No education means extermination: my most idiotic financial mistake

financial mistake

Have you heard about the Darwin Awards? No, I didn’t think so! Not to worry; neither had I till Harri Pierce from Totally Money invited contributions to their Personal Finance Darwin Awards 2012. Just so that you all know what I am getting myself in for (although it is about winning, of course) the Darwin Awards commemorate people who have exterminated themselves from the gene pool by the most idiotic mean possible. Hence the PF Darwin Awards are about financial idiotism. Could I win this? Let’s see, shall we?

I would have thought that, to the ones amongst you who read my blog regularly, it is probably obvious by now that I have made many idiotic financial mistakes in my life. How otherwise I would have managed to learn so much?

Yes, I bought the wrong things, didn’t think about tomorrow, didn’t know how much I earn or how much we spend and didn’t check our bank balance for a decade. You heard me right – for a decade. These were all serious transgressions of the personal finance code of honour but they still don’t convey the level of idiotic disregard, the financial mistake, that will bag me the prize.

I suspect that my first attempt at investing in shares may just about cut it.

What am I talking about? Well, in the mid-1990s, we had some spare money. I

t wasn’t too much and it wasn’t too little (the amount is beyond the point). We decided that we will show some responsibility and financial savvy and open a shares ISA account. So we did! We didn’t check the conditions of the ISA we didn’t do any preparation – just opened an account without much ado about something. Next we selected the shares. Do you think that we did any checking and preparation? Did we heck!

We selected the shares using the casino approach: black or red? Shall we bet on seven, I like the sound of it? Sounds ridiculous? Well it really was – no kidding, no exaggeration. I insisted to buy Skyepharma (SKP) shares because I liked the sound of it and it looked like it is vaguely in pharmaceuticals. Can’t be bad, can it? (Ironically at this very moment I know so much more about Skyepharma than when we bought the shares.)

Having taken a completely blind gamble on buying the shares it was a miracle that several months later they had increase in value about three fold. Did we do something about it? Of course not; we left the ISA to its own device and…well, we (almost) forgot about it. A year later most of the shares had collapsed; including Skyepharma. Then we inherited some HBOS shares and put these in the ISA with the rest. These collapsed as well.

To add insult to injury it turned out that it will cost more to close the ISA than there is currently in it; so we still have a shares ISA with several pounds worth of shares. Some of them are Skyepharma and in the last 24 hours our portfolio has increased by all of 23 pence. At this rate it will be cost neutral to close the ISA in about 16 years.

When all our shares collapsed my husband made his legendary pronouncement that

‘This capitalist lark is not working for us’.

This was in the early to mid 2000s and events since seem to show that the ‘capitalist lark’ is not working very well for anybody. Even George W. Bush in September 2008 stated on TV that capitalism doesn’t seem to be working.

In our case, however, capitalism and its inherent weaknesses had little to do with it; most was down to our lack of knowledge and understanding.

Having shared the financial mistake that is behind me deserving to win the Personal Finance Darwin Awards 2012 I have to tell you that now books on investing are my bed time reading; the Financial Times is my best friend and the economic news my morning companion.

Smart people make idiotic mistakes and learn; idiots don’t learn whether they are right or wrong.

photo credit: Photo taken by mistake via photopin (license)

20 thoughts on “No education means extermination: my most idiotic financial mistake”

  1. Never heard of Darwin awards. Interesting. We have made a lot of mistakes too. Thankfully nothing too hard to bounce back (except the C (Citi) shares that I have written off). With the first few mistakes we didn’t learn, well, we didn’t even realize we were making any mistakes. A mortgage broker trying to sell us a giant mortgage that we could “afford” brought me back to the real world. Luckily I realized we cannot even think about buying a house and started to get disciplined from there. I might have drowned in debt if we had bought that house. We have been lucky.

    1. @Suba: The mortgage is a good one; well done. I follow with interest the financial reports of some blogger-buddies from the US and still can’t get over the fact that a lot of them seem to have negative equity (loads of it). In the UK some people did get cought up in it but not that many.

  2. Never heard about this reward. Could have submitted a couple of my own stupid ideas from the past. I think my biggest was getting into debt when in reality I could have avoided it. Good Luck with nominations!

    1. @Aloysa: Harri from Totally Money put a note on the Yakezie boards about this one. Since publication I have been considering adding our latest: having heavy suitcases on a budget line meant that we may as well have travelled using a normal one. Life! But I have learned – leave the heavy skiing stuff in the apartment in Sofia and stop taking it back to Manchester.

    1. @Jai: Ha, ha! Some healthy competition won’t hurt anybody and you know what? I would rather loose this one. But I have the feeling that when it comes to close combat I am going to win :).

  3. I definitely made some bad financial decisions in the past. Too young to know any better I guess or desperation kicked in. One of the two. I have bounced back decently but it still ticks me off that I have that bad history to begin with. Lessons learned. I try to make much more sound decisions now.

  4. that’s pretty bad. I invested in some stocks back in the days when the company did a reverse merger. It did that 3 times and every time it did, there was a huge fee associated with it. So not only did I lose all my money invested, I lost additional due to fees.

    1. @Familyancials: This is almost as bad as us; except that it sounds like a run of bad luck and fees and with us it was sheer ignorance and bad gambling.

  5. Oh Maria,
    If I write about my mistakes one more time, my wife will get so annoyed with me. Literally, for 2 months it seemed like every post referenced some mistake. It was therapeutic to say the least. I guess I should become more familiar with these Darwin Awards 🙂

  6. I have heard about the Darwin awards and while it isn’t a nice thing to say, most of the recipients deserved the accolade! I wouldn’t say that your mistake was stupid, perhaps naive, but you have to start somewhere. The best part is that it has prompted you to research more and continue to seek success, job well done I’d say.

    1. @Shaun: Thanks, you are too kind. It was pretty stupid thing to do – but one of the things I do is learn. Let’s see what will happen when we decide to dable again. As to winning this one – well, we shall see. My feeling is that there will be more serious contenders for the PF Darwin Awards. Was fun to write!

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  8. It’s crazy. We’re given a great (and legal) way to keep our cash and shares out of the clutches of the tax man, and so few of us take full advantage of it!

    I think that there needs to be more education and understanding around ISAs, what they are and how best to use them.

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