It pays to look back at your mistakes to determine if something has consistently taken you off the better path. While I have made several mistakes in my financial journey, I would have to say that not seizing the day has taught me the most. It is one thing to be able to see trends and have ideas about how to take advantage of those trends, but it is a whole other thing to execute them.
You may have heard it said to measure 3 times and cut once, but I have second guessed my decision-making dozens of times, convincing myself not to take calculated risks which would have resulted in substantial gain. Even though there was market devastation after the dot com bubble burst in 2000 and 2001, I understood that there were certain stocks that would continue to thrive as the Internet became a more important part of our lives. While I was comfortable putting money into my 401(k) account, I hesitated to pull some money together and buy the stocks that I had a conviction about outside of my retirement plan. Unfortunately, I did not seize that moment and missed out on one of the greatest bull markets in the technology sector.
Plan to seize the opportunity. One thing I learned from not taking risks is to make sure I have the means to execute my goals. In this case, it would have meant having savings beyond my emergency fund and my retirement plan. At the time of this opportunity, I had just bought my first home and my remaining savings were needed for my emergency fund. I had achieved the top goals on my financial list in my young career, but I learned I needed to be more self-aware about my stretch goals. If I was clearer on the goals beyond my home and my security, I would have set up a budget line item to save and sacrifice a little fun to have the investment dollars.
I also needed to have confidence in my research. I was not ready to take that chance at the time because I really didn’t trust myself. I was afraid to fail, but I needed to accept that failure was a possibility and be willing to take a calculated risk.
Prepare in case of failure. One thing I am glad I did not do was to invest my emergency fund or borrow to invest. It still took several years to reap the benefits of investing and I would likely have needed that money in the meantime.
It is easy to glamourize the one that got away. I see this with cryptocurrency. I have heard many people say that if they just bought Bitcoin when it was a couple of thousand dollars, they would have been wealthy.
They neglect to see the wild fluctuations to the downside that drove people out of digital currency. They also miss out on the fact that there were major security issues with crypto in the beginning. It’s easy to assume you would have ridden out the volatility, but many people could not stick it out or they lost their coins. Be sure to protect the core of your financial plan in case things do not go as planned.
Do not overcompensate. I had to resist the urge to try to overcompensate for my past indecision by taking wild risks. We can sometimes over-correct and chase the next opportunity without doing the due diligence, which can end up putting you in a deeper hole. The next major market downturn for me was more financial services and real estate focused and it functioned a bit differently from the dot com bubble. I had to reconsider where the opportunities were in that case.
Learn from your past mistakes. I eventually learned from this lesson and in future market downturns, took some calculated risks and experienced some investment success. Instead of just beating myself up for missing an opportunity, I put my efforts into having better preparation. If you fear missing out (FOMO), go beyond beating yourself up and analyze what caused you to miss out, prepare for the downside and make the decision that is right for the current environment.