What's the Worst Thing That's Ever Happened to You Financially?

I thought it would be "fun" for us to discuss this question today:

What's the worst thing that's ever happened to you financially?

It could be a circumstance that happened to you, the result of a bad decision you made (like this guy), or anything else. Just interested in what's the worst thing ever to happen to you from a financial perspective.

I have to admit that I haven't had a lot of financial disasters. Even though I grew up fairly poor, I was always conservative with my money, didn't borrow more than I could repay, etc. As such, I don't have much to share on this subject, but there is one incident that does stand out. It looks like a small problem now, but at that point in time, it was a huge issue for me.

In the small town in Iowa where I grew up, there was a bank that was not backed with the FDIC protection on deposits. This wasn't a big deal for most folks since everyone "knew" that the bank owned enough farmland to cover all deposits. In addition, we all knew the banker and trusted him that all was well.

I had worked several summers (at $3.35 per hour in a grocery store, mind you -- yep, that was a looooong time ago) and had $2,500 or so saved up (not a huge sum to most, but a fortune to me at the time). As you're probably guessing by now, it was in the uninsured bank. I was in college and was drawing on the money as needed to pay for various expenses.

One day my mom called and said they had closed the bank. The government had not liked the level of cash reserves the bank held (or some such nonsense) and come in and closed it all down. Rumor was that depositholders would get only a small portion of their total deposits back.

As you can imagine, I was in a panic. All of my cash reserves/spending money was gone. I still had family I could borrow from and the hope that I'd get some of the money back, but in the short-term, I had nothing. I did borrow a bit (from my grandmother) to tide me over (I was frugal then as well so I didn't need much) and made it through, but for a while it was tight.

In case you're wondering:

• Yes, I learned my lesson! No more uninsured banks!

• I ended up getting 90% of the money back (even after all the expenses the bank had for selling assets, etc.). Turns out the bank did have enough to cover most of the deposits and it appeared that the government was a bit jumpy to close it once all was said and done.

So, what's the worst thing that's ever happened to you financially?

Comments

[Rob]

Great question, for me it would have to be borrowing from my 401k to pay for college a few years back. If I only knew then what I know now, if I ever want to leave my company I have to pay it all back or pay huge taxes as Im sure you know. I will NEVER make that mistake again, regardless of my situation, not even sure I would do it as a last resort.

How about a post where you ask the opposite question as well, if you had to attribute one MAIN thing in your life that helped you do well financially, what would that be? For me, I wouldnt say Im doing great financially, but my fiance and I are not feeling the affects of the recession because we have both been working full and part time jobs for at least a year.

[Angie]

College loans.

Buying a 35k car when I had one that was paid off with only 60k miles! (And had 100k in student loan debt).

I looked the other day and had I not bought the car and put that money towards loans, I would be about 43k more into repayment ):

[Holly]

A pulmonary embolism and several other serious health issues. I've lost count of how many thousands I've spent in healthcare costs in just the last three years; and I'm pretty much uninsurable now too. So my kiddo has no safety net if anything happens to me.

[Richard]

Get this one...

In 2004 I owned a 1994 Jeep Cherokee that I loved. However, it wasn't worth didley so I didn't carry collision insurance on the car. The car broke-down and I had to rent a car for a week. I purchased off of priceline for 13.95 per day on my AMEX card and declined the LDW insurance since AMEX covers rental cars. I get to the rental agency and they have a deal where they can upgrade me to a better car for an additional $2.00 per day. I put this transaction on my visa signature car.

At 10pm I am driving home and a deer runs across the road and I hit him MID STRIDE at 65mph. I total the car, call AMEX to file the claim and hear the worst news of my life "Sir, because you split the total transaction across two credit cards -- we cannot cover the loss. For AMEX to be responsible, the entire transaction needs to be on your AMEX card..."

After a lengthy negotiation with the rental agency, I have to write them a check for $6,500. Damn.

LESSON #1: Deer suck.
LESSON #2: Put it all on the same card!!!

[Paul]

I did a bunch of consulting work early in my career, for which I didn't do the necessary tax withholds. Due to stupidity and working in a high tax state, I was hit with a $5,000 tax bill while making about $40,000. I had absolutely nothing saved up.

Today, I could cover that kind of tax bill, but back then it sent me scrambling for several months. Since then, I always check my withholds regularly to make sure I'm saving at a rate that I need to in order to pay in at the end of the year.

[Bobby]

I traded in a car, couple years old, on a newer car because I thought the bright red car was getting me all those dang speeding tickets. As you probably figured, I was upside down, very little down payment and sure enough 2 months later a guy ran a light and totaled it. I either passed or wasn't paying attention when they did or didn't offer gap insurance. Needless to say, I was coming up about 5,000 short on the ins. and what I owed. I felt like a total tool. Never pass on the gap, unless of your course your not foolish enough to by more car than you can afford to buy outright, or at minimum, put a sizable down payment. Thanks for all the great post FMF.

[Pamela]

I moved to New York from California in 2008 (April) and decided to buy my first place instead of renting (rent is so expensive!) Took almost all my life's savings ($50K) and put 10% down on a beautiful studio apartment in Greenwich Village.

The mortgage broker promised that I could afford the loan (interest-only at 5%) and that he had 2 different banks who promised 90% financing. There was a non-contingency clause in the contract, but I assumed since we have the banks promising the loans, we didn't need it. You can see where this is going...

By the time the loan closed, I could only get one loan, which was at 80% financing (since the market had died in the few weeks between contract and close) so I had to borrow $10K from my credit cards, $12K from my 401K, and $25K from a friend, so that I didn't lose my down payment!

My salary could barely cover the payments to my debts alone, so I ate a lot of rice for the last year. I only enjoyed New York City for free (they have tons of free concerts and events, especially in the summer) and I jogged around Central Park all winter, training for a marathon.

I'm happy to say, though, that through my frugality and bonuses at work, I've paid off the $25K loan to my friend, and I'm chipping away at the credit card debt (only $18K to go.)

[Mike Wachowski!]

Divorce!

[justatron]

I let myself get duped into buying a whole house water filter/softener system...it embarasses me to even type that now. And I financed the stupid thing too...I have no idea what got into me that night, but I surely learned my lesson. Oh, and it doesn't work on top of all that...

[MC]

Most costly mistake? Getting married to an idiot! I paid off his pre-marital loans too. The divorce cost a lot, but it was money well spent to be rid of that cheating POS.

Unfortunately, I'm still paying for the mistake of marrying him---I just heard he's suing me because he wants to stop paying child support. Ugh, more lawyer bills, sigh.

[Pat]

While serving in the Navy I took my mom in since she had left my abusive father and had nowhere to go. As an enlisted sailor I was making about $18,000 annually. I could no longer live in the barracks (luckily I was on shore duty at the time) so I had to rent a place for my mom and me to live in San Diego. My mom was in poor health and since the Navy would not allow me to claim her as my dependant, I ended up paying for all of her medical expenses and then I also helped pay for her divorce lawyer. I was young and didn’t know jack about my mother’s rights (and she didn’t either) so needless to say I lost a lot of money that I probably shouldn’t have in the long run. Long story short, I ended up getting a hardship discharge and declaring bankruptcy at the ripe old age of 24.
Do I regret it? Of course! It was the most embarrassing thing I have ever had to do. But I don’t regret doing everything that I could for my mom. I just wish that I knew then what I know now

[NP]

When I was a teenager, my father opened a furniture business with a friend and another person the friend brought into the deal. The other person defrauded my father of all the money he put into starting the business the day before opening and my dad had to borrow the money he needed from friends. At the time he was drinking heavily so he continued to make bad choices. The buisiness failed and he declared personal bankrupcy. He then went on to open another furniture business where all the vendors recognized him and demanded he repay them for the furniture from the last store. He did that, and eventually that business failed. He finally stopped drinking, got a well paying managerial job in a factory and repaid all his debts to his friends. It took years and we almost lost our home twice during the business failures.

While these weren't my mistakes, they impacted my life in countless ways.

[Liz]

I had gotten ONE ticket on my clean driving record that increased my car insurance about $400/year. I called my insurance to see what I might be able to do and the gal suggested that maybe I remove collision from my policy since my car was 10 years old. I thought that might be a good idea since it was paid off and I was thinking of getting a new car soon anyway, so I did. You can guess the rest I'm sure.....

I got into my very first accident during a freak hail storm in the middle of summer when my car spun off the road and was totaled. I got a big fat nothing from my insurance company... and I had to buy a new car with no money down.

[JerryB]

At 47 years of age, I can assure you that the biggest financial mistake I ever made was to not start saving for retirement at 20.
What's really sad is I don't have all that much "stuff" to show for not saving.

[Cat]

Marrying the wrong person

[Sam]

Paying US taxes. I came to the US after a company talked me into transferring. I have paid hundreds of thousands of dollars in taxes so far and got nothing in return; permanent residence not yet granted, no government services to speak of, pay thru the nose for basics and so forth. Once my current project is finished I'll leave again and take the job with me and work from somewhere a bit more welcoming.

[Mike Hunt]

One mistake was a failure to take action. When I was in my 20's I had stock options (mostly unvested) and I put in all my savings into the company stock purchase program... the stock went up 7X the purchase price and I didn't sell... wanted to get to a few hundred K of profit before unloading. Well I don't have to tell you I rode it down all the way to zero profit! Now I follow the rule of always take something off the table.

Another mistake was using a resume mail campaign to try and find a job (I think they were called Wayne Starr or something)- I sent out 5000 resumes with this company to different CEO / top mgmt people, and while I got lots of letters back, I didn't receive one phone call that could be turned into an interview. I'm pretty good at interviewing ususally.

I contacted the better business bureau and got a refund of $1500 for services I never used. However I was still out $9000- a painful loss considering I was unemployed and stuck in the 2002 recession. It all worked out a few years later but it was bad decision at the time.

Hopefully I can use this lesson to be more careful.

-Mike

[Param]

Not understanding the tax implications BEFORE selling ESOPs in US while residing in home country - more than 3 years later, I'm yet to settle the tax notices from IRS & my home country.
Moral: Always read enough or consult someone competent/honest about tax angle of any major financial decision.

[Rick]

I retired, my wife divorced me and the housing and stock market debacle hit me all at once. I'm still here but with a whole lot less net worth.

[Crystal]

We invested $15,000 into a game store business that the main owner ran into the ground right before we bought our first home. Luckily we kept our 20% downpayment separate and only lost $9000 overall. Huge hit for a couple in their early twenties. In the long run, it was just a really expensive lesson learned...look into the people as well as the business.