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GOLD! What Are the Dumbest Financial Decisions You Have Ever Made?

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sambreaker20

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During the amazon fba craze about 4 years ago I opened up 4 credit cards with a limit of about 20k total and a pay pal working credit of about 10k. When on a crazy fba shopping spree, lots of prices tanked and was stuck with about 18k in credit card debt. Set my flipping back about 3 years and killed my credit. Total idiot will never do that again.
 

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Leona Ta

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:) Hi ! The most dumbest decision I've made so far is buying an 20 ml eye cream with 80 USD. The problem is I didn't use it after that and I bought it because I thought I might use it somehow. In Vietnam and for a woman, 80 USD is a paycheck for 2 working days, I could have done a lot of useful thing with my 2 days time, now I can't take it back. :(
 

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Here's one that someone posted here recently...



Ignorance of wash sales washes guy out...
 

James007Hill

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Just before the "credit crunch" in 2007 I invested £10,000 on a Bulgarian "off-plan" ski property - and lost the lot, with the property never even getting built! DUMB!

However, a few years later I made this look like nothing when I decided to move away from investing on the financial markets to instead take up GAMBLING (under the guise of "trading") on these things called "Binary Options". I gambled away well over £100,000, 2 houses and racked up £70,000 in debt too. So in hindsight, not my finest decision ;)
 

TSM

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Just before the "credit crunch" in 2007 I invested £10,000 on a Bulgarian "off-plan" ski property - and lost the lot, with the property never even getting built! DUMB!

However, a few years later I made this look like nothing when I decided to move away from investing on the financial markets to instead take up GAMBLING (under the guise of "trading") on these things called "Binary Options". I gambled away well over £100,000, 2 houses and racked up £70,000 in debt too. So in hindsight, not my finest decision ;)
Ouch. Binary options are the devil's work!! I think they have been banned now. Here's my story of 'trading' if you'd like to read it Hope Dies Last. You will probably recognise a lot of the thinking processes. I, too, started trading to try and undo a previous mistake and that is why I am now very curious about how people process losses.

How have things been for you since then?
 
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James007Hill

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Ouch. Binary options are the devil's work!! I think they have been banned now. Here's my story of 'trading' if you'd like to read it Hope Dies Last. You will probably recognise a lot of the thinking processes. I, too, started trading to try and undo a previous mistake and that is why I am now very curious about how people process losses.
They really are! Yes, I think you can still trade them in certain countries but UK based companies are definitely banned from providing them now. I'm not sure if you can still access them through a company not based in the UK though, but as you can imagine, I don't want to find out!

Thanks for sharing your post. A lot of it definitely resonates, such as the classic addict's downward spiral. My story in a nutshell was one of slowly transitioning from investing, to trading, and finally to outright gambling, and because the lines that separate them are thin and blurry, I barely even realised I was gambling like a degenerate by the time I was! I still thought I was just "trading", which was probably also one of those "justifying my behaviour" type things you talk about in your post. I started investing in about 2008 but it was 2011 when I fell into the Binary Options trap - same year you started your trading journey! By 2015 I was sleeping in my car...thankfully I have bounced back well. Completely recovered, debt free, never trade or anything remotely like that, have recently bought a house for cash (with my brother so only joint owned) and pursuing my entrepreneurial ambitions :)
 
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monfii

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Ouch. Binary options are the devil's work!! I think they have been banned now. Here's my story of 'trading' if you'd like to read it Hope Dies Last. You will probably recognise a lot of the thinking processes. I, too, started trading to try and undo a previous mistake and that is why I am now very curious about how people process losses.

How have things been for you since then?
I think the fundamental issue at stake here is education. People watch "the big short" and download robinhood during the end credits. The nexy day, thay are gambling their house with puts on Tesla.

I think if you take the time to observe the market, read the intelligent investor, become aware of your emotions and stay off WSB....you ll already be better than the average retail trader out there.
 

thechosen1

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Here's one that someone posted here recently...



Ignorance of wash sales washes guy out...
Reading about wash sales, I still do not understand how that $800,000 bill is possible.

It should have only reduced the tax deduction he could take for losses... So how on earth... ?
 

TSM

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I think the fundamental issue at stake here is education. People watch "the big short" and download robinhood during the end credits. The nexy day, thay are gambling their house with puts on Tesla.
Yes - I think that's often the case. Trading looks so easy in hindsight and I cannot tell you how many newbie traders I have spoken with who convince themselves that they are somehow special and that the terrible odds don't apply to them.

In more general terms, human brains are terrible at stats: huge, but very unlikely gains (e.g. lottery, day trading success) draw us in like bees round a honey pot. We lose all rational decision making capacity and forget that the applicable equation is value = probability of success x potential gain.
 
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wouldntitbenice

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Aug 13, 2018
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During the amazon fba craze about 4 years ago I opened up 4 credit cards with a limit of about 20k total and a pay pal working credit of about 10k. When on a crazy fba shopping spree, lots of prices tanked and was stuck with about 18k in credit card debt. Set my flipping back about 3 years and killed my credit. Total idiot will never do that again.
There was an Amazon FBA craze 4 years ago? Was this a craze around buying existing operations or starting one? I thought the craze was happening now.
 

wouldntitbenice

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Aug 13, 2018
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Reading about wash sales, I still do not understand how that $800,000 bill is possible.

It should have only reduced the tax deduction he could take for losses... So how on earth... ?
If you're trading a stock daily, racking up losses on it but also gains, and every gain is the only thing the IRS is looking at, you'll have a nice capital gain on paper. This person had $45MM (!) in transactions, with only $45K in profit.
 

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monfii

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Yes - I think that's often the case. Trading looks so easy in hindsight and I cannot tell you how many newbie traders I have spoken with who convince themselves that they are somehow special and that the terrible odds don't apply to them.

In more general terms, human brains are terrible at stats: huge, but very unlikely gains (e.g. lottery, day trading success) draw us in like bees round a honey pot. We lose all rational decision making capacity and forget that the applicable equation is value = probability of success x potential gain.
I wouldn't have been able to put it better myself, 100% agreed!


There was an Amazon FBA craze 4 years ago? Was this a craze around buying existing operations or starting one? I thought the craze was happening now.

The craze now is in SaaS and NFT (not that the latter is worth anything, but that's another topic...)
 

wouldntitbenice

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Aug 13, 2018
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The craze now is in SaaS and NFT (not that the latter is worth anything, but that's another topic...)
Online business broker listings have a lot of FBA businesses for sale. FBA is easily the vast majority of ecommerce listings. SaaS is definitely growing in popularity, but NFT is just a craze being peddled by the media and speculators.
 

WJK

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Enjoying this post a lot. My worst was not buying back into property in 2009/10 after selling around the first top in 2007. I made a lot during the GFC but then didn't switch my view in 2009 when things turned around. I had been so excited by what I thought was a great ability to time the market, that I held on to my doom and gloom view, not realising that the economy had become almost irrelevant as we were now living in QE times.

BUT I made it much worse by then trying to get my money back by .... day trading.

My question is, how have you got past losses? It seems to me that if you don't process the experience you keep repeating it.

I got stuck in regret and getting angry at myself. A friend of mine lost 38Mill in the GFC and then went on rebuild almost straight away and now financially free again.
The answer to your question has just a few steps.

You learn from that mistake or failure. You drill down and figure out what part of the whole situation was your faulty move or moves. What sunk the ship? Sounds so simple. It's not. What you don't understand, you're bound to do by rote, and repeat in the future.

Then you adjust your glasses. Part of your problem is how you view money. The money you lost is not a unique thing that can never be recovered -- like a piece of art or a lost love one. Money is a commodity -- it can be bought and sold. It's fungible -- it can be replaced or interchanged for another of the same value. It's only money -- not blood.

Then, realize that you now have an advantage that the other newbies around you don't have. It's much easier to do something that you have done before. Even if you failed, you gain insight and experience in your efforts. Each time you do that sprint, you get better and better. You intuitively know where to find the stepping stones and where the potholes are in the journey.

And here's a little truism for you. The guy who gets the most emotional in a negotiation loses. Since you're getting angry at yourself, you're setting yourself up for failure & loss in the future. Rewrite your story of what happened. What did you do right? What could you have done better? You and your inner voices must become friends.
 

Phil Yu

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Aug 25, 2020
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I liked car since i was a kid. So when i had a chance to get into the car hobby after moving to the state. i jumped on it.

I spent alot of money and time on cars. all of them are down the drain at this point.

The biggest mistake of them all was buying an used BMW M3 for $7000 that was raced on track day every month. When the engine blew, i entrusted it with the wrong friend to fix it for me, friend pretty much stole the remaining engine, transmission, car computer and returned an empty shell to me. At the end, sold the car shell for $1.4K and kept all the lessons i learnt.
 
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monfii

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I liked car since i was a kid. So when i had a chance to get into the car hobby after moving to the state. i jumped on it.

I spent alot of money and time on car. all of them are down the drain at this point.

The biggest one of them all was buying an used BMW M3 for $7000 that was raced on track day every month. When the engine blew, i entrusted it with the wrong friend to fix it for me, friend pretty much stole the remaining engine, Tranmission, car computer and returned an empty shell to me. At the end, sold the car shell for $1.4K and kept all the lessons i learnt.

Making dumb financial decisions is not only about money, but also about trusting the wrong people.

Very interesting.
 

WJK

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Making dumb financial decisions is not only about money, but also about trusting the wrong people.

Very interesting.
Do other people here give themselves permission to forgive themselves?????\

Yes, I made some dumb moves when I was young. Yes, I still make some dumb moves today. BUT, I must remind myself that I made the best decision I could. I used my experiences, education, and information that I had at that time. Now I have the 20/20 vision of hindsight. Some of my biggest blunders have been necessary stepping stones toward great and small successes later. If I hadn't put my face out there to get it slapped, I could not have been ready to create the subsequent wins. That truism allows me to forgive the missteps and accept my human limitations.

The ones that are harder for me to accept are the other category. There are times when I do everything just right. I know what I'm doing. I have done it successfully before. And it all falls apart. I have a friend who always reminds me that it better to be in rhythm with the Universe than to be "right". Being "right" is not a guarantee of success. There's a time and a season for everything. I've had to learn to accept the fact that some things and situations are simply not within our control.
 

jpl

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My dumbest financial decision is not only about the amount of money I’ve wasted but also the place I spent it: I played an online role-playing game for years and spent a hilarious amount of 5k mostly on cosmetics (stuff that just enhances looks but has no further impact on the gameplay).

Way worse than the money I spent was the time I lost playing that game though... over 8.000 hours (that’s almost a year of my life).

Luckily that’s in the past and for over two years I didn’t either play any game or waste time to consume other media like shows or movies. I just focus on enhancing my knowledge and skills as well as working on a business idea I’m having. Few months ago I also added regular lifting to my hobby of self improvement.
 

WJK

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My dumbest financial decision is not only about the amount of money I’ve wasted but also the place I spent it: I played an online role-playing game for years and spent a hilarious amount of 5k mostly on cosmetics (stuff that just enhances looks but has no further impact on the gameplay).

Way worse than the money I spent was the time I lost playing that game though... over 8.000 hours (that’s almost a year of my life).

Luckily that’s in the past and for over two years I didn’t either play any game or waste time to consume other media like shows or movies. I just focus on enhancing my knowledge and skills as well as working on a business idea I’m having. Few months ago I also added regular lifting to my hobby of self improvement.
It sounds to me that you learned a couple of important lessons from playing this game. You learned the money you spend must count -- and simply cosmetics are a waste. You also learned that you must get value for the time you spend. We have many seniors around us who haven't learned these two important lessons. Congrats.
 

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thechosen1

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If you're trading a stock daily, racking up losses on it but also gains, and every gain is the only thing the IRS is looking at, you'll have a nice capital gain on paper. This person had $45MM (!) in transactions, with only $45K in profit.
shouldn't they also see the losses?
 

MJ DeMarco

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shouldn't they also see the losses?

Wash sales can get confusing. From what I remember is this:

If you sold Tesla stock at a $4000 loss and bought back the stock within the wash sale period, the $4000 is disallowed. So if then the next trade you made $4,000 on Tesla and break even-- it isn't a wash. You get taxed on the $4K, not $0.

In other words, you got taxed $1,600 to break even. (at 40% tax rate).

If he is trading in and out of the same stock at a $45M clip, I can see how the big tax bill comes into play.
 

thechosen1

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Wash sales can get confusing. From what I remember is this:

If you sold Tesla stock at a $4000 loss and bought back the stock within the wash sale period, the $4000 is disallowed. So if then the next trade you made $4,000 on Tesla and break even-- it isn't a wash. You get taxed on the $4K, not $0.

In other words, you got taxed $1,600 to break even. (at 40% tax rate).

If he is trading in and out of the same stock at a $45M clip, I can see how the big tax bill comes into play.
does the same apply when you BTC (buy to close) a short option in the red? Because that would be a BIG yikes.
 

Djioul

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I bought a Jeep Cherokee Trailhawk which is quite expansive in Europe. The car cost me around 45 k€ but at least, I bought it cash.
I sold it a few months ago for half the price and 2 weeks later, the new owner started to have some mechanical problems with the car. Now he will most likely take me to court because he claims that I am responsible for the car issues.

I have no regret about this situation as I had to make a shitty financial decision in order to learn the hard, what it's like to take dumb decisions. It also totally changed my relationship with money.
I am the only one responsible for this situation and instead of wasting my energy on complaining, I focus on ways to reduce the impact of this situation on my life.
 

SaharaSnow

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1. Getting married! Biggest financial mistake.

2. Getting talked into a business partnership when my online portal was doing well.

PS: Maybe I just don't play well with others.
 
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WJK

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1. Getting married! Biggest financial mistake.

2. Getting talked into a business partnership when my online portal was doing well.

PS: Maybe I just don't play well with others.
So, on #1 -- did he spend your money while you were together, or did he get it in the divorce? or both?

On #2 -- what did he say he was adding to your business to get you to say yes? What did he actually contribute or rip away?

Without knowing the details, I would suspect that you trusted these people. They talked a good game. And then they major let you down.
So,
When did you know that it was all going south in each situation?
What are your lessons from all of this? It's a lot deeper than don't get married and don't take on partners.
Why did you think that you needed these relationships and these particular people in the first place? What attracted you to the situations and why did you choose these particular people?
What were the commonalities in the two situations? They sound very similar.
What has changed since you made these decisions? Would you still be attracted to them and would they be attracted to you? Have you changed enough that they would now run away when they saw you coming?
Do you look in your mirror and see a different person now? Are you still the same person on the other end of all of this? How have you grown?
 

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