Acknowledging and Learning from Financial Mistakes

Have you made any significant financial mistakes over your lifetime? Are you willing to admit them? Apparently lots of middle class Americans would answer “yes” to both of these questions, at least in an anonymous telephone survey.

The Consumer Federation of America conducted the survey of 2000+ adults in July 2012. Among other financial issues, each participant was asked about having made financial mistakes. Here is what they collectively said in response:

  • 67% said that they had made at least one “really bad financial decision.”  (I’m not sure what “really bad” means but apparently it is bad enough that they would remember it years later.)
  • 47% responded that they had made more than one bad decision about money.
  • The median negative impact of these bad money decisions was $5,000.
  • The average cost of the bad financial decisions was $23,000. (The large gap between median and mean impact indicates that there were a number of VERY bad decisions skewing the data!)

There was something else strange about the survey responses. Despite the large number of bad mistakes being acknowledged, a high percentage of respondents also affirmed a belief that they had “good” or “excellent” money management abilities. Older Americans (65+) were more likely to put themselves in the “good” or “excellent” categories.

This tells me that many American adults are either in denial about their lack of money judgment or, I hope, have learned from their past mistakes and are unlikely to repeat them.

The survey report doesn’t say anything about the nature of the money mistakes that the respondents acknowledged. I’m sure that they are quite varied but I am curious as to what percentage were in relation to retirement investing. For example, did folks take too much risk in either the dot.com boom or in upsizing their home and debt during the housing boom? I have to think this is the case.

I have made plenty of financial mistakes over the years but none that I would classify as “bad.” That may change however. We are currently working through an issue that could go south in a hurry. We have a plan in place to prevent that and litigation may be involved, so stay tuned.

So how would you answer the questions about financial mistakes?

Here is a link to the complete survey summary.

 


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