Always Be Making Mistakes

Have you ever had one of those days when you feel like a giant failure?  At times, life seems to be a giant pile of mistakes…one piled on top of another.

Today’s post is brought to you (in part) because of a mistake.

Last week, my son came home from daycare with a serious look on his face.  Normally he’s a happy goofy guy, but something was on his mind that day.  He walked up to me and said, “Daddy I need to tell you something…”

“OK sure, what’s up buddy?” I replied, trying to sound positive.

“I was a bad boy today.  I scratched my friend at daycare today.”  He said this with a very sad and disappointed face.  Please remember — my son is 3 years old.  He’s only just starting to learn the difference between right and wrong.  He was taking this very seriously.

Apparently, he had gotten into a tussle with another child at daycare (over a toy).  During the scuffle, the other child got scratched, and you could tell he was feeling bad about it from his facial expression and tone of voice.  It was clearly a mistake.

The conversation that followed between us was about making mistakes.  I gave pretty typical fatherly advice — “Hey, mistakes happen.  Don’t beat yourself up about it.  Everybody makes mistakes.  What’s important is what you learn from your mistakes.  What did you learn from this mistake?”

This is the kind of advice parents tell our kids all the time, because they’re constantly making mistakes.  It’s good advice, and very true.  

But after I had this conversation with my son, I began to wonder why we have a double standard around making mistakes.  For kids, it’s OK and accepted that they’ll make mistakes.  But adults?  That’s a completely different story!


A Double Standard

Maybe it’s the attempt to avoid fatal errors — At some point in our adult lives, making a mistake no longer becomes OK.  Maybe it’s the fact that when we’re older, mistakes can kill or seriously hurt people.  

Make the wrong kind of mistake and you could lose your job, or get put in jail…. or worse.

We go from being children who constantly make mistakes, to adults that abhor any kind of error.  Perhaps it’s our years of school…we’re judged at every turn and penalized for every mistake.

Did you ever notice that humans become more risk averse and try to make fewer mistakes as they age?  Eventually this phenomena culminates into senior citizens with a portfolio of “ultra safe” bonds that never leave the nursing home.  How safe is that?

Ironically, this in itself is one of those fatal mistakes.  When we stop making mistakes, we stop learning and growing.  Life essentially ends.

Rock climbing
Sometimes the biggest ‘fatal mistake’ in life, is keeping ourselves from making mistakes.

It was Neil Gaiman (the author) who best summed up how I feel about mistakes:

“I hope that in this year to come, you make mistakes. Because if you are making mistakes, then you are making new things, trying new things, learning, living, pushing yourself, changing yourself, changing your world. You’re doing things you’ve never done before, and more importantly, you’re doing something.”


Financial Mistakes

When it comes to money, the human aversion to mistakes gets even stronger.  Research has show that the aversion of financial loss is greater than the positive effects of financial gain.

Over the years, I’ve made tons of financial mistakes in my lifetime.  Here’s a sample of some of the worst financial mistakes I’ve ever made:

  • I once bought a used car with a loan, when I was already saddled with massive student debt.  Yeah, that was dumb.
  • I used to invest in mutual funds that were actively traded.  Most had high fees, and high turnover.  Good performance turned out to be only temporary.
  • Right out of college, I took a poorly paid job with a small startup company.  I thought I would make it big with stock options.  The company went bankrupt a year later.
  • After Borders went bankrupt, and Barnes & Noble screwed up the Nook business, I shorted the stock thinking business failure was eminent.  It’s a business in serious decline, but it just won’t die.  Eventually I gave up on my short position.
  • I used to invest very heavily in technology stocks and other popular momentum stocks.  Most of the time these investments didn’t lead to good returns.
  • In the past, I purchased new cars instead of older cars.  Depreciation is a financial killer.
  • For a few years, I was very into deep value stocks — the ‘net-nets’ as Ben Graham described them.  These were usually very low quality companies.  I don’t know how, but on-average I managed great returns doing this.
  • I bought a house that was far larger than I needed.  This saddled me with a large mortgage payment, and a ton of home maintenance.

Argh!!  I really hate this list.  It’s really painful to look back on these mistakes and realize what a complete financial idiot I was.  Down right embarrassing is what it is.

But you know what?  I’m really glad I made these mistakes.  I learned tons from each individual mistake.  Without these big mistakes, I wouldn’t be the person I am today.  I certain I wouldn’t have a 2.5 million dollar net worth if it wasn’t for all my financial mistakes.

Despite the fact that these mistakes are painful, given the choice I would make most of them all over again.  I learned a lot about life, investing, and managing my finances from making those mistakes.

The value of those experiences is worth far more in the long run than the few thousands dollars it may have cost me in the short term.

Wrecked Car
I like to think that Mrs. Tako learned something after her big accident last year.  In the short term, it was a big financial loss.  In the long term, I hope she learns to be a more careful driver.


How To Fail Really Well

A lot of what I write about on this blog is learned from my mistakes in life — Topics like how to invest well, how to save money, and live a really awesome life at the same time.

One topic I’ve neglected to write about (until today) is How To Fail Really Well.  

It’s important, because I firmly believe that we learn more from our failures than we do from our successes.  As you can tell from my earlier list of failures, I have significant experience at failing!

You want to know the secret to failing like a Boss?  Well, you’re in luck!  Mr. Tako is going to share the secret to failing well.  Here goes…


Secret To Failure #1:

Try new things, but never commit more than 10% of your financial resources.  At least until you have significant experience already under your belt in that area.

The point is:  failure is going to happen to everybody.  Life isn’t all sunshine and roses.  Get used to the idea that you’re going to be a failure at something new.

So, plan for failure.  Plan for mistakes, and for financial loss.  Never commit yourself financially to something so deeply that a failure would be a giant setback to your life.  

Fail, but fail small.  Then try something new, and fail small again.  Eventually, you won’t fail.  Maybe it was luck, or maybe you learned something.  Be humble.  As your financial resources grow you can fail just a little bit bigger, but always remember to ‘fail small’.


Secret to Failure #2:

The most importantly part of making mistakes is learning from it.  Analyzing where you went wrong.  You don’t want to repeat the same failures over and over again expecting different results, do you?

Whatever you do, don’t forget your mistakes either.  Revisit your mistakes frequently.  The human memory is weak and forgetful.  You can’t learn from mistakes if you forget them.  So, I put systems in place to keep myself from forgetting.

I used to keep little mementos of my mistakes to remind me of my failures, but one day I realized I was starting to collect far too much junk.  

Now, I just keep a list.

‘The List’ is a spreadsheet I started (and maintain) that contains a looong list of my personal financial mistakes, and a few mistakes that I’ve watched other people make over the years.  The document is literally called “The List.ods” and I keep it backed up to the cloud so I’ll never lose it.

Every time I make a new investment or a big financial commitment, I review ‘The List’ to make certain I’m not making the same mistakes all over again.  Every time I make a new mistake, I add to ‘The List’.

Never forget.


Final Thoughts

If you’ve read my About page, you’ll know that a lot of the reason why I write this blog is for my kids.  One day, I hope they read today’s post and feel a bit better about themselves (and their own mistakes).  It’s for you guys.

Society tell us to avoid making mistakes, but frankly that’s terrible advice.  Making mistakes means you’re actually doing something with your life.  Keep challenging yourself.  Try new things.  Plan for mistakes.  Fail, but always learn from it.  And most of all — don’t be too hard on yourself.

I make mistakes all the time, and I don’t intend to stop making mistakes now that I’m an adult.  In fact, now that I’m financially independent, I have the time and resources to make even more mistakes… and I look forward to it.  

It’ll mean that I’m really living.

Have any big financial mistakes you want to share?  What did you learn from those mistakes?


[Image Credit: Flickr1, Flickr2]

32 thoughts on “Always Be Making Mistakes

  • February 11, 2017 at 2:18 AM

    Hummm.. I don’t think I have ever made a mistake financial or otherwise in my life. :).

    Great post Mr. Tako. Here’s my partial list (the full list is much too long to share here):
    1. Brand new car purchase right out of college. Since I didn’t quite have a pay check yet, i paid the first two payments on a credit card. This was the one and only new car I ever purchased in my life and it will be the last.
    2. Credit card death cycle 3 times in the first 5 years of my life after college. I didn’t buy anything of note, just lived beyond my means [shaking my head].
    3. High turnover, high cost mutual funds in my early investing years.
    4. Developing a red wine habit. Yeah, I’m an educated connoisseur now, but long gone are the days of $40 bottles of wine. Now I pride myself on finding the best wines <$10 per bottle!
    5. Here's one I am dealing with now – I've built up too much cash. Too fearful to invest when the markets are up and too greedy to pay down the 3.25% mortgage [what if a big market correction happens and all my money is in home equity?]

    I am sure I will make more mistakes in the future, but hopefully they will not be the same mistakes! :).

    • February 14, 2017 at 5:32 PM

      I can relate to Mr. Zero’s pain. I have been accumulating cash for years, stepping in and out of the market for quick trades. If I had just steadily invested, even conservatively, I’d be retired now and enjoying more time with my granddaughter now. I’m 49, debt and mortgage free, but putting my nest egg in with markets at all time highs, it’s difficult to step in. But, then again I know that market timing is foolish and I’ll pay once again for waiting. I sort of feel like I’ve cheated my family and it haunts me daily, especially as the market continues its meteoric rise. But, I do try to tell myself how lucky I am. Being born in the USA, owing no one, and having health and savings should be enough. Then, I feel kind of greedy while I’m beating myself up.

  • February 11, 2017 at 4:33 AM

    A really great post, Tako. I’ve got a long track record of making big mistakes. From buying new cars to trading options and trying to time the market for quick financial gain. I always seem to learn the hard way. But these mistakes taught me lessons I will never forget.
    Even though they were painful lessons, and I could be in better financial shape, I wouldn’t go back and change a thing. They are all part of what me me who I am, and despite my mistakes I am pretty happy where I am now 🙂

  • February 11, 2017 at 5:32 AM

    I am worried I am about to make a big mistake. I used to have a lot of student loans;

    I am about to get a decent chunk of money through the sale of an old house. My wife would like to pay off our remaining $90k worth of student loans (law school). I am worried that as soon as I do this there will be some huge development in the world of student loans due to the high default rate and I would be wasting all that actual capital. I am almost paralyzed about whether to do this or wait it out and see if politicians change the student loan landscape.

  • February 11, 2017 at 6:15 AM

    Your article reminded me of a common Silicon Valley startup mantra “fail fast, fail often”. The valley is big on making mistakes and learning from them. A failed startup is not considered a blot on your resume. There is even a conference to discuss and learn from failures – FailCon.
    Mrs. BITA recently posted…The 5 Commandments of Personal Finance

  • February 11, 2017 at 7:15 AM

    Great advice. Learn from you mistakes. I grew up in a family where my mistakes were not allowed. Tons lectures for even little mistakes. Made me quite high strung. Then, I met my husband. Over the past few years, he’s slowly teaching me to not worry about mistakes. It’s been a slow progress for me. But I had a win this past week. My husband accidentally but the Ninja blade on the lower rack of the dishwasher and the plastic burned. Originally, I would have freaked out. Instead I picked up the phone, called the warranty line and ordered a replacement part for $6. I didn’t reprimand, I just ordered it and moved on. I just have to keep doing this in life.

    • February 11, 2017 at 12:39 PM

      That’s a great example! Thanks for sharing SavvyFinancialLatina!

      Many people get caught in the trap of just repeating the same financial mistakes over and over. Real change and real learning is often harder than we’re willing to admit. It takes time… and a lot of mistakes!

  • February 11, 2017 at 8:37 AM

    Nice post! Curious why you consider your investments in net-nets a failure? Sounds like they were an enormous success. Perhaps it was just uncomfortable investing in crumby businesses, even if it worked out well.

    • February 11, 2017 at 12:38 PM

      Yeah, it was a constant struggle. Some worked out, some didn’t. On average I did OK though, but it was stressful.

  • February 11, 2017 at 2:54 PM

    Great post Mr Tako!
    I also made plenty of mistakes already and there are probably more to come. I for example bought a house with too high a mortgage and too little equity which backfired when we wanted to move. Another great one is buying shares of a company in March 2009 and selling them after a 10% return. The shares trade now around 5x higher to where I bought them.
    I also have periods where I live well beyond my financial means. However, I am working actively on reducing those and save more, to invest more.
    Thank you for sharing!

  • February 11, 2017 at 3:50 PM

    One of my biggest mistakes was when I purchased a brand new car right out of college, when I could have continued using one of my parent’s cars as they were being left unused. It would have been cheaper on my budget and I wouldn’t have had to pay the monthly payments for the months I don’t use it. From now on, I’m either going to purchase a used car outright or just use what I or my family has.

  • February 11, 2017 at 6:01 PM

    Hahahaha, hey, we’ve all made mistakes. In fact, I haven’t heard of a single FIRE blogger who’s done *absolutely everything* correctly. That’s really adorable that your son owned up to his mistake too. 🙂 It’s good to show that he can come to you as a confidante!

    I think my worst financial mistake was attending a private four-year college. In total, my tuition ran about $150,000–just for a Bachelor’s degree. Ouch.

  • February 11, 2017 at 7:19 PM

    Nice post! I’ve made a few mistakes, most of which I talk about on my blog. A few examples:
    – Financed a new $25k car with a $39k salary
    – Got a credit card as a wide-eyed freshman in college to “build credit,” only to end up building the bad kind
    – Cashing out my 401k money from my first two jobs

    Life happens. Mistakes happen. Learn from them, keep them with you, and try your best not to make the same mistake twice.
    SomeRandomGuyOnline recently posted…Financial M&M

  • February 11, 2017 at 11:09 PM

    Great post. Ultimately mistakes are a form of learning if you let them be. They shape who you are, and ensure you don’t make even bigger ones later. For example, I’d much rather make some of your early investing mistakes on a recent college graduates portfolio then your current net worth. Yet had you not had it then what would happen if you made that mistake now? It would be recoverable I’m sure, but it would be far worse.
    Fulltimefinance recently posted…Should I Write A Blog

  • February 12, 2017 at 10:19 AM

    One of my favourite quotes is “When you’re green you’re growing. When you’re ripe you rot.” Gotta continue making mistakes to grow.

    The most mistakes we make earlier the better. Because expectations are much lower when you’re young so you can take that time to inoculate yourself so you don’t make any fatal mistakes later on in life.

    Your son sounds really adorable and it’s so great that he knows right from wrong at the tender age of 3. Great job, Mom and Dad 🙂

  • February 12, 2017 at 2:13 PM

    I freaking love this article. Thanks for the great read. I wrote about something similar in January, about taking financial risks because you have nothing to lose in the end. In my opinion, the best way to learn is to try something, analyze the results, and adjust accordingly. Sometimes you will succeed and other times you will make a mistake. The key is finding the lessons and making sure you learn from them so they don’t happen again.

    Would you have learned if you didn’t take those risks? No. Would you have realized that a large house isn’t always the right way without experiencing it? Possibly. I just need to convince my wife about this before we buy our first home! Same with your stock options experience. You went for it and it didn’t work out. Who cares?

    Now I’m inspired here and getting juiced up. Thanks again for the great read!


  • February 12, 2017 at 3:18 PM

    Awesome topic to talk about!! Unfortunately, I think it’s the schools that feel you shouldn’t make mistakes and start to ingrain that in the minds of us all. The important thing is to later undo this mindset or you’ll never move on to bigger and better things.

    I don’t know one business owner or other entrepreneur that hasn’t made mistakes… I think it’s the only way you can grow.

    I think I made more mistakes buying my first rental property than most of my life combined! 🙂 But those mistakes were not the end of the world and helped me to learn so much more than I would have if I had gotten lucky and done everything perfect. That helped me tremendously in buying the second rental property.

    — Jim
    Jim @ Route To Retire recently posted…Panama Vacation Booked… Check!!

  • February 12, 2017 at 4:17 PM

    One of my bigger mistakes was investing in Nationwide Mortgage Company back in 2006. I just couldn’t help but see that awesome growth history and dividend payment and think – this is a great stock! Unfortunately I didn’t understand the business well enough, and obviously the bigger housing crisis picture. Lesson learned though – invest most of your money in the market (index funds!), not in individual stocks!
    Freedom 40 Plan recently posted…Is My Rental Worth It? (Feb 2017 Edition)

  • February 13, 2017 at 7:32 AM

    Yeah, I thinking making big mistakes while you’re young is good. You’ll learn a lot and you have plenty of time to recover. When you’re older, I’d say avoid huge financial mistakes. It’s a lot harder to recover from.
    Here are some of my bad mistakes.
    – Buying a new car right out of college (got a loan). Actually, it worked out pretty well. We used it for a long time.
    – Going with a financial advisor at the bank when I started investing. That was a bad mistake and I’m glad I got it out of the way early. He was just interested in selling me crappy high fee funds.
    – putting my 401k into company stock before the internet bubble…

  • February 13, 2017 at 7:33 AM

    I think this is a great post. We are told “mistakes are okay” but get the message “you messed up!” What are you supposed to believe?

    Adventures in life – financial, experiential, whatever – keep us alive. There *will* be mistakes. The failure comes in not looking at the adventure and learning from it, even if it is to only learn you never want to do *that* again!

    One thing I did was day trading, but I did it back in the 90s when all I had was a dial-up modem. I had a sum set aside because I knew I wanted to do it. Experience is my best teacher, IMHO. One day I made a couple of grand on a $200 investment – sweet! The next day it crashed. But, I never put in more money than I had allocated for the experience. From that, I learned I didn’t like the stress, I needed better technology, and it took too much focus and time in front of a computer, when I would rather be outside.

  • February 13, 2017 at 1:42 PM

    I don’t like to make mistakes. I try to avoid making mistakes as much as possible. When they happen, I try to learn from them. It is always preferable to learn about other people’s mistakes than your own. But I am not a big fan of taking risks for the sake of taking risks.

    I agree that in general, it is nice to try new things and to grow. But I try to take a calculated approach to risk, so that a mistake will not lead me to go back to “go”.

    For example, if had accumulated a $1 million nest egg generating $30K in annual dividend income that I use in retirement to pay for my fancy lifestyle, you can bet that I will try to reduce the risk of anything happening to this money as much as possible. This would include things like creating redundancies.

    The idea of loss aversion is BS – if you gamble that $1M and you lose $1M you are on the streets ( or have to get back to whatever you did prior to 2015). You probably want to avoid this scenario, particularly if it has taken you 10 – 20 years to get to that kind of money. If you win another $1M from the original $M, you now have double the money but you won’t be really that much better off due to marginal utility.

  • February 13, 2017 at 4:36 PM

    Luckily not many big mistakes except perhaps start investing late and was more conservative in stock allocation.

  • February 13, 2017 at 6:13 PM

    Failing small is so helpful. I was intrigued by the idea of DGI, but did not feel I was learning enough by reading about it. I, knowing it was silly, purchased one share of a REIT. One. Just to watch and see what it was like to own it. The cost of the trade is a learning expense.

  • February 13, 2017 at 6:23 PM

    It’s fine to be making mistakes but as we get older it’s best to limit these to non-fatal ones.

    As Charlie Munger once famously said, “you only need to get rich once” so there is no reason to have to risk it all once you’ve basically made it, as you have already. Don’t race trains, don’t do cocaine and don’t speculate on margin. Living a long and healthy life becomes an admirable goal once you achieve a solid level of wealth. Yes, keep making mistakes and learning along the way but don’t put everything at stake.


  • February 14, 2017 at 12:47 PM

    It is the interesting conundrum, no? We say mistakes will happen, what is important is to learn from your mistakes…and yet at the same time society is rife with examples of ‘zero tolerance policies’; ‘minimum sentence provisions’ massive advertising campaigns rooted in imperfection-phobias, and helicopter parenting that insists that everyone must excessively bubble wrap children to the point that they’ve got much fewer opportunities to explore and make mistakes. I’d be interested to hear more about how you’re approaching teaching your kid that you value mistakes (and why), even when society often requires and fetishizes ‘perfection’.

  • February 14, 2017 at 3:24 PM

    I’ve got a boss that’s fond of saying, “fail fast.” This advice works in personal finance just as much as it does in the office. Mistakes are fine, but as soon as you recognize that you’re not going to succeed, stop.

    Good list. I’m going to think about my own list of failures now.

  • February 18, 2017 at 5:14 PM

    It’s unfortunate that fear of mistakes lead many people to avoid trying new things. Mistakes are the best way to learn, even if they can be painful/expensive. The best way to learn from mistakes though, is too learn from other peoples mistakes. Way easier! Though I’d also add the flip side to learning from mistakes is being careful in how you learn from successes. I started keeping a ‘decision journal’ recently for work and investment purchases. It’s easy in hindsight when something goes right to just chalk it up to our inherent brilliance. Keeping a decision journal is a way to keep yourself honest. I write down my rationale for the decision, unknown factors and record my emotional thoughts around uncertainty. It’s been interested to go back and review after events to remember why I made the decisions I have. For successes, it keep the luck component in perspective.

    Also, props to the Ben Graham shout out!

  • February 19, 2017 at 8:32 PM

    I have a fridge magnet that says “Always make new mistakes.” I try! Luckily my repeated mistakes tend to be smaller, fixable ones, like nor planning lunch right for the week, but having a can of soup or a gift card I can get lunch with. Really the reoccurring one is getting upstairs and then realizing I didn’t adjust the thermostat.
    I do wonder about running out of small mistakes and having the Dumbledor problem… “I make mistakes like the next man. In fact, being–forgive me–rather cleverer than most men, my mistakes tend to be correspondingly huger.”

  • February 20, 2017 at 11:37 AM

    When Sara Blakely (Spanx founder’s) was growing up, her father would often ask her the same question at dinnertime.

    “What have you failed at this week?” Blakely recalled in an interview on CNBC’s “Squawk Box” n Wednesday. “My dad growing up encouraged me and my brother to fail. The gift he was giving me is that failure is (when you are) not trying versus the outcome. It’s really allowed me to be much freer in trying things and spreading my wings in life.””

  • February 28, 2017 at 8:02 PM

    For the Record, I am new to the whole PF blog scene, My wife likes the name ‘Mr.Tako Escapes’ the best. Just FYI

  • September 9, 2018 at 9:11 PM

    Mr. Tako, what’s the best mistake you’ve done? One that changed your financial life, ‘d be glad to know about it.


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