I feel that I’ve picked up a valuable lesson about sticking to my guns and listening to my gut instincts.
Terrible housing market timing
We made the offer on our home in early 2008. Friends, family members, co-workers, and mainstream media had been touting the housing market as “the place to be” for so long that it just seemed like high home prices were the new norm. And while my gut was telling me things just didn’t feel right, after the housing prices in our area of Chicagoland made a strong 10 percent pullback and then evened out for several months, we thought that the worst had passed. Little did we know, the worst was yet to come.
We ended up losing another 20 percent on our home from the time we purchased until we sold about three years later, which paired with closing costs, seller-requested repairs and updates, and similar costs, landed us a crushing financial loss to the tune of about $100,000. Had I trusted my instincts and continued to rent, we could have ridden out the worst of the housing market storm and seen just how bad it was really going to get.
A bustling stock market
Now it seems like the same thing that happened with the housing market in the early 2000s is going on with the stock market. Stocks keep going up and up, and it is a temptation for many to jump in at already high market prices.
Having learned from the housing market and its ensuing collapse though, I’m holding my ground when it comes to my retirement account and not making any rash or overly risky moves.
Why I’m staying put
I’m not really a stock kind of guy; and I’m definitely not a day trader. The little money I do have invested in the stock market, I keep in an IRA. Rather than doing something drastic during the financial crisis, I made a simple move. I put my money into an income fund in which monthly dividends are reinvested into the plan. This way, while I was uncertain of the future, I was able to put my market money into a more secure fund that wasn’t as risky, paid monthly dividends that grew share total, yet was a fund that still moved with the market.
This means that during the down times, I lose, but I don’t lose to the extent that I might have otherwise. And sticking to my guns with this fund, while the market has been in a multi-year recovery period, I haven’t exchanged it for riskier, higher paying funds, but kept it in place, growing share total and value, albeit more slowly than market averages. However, by ignoring the trend to rush to stocks, I’m not falling into that “follow the herd” mentality, and I hope I’m better protecting myself against the next collapse.
More From This Contributor:
Building a Revenue Producing Blog
How I Differentiate My Blog
Preparing to Publish My First E-book
Disclaimer:
The author is not a licensed financial or real estate professional. The information provided in this article is for informational purposes only and does not constitute advice of any kind. Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.
