Thursday, April 06, 2006

My Biggest Financial Mistakes

Seeing Financial Reflection's recent post on money mistakes made me think about my own mistakes. I am lucky that I haven't made any large financial mistakes that have put me into debt. However, I do think there are a few mistakes that I made that has set me back financially.

The first mistake I made was accepting my first "real" job post college/grad school without negotiating. I had been unemployed for some time, originally looking for work in the nonprofit world. When I decided to try to apply for some business jobs, I got the first one I applied for. When presented with the offer, I was ecstatic to have a job offer from a company with an excellent reputation. The salary was higher than I would have made at a non-profit, but nothing to write home about. In hindsight, I realize that those in my group were not paid that well, me especially.

I was doing a great job, however, there were some management changes. With these new changes, came new responsibilities for me. I decided to ask for a raise. The mistake I made here was not writing down what I wanted to say and presenting my new boss with the reasons why he should give me a raise. I was told that I would have to wait until the end of the year. I was already unhappy with my job and the management changes, so I decided to accelerate my search. In hindsight, this wasn't that bad of a mistake. It allowed me to find a position at my current company, where I am happy and I think I have the opportunity for much more upward mobility.

The next big mistake I made was not negotiating a higher salary at my current position. I think I was hired at the right level (hoping to get promoted in June and my boss has expressed support for this as well), but at the lowest salary for my level. Once again, I was euphoric about getting this new position and the opportunities it would afford me. That blindsided me into making a hasty decision and giving up some benefits (starting salary, relocation costs, signing bonus). Since my new job provided less benefits that my first job, I actually don't think I even got a pay increase in changing jobs.

As you can see, this is a pattern of never asking for what I know I am worth. While to some people, this might seem petty, but over the course of my career, it can add up to several hundred thousand dollars since a lot of raises are decided as a percentage of base salary (rather than a dollar amount raise). I am hoping to make up for lost ground in this upcoming year (hopefully mid-year and end of the year).

There have been other financial mistakes I have made, but none that have impacted me as much as the items listed above. Some other mistakes

- Moving to NYC and paying $1,000/month plus utilities for a tiny bedroom in a 3 bedroom place -my room couldn't even fit a full size bed in it. Luckily I was offered campus housing next semester and I was able to pay about $700/month for everything (rent, high speed, electricity).
- Holding my money in cash after the stock market crash. My mom picked out several mutual funds for me during the dot com boom. Since I bought many funds at their peak, I ended up losing several thousand dollars - probably more than half my net worth. That made me gun shy to buy anything else, but the best time to buy is when the market is down.
- Not maxing out my Roth IRA each year, even though I had the money to do so

There have been several other choices that I have made that have hurt me financially. I do not consider all of them mistakes. Many of them were based on choices I made, which in hindsight proved to be the wrong thing to do. However at that time, more education or more knowledge about personal finances would not have swayed me to make a different decision.


Anonymous said...

I think not negotiating or not negotiating hard enough is something asians tend to do, especially if they are new to the workforce. I guess it has to do with the culture of obedience and non-aggressiveness that is drummed into many asian kids.

CollegeGrad said...

Thanks for that post! Since I will be applying for my first 'official job' soon that was extremely helpful advice.

Also, I think the negotiating thing is what women tend to do as well! I did the same thing when I was in college. I was promoted and accepted the very first offered with an, "Okay!"... It was horrible!!!