The Worst Financial Moves Anyone Could Make

In a few weeks I'll be speaking on "the worst financial moves anyone can make" or perhaps "financial moves you should avoid" (I haven't decided on the title yet) to several hundred people. I thought I'd share with you all my initial thoughts on the worst financial moves and let you add to or subtract from them. Here's my list:

• Investing too much in your company's stock
• Both spouses working at same company (too much riding on the fortunes of one company)
• Having no emergency fund
• Paying the minimum on credit card debt
• Ignoring your career (and not working to grow it)
• Not saving (for retirement, college, etc.)
• Waiting to invest
• Letting your kids decide where to go to college without cost considerations
• Neglecting to make a will
• Refusing to take the investing long view
• Cashing out a 401k when changing jobs
• Not diversifying your investments

See any you like here? Any you don't? Anything to add?

Specifically, if you had to name the worst seven financial moves anyone could make, what would they be?

Comments

[Money Reasons]

How about this one:
Buying popular tendy items because the are popular, and not because you need them.

Nice, list you have. Suddenly, looking over them, I realize I ame deficient in a few of the areas you have listed!!! Oh no!

I'm looking forward to the series!

[FA]

Investing too much in your company's stock is a mistake I have seen many of my friends make. And when I tell them about it, they just seem to shrug it off.

[Matt]

Telling me that you go to the "Casino for entertainment purposes"

[Roy Nelson]

Spending too much on automobiles. That was my mistake in my younger years.

[DCS]

I would add being impulsive.

[The Biz of Life]

Getting as many credit cards as the banks will allow and maxing them all out on frivolous purchases.

[Ché Ché la Femme]

Marrying the wrong person. For example, Heather Mills.

[Tyler]

Failing to read FMF.

[billyjobob]

Not living within your means...or spending more than your taking in.

Accepting credit without understanding fees,penalties and interest rates.

Not paying attention to fees involved with investments. Such as mutual funds that charge high fees or load funds.

[Lakita (PFJourney)]

Risky loans with unpredictable adjustable rates
Co-signing

[JM]

Definitely investing too much in your company's stock. My dad put all of his 401(k)/retirement plan with the company he worked at for several years because they gave him bonus stock options if he did that. After he left the company, they were bought out by BoA. He neglected to rollover his 401(k) to his new company. And then he lost almost his entire 401(k) during the financial crisis due to this. Pretty sad since he's a banker and should know not to do dumb stuff like this.

[JM]

Oh yeah, and I cashed out my 401(k) when I switched my job, but only because I had been there a mere 3 months (and the 401(k) only started after I'd been there a month, so make that 2 months) and it was automatic if you had only a certain amount in the 401(k). But yeah, if I'd actually worked there a reasonable amount of time I would have rolled it over.

[Evolution Of Wealth]

Buying financial products and services independent of each other (Not accounting for the rest of your financial situation)

Not being protected from catastrophic life events (Not having your child be protected)

Buying high and selling low

[FMF]

Tyler --

Nice. :-)

[tom]

"Both spouses working at same company (too much riding on the fortunes of one company)"

I don't like this one because it assumes the company will fail. You might as well add "Only one spouse works" to the list. It would be the same concept (too much riding on the fortunes of one company).

[Strick]

Buying too much house. - And I'm not just talking about the obvious "difficulty making the payments" level of mistake. I did a calculation when I bought that showed, because of interest, the lost opportunity costs on the higher payments, and the never-ever-ending higher property taxes, I could work a decade less by buying the $200K house instead of the $400K house.

I see the risk, but I'm not sure how to practically apply the both spouses working at same company "mistake". If they're already both there, one should quit? If one is there and the other's best offer is there, they should turn it down? My parents worked at the same company and the shared commute with the lunches together seemed a pretty good bonus to the fact it was the best job for both of them.

[MikeS]

I'm with Tom. As long as, sufficient precautions are taken (ie larger emergency fund), I don't have a problem with both spouses working at the same company. I don't think it would be one of the worst financial mistakes someone could make.

[Allen Weinberg]

Not diversifying your investments - yes, that's a worst financial move you could ever make. I think we should have something like an offshore bank formation so that your business would have other means of getting funds.

[Esther B.]

- Quitting your job without another job lined up.
- Not being aware of your family finances because you have your spouse handle all of it. Especially, signing tax returns or other finanacial documents without having any idea what you're signing.
- No life insurance.
- Not making sure to do all the correct paperwork and taxes when starting your own business; having a work-from-home money-making situation and not treating it like an actual business with regards to taxes, etc.

[jclimber]

- Getting divorced

- I see both spouses working at the same company as a risk, not a financial mistake. If the jobs are great then go for it but keep a substantial emergency fund.

- Neglecting a will: Well, this won't exactly affect you, but definitely your family.

[Tim]

Not having enough insurance for a large, financially devastating event: Health, Life, Auto, Liability, disability, home.

[tmatt]

Investing in complex investments you don't understand on the faith of advise from someone who stands to gain from your investment or proforma figures you have not analyzed.

[Paula1849]

I am looking forward to the series as I have learned so much from this blog and have been attempting to put what I learn in practice.

I would add:
- Not spending enough time with your money or trusting others to manage it.
- Not teaching your children how to manage money and make good choices. My husband's parents are quite good with how they manage thier money but never parted that information to him.
- Needing a budget or not knowing where your money is going.
- Never stop learning or trying to improve your money managing skills.

Personally having an emergency fund is one of the steps that we have taken that has provided the most benifit. It was kind of the tipping point for us to become more fiscally responsible.

[Angie]

I would add always having a car payment. Most people assume that they will always have a car payment, and never thing twice about buying a new car every 3-5 years.

I disagree that both spouses working at the same company would be among the worst financial moves. By that token, my worst financial mistake would be staying at home with my kids - we put to much faith in my husband's job. And couples who start a business - yes, it's risky, but again, not necessarily a mistake.

Other than that, love your list!

[Amy]

How about spending more for 'living' when you get a raise? If that's what your goal is, fine, but I've seen so many people who bellyache about not being able to save, yet, as soon as they get a raise, they do something like, buy a new car (when the other one was just fine...'but I'm making more now...'), unplanned vacation, etc.....

[Budgeting in the Fun Stuff]

Investing too much in your company's stock - YEP
Both spouses working at same company - NOPE, this is even worse with one salary households...
Having no emergency fund - BIG ONE
Paying the minimum on credit card debt - BIG ONE
Ignoring your career (and not working to grow it) - YEP
Not saving (for retirement, college, etc.) - BIG ONE
Waiting to invest - BIG ONE
Letting your kids decide where to go to college without cost considerations - Yep, but not the most important thing ever...
Neglecting to make a will - Yep, but you'd be dead, so this is more important to those you'll leave behind.
Refusing to take the investing long view - YEP
Cashing out a 401k when changing jobs - BIG ONE
Not diversifying your investments - BIG ONE

My 7 would be:
1. Having no emergency fund.
2. Not saving or waiting to save.
3. Having credit card or any other high interest debt.
4. Cashing out a 401k when changing jobs.
5. Not diversifying your investments - having too much company stock.
6. Chaining yourself to a mortgage that's just too big for you.
7. Impulse investing - you worked hard for that money, invest with thought.