Welcome back to Money Mistakes, where we take a look at mistakes the self proclaimed “experts” of personal finance have made. This weeks contribution comes all the way from the Netherlands! My goal is not to call out fellow finance bloggers but to show that we all make mistakes, and we can all learn from them, happy reading!
Tell us a little about yourself
Hi, I’m Marjolein. I live in the Netherlands (Europe) near Amsterdam. I have loved finances since I was very young, which led to studying economics and having a passion for personal finance.
After just a couple of months of working an office job, I was already sick and tired of spending 40+ hours a week behind a desk. That’s when I googled “how to retire early.” Surprisingly, I actually found helpful information about financial independence and retire early.
To keep track of my own journey, I started Radical FIRE. At Radical FIRE, we talk about saving money, making money, and investing. We want you to reach your financial goals and have fun while doing it!
What was your money mistake and when did you make it?
My mistake is waiting too long with investing. I knew exactly how to invest, and I learned a lot about the stock market during my studies, but I never took action.
I could have started investing around 2015. Instead, I waited until 2018 to invest my first dollar. Only in late 2019, I started investing consistently.
What led you to making the mistake?
It was really a lack of knowledge.
Can you imagine an economics student who doesn’t know enough about the stock market to start investing?
That says something about how investing is perceived because I had plenty of knowledge.
I knew how to invest in individual stocks, I learned how to analyze them, and I knew the risks of investing in individual stocks.
However, my parents always told me that investing was too risky and that you would only lose money if you invested. No, they never invested a single dime. And they still don’t.
However, I was taking their advice…
So never listen to someone who isn’t where you want to be.
My parents were broke and spent all their money on a home that decreased in value immensely during the 2008 real estate crisis. They’re good people, and I love them, but I shouldn’t have taken investing advice from them.
Because people kept telling me how risky it was, I postponed investing more than three entire years. With an average annual return of 7%, that’s thousands of dollars I missed.
How did you recover from it?
I started investing step by step.
Once I started earning more and more money every month, I saw my bank account growing. While it’s great to have an emergency fund in your bank account, it isn’t necessary to have three years of expenses saved in your savings account.
That’s when I decided that I wanted to do something with my money that would make money. I wanted to build a money-making machine that was making me money while I was sleeping.
I started reading more about investing in stocks and other asset classes like gold, silver, and cryptocurrencies.
I started by dipping my toes in.
In 2018, I invested around $2,000 in the entire year. That isn’t much for me now, but it was a big step back in 2018. It was mostly my money mindset that I was working on at that time.
I started investing my first dollar when I had a $27,000 salary.
It was hard not to try and time the market when I was starting. I didn’t want to invest in the market when it was higher than the average price I bought my other stocks for.
The stock market generally increases, so waiting for the stock market to fall and only investing when that happens isn’t such a great strategy.
It took about a year until I contributed to my brokerage monthly.
When my salary increased, I started to invest more. Every month I began to invest more and more.
Since that time, I’ve more than doubled my salary because of me negotiating my salary and building high-income skills. I’m investing around $3,000 per month at the moment.
What would you have done differently?
If I talked to my younger self, I would tell her that she should invest automatically on the first day of the month. Invest the money in the market and never look at it again.
You’re investing for the long term, so daily or even monthly fluctuations aren’t important.
With automatic investing, you’re not trying to time the market, and you’re not thinking about investing as much. The money disappears from your account every month, and it’s like you’ve spent that money.
That’s why paying yourself first is an excellent option if you have a monthly salary.
How can others avoid the same money mistake?
I want you to realize that investing doesn’t have to be complicated. You can invest in low-cost index funds, where you invest in a specific index like the S&P 500. That way, your investment risk is much lower, and you have diversified across industries and countries.
It’s essential to start. And done is better than perfect.
It doesn’t matter if one broker is a little more expensive than the other. Just start and figure the details later.
If it’s keeping you from investing, it’s probably not worth it.
Here are some brokers that I can recommend:
- M1 Finance is an American broker that has specified portfolios that you can invest in. With automatic rebalancing and zero trading fees. Read the full M1 Finance Review here.
- DEGIRO is a European broker that offers free trading in specific index funds. Read the full DEGIRO review here.
Most importantly, what did you learn from your money mistake?
I learned that it’s important to start before you’re ready.
I wasn’t ready when I wanted to start investing, far from it. However, I just opened a brokerage account and started. I still did it slowly and at my own pace, but I started.
When you’ve taken the first step, all the following steps become easier.
Another thing I’d say is to only listen to people who are where you want to be.
Don’t listen to people giving you advice if you don’t want to be in their shoes. Don’t listen to your friend who’s been single their whole life about relationship advice. Don’t listen to the advice your parents give you about investing if they’ve never invested a dime in their lives.
Anything else you want to say?
Stick to your plan, know your goals, and go for it.
You only have one life. Make the most of it and make sure that you’re living your life for yourself. You are the one that should be enjoying this life, so go out and do what makes you happy!
Before you buy your home, you want to make sure that your finances are in order. You could do that by making sure that you’ve paid off your high-interest debts and you want to have an emergency fund, to name a few examples. Getting your finances in order looks different for everyone, so think about what it means for you and start to take action.
I was in a situation where I wanted to buy a house, and I was in the process of talking to the bank. That’s when I found out that I couldn’t afford the home because of my debt. You see, there are regulations in place in the Netherlands, where your debt influences the amount of mortgage you can get. It didn’t matter that I had a high average net worth in the Netherlands. If I knew that before, I would’ve started by paying off my debt, and I wouldn’t have wasted my time. Get your finances in order and you’ll be able to buy a home with peace of mind.
Radical FIRE is a personal finance platform that is all about financial independence. At Radical FIRE, you will learn to save money, make more money, and invest to optimize your way to freedom. We want you to reach your financial goals and have fun while doing it!