FOOL'S EYE VIEW
My Biggest Financial Disasters!

By Cliff D'Arcy
June 30, 2005

I bet that you've made some money mix-ups in your time, haven't you? Yes, of course you have; we're all in the same boat, because we're only human. However, I'd wager that my own personal money mistakes would impress even the craziest among you. Here is my confession: six financial foul-ups that cost me plenty and taught me some painful life lessons!

1. Who Wants To Be A Millionaire?

Loss: £999,000?

I've always been a whiz at quizzes - I've won countless pub quizzes and company competitions, as well as a national quiz contest as a child. So, I was keen to have a go at this quiz. I spent months training for my moment of glory, and racked up a £200 phone bill calling the 090 number. Finally, in December 2001, my wife and I sat in the hot seat opposite Chris Tarrant.

I'd planned my strategy carefully and was confident I'd do well. Alas, I'd never prepared myself for the physical and mental stress of sitting beneath blazing studio lights, under the watchful eye of hundreds of audience members. I fluffed my ninth question (even though I absolutely knew the right answer, I panicked) and walked away with a mere grand. Pride comes before a fall, and I fell a loooong way that evening! These days, I aim to make my first million from careful, methodical investment in the stock market.

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2. Not climbing the housing ladder

Loss: £200,000+

My girlfriend and I bought our first house in late 1992 and ended up staying put for the next 12½ years. We married in 1996, at which time we were financially secure DINKYs – Dual Income, No Kids. I look back nostalgically at this period in our life (when our earnings were rising and our outgoings were modest) as our 'financial nirvana'.

One mistake that we made was we never took advantage of our rising income by climbing up a rung on the housing ladder. One married couple we know did the right thing, selling their three-bedroom terraced house to buy a three-storey townhouse in a new development. We almost became their neighbours, but I was wary about doubling or tripling our mortgage repayments. Hence, we never quite got around to buying a bigger family home, and lost out on a mighty increase in house prices. That £425,000 house we almost bought is worth about £625,000 today. Drat!

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3. Gambling

Loss: four years' wages

Boy, I was a crazy hothead in my twenties! Between 1995 and 1999, I embarked on a four-year gambling spree, which almost ended with me filing for insolvency. I had no interest in betting on horses or sports, playing bingo, or wasting money on the National Lottery. No, my game was Blackjack, where my knowledge of statistics and game theory should give me an edge.

Unfortunately, after a good start, I became hooked, and my addiction led me to abandon all reason. During this period, I spent thousands of pounds a week fuelling my casino habit. At the start of 1998, I owed almost £50,000 on a string of credit cards plus several personal loans. I came to my senses later that year, paid off my debt, and never played Blackjack again. Last year, I accompanied a friend to a casino, in order to test my willpower. My resolve held and I never placed a single bet all night. On the other hand, my chum dropped over £1,000, which only reinforced my view that gambling is for mugs!

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4. Not listening to my wife

Loss: around £94,000

How can not listening to your missus have destroyed almost £100,000, you ask? Well, back in early 1999, my wife owned about 10,000 shares in her company, acquired through share options and discounted Sharesave schemes. Merger speculation pushed the price of these shares to all-time highs, so Mrs D told me to sell her shareholding.

The sell price at the time was almost £23, so she would have reaped nearly £230,000. Unwisely, I chose to pay no heed to her request, and the share price duly headed south. However, it started to climb towards the previous peak and, in early April 1999, she-who-must-be-obeyed once more ordered me to sell, this time at over £22. Regrettably, I again chose not to, and the share price then set off on a five-year plunge, hitting a low of £10. The current price is around £13.50, leaving Mrs D about £94,000 out of pocket. Still, at least we've had some chunky dividends over the past six years!

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5. Letting debt get the better of me

Loss: at least £25,000

I got the borrowing bug fairly soon after I arrived at University in the Eighties. Armed with a full student grant, two credit cards and a hefty overdraft limit, I began overspending wildly. This bad behaviour continued until the mid-Nineties, when I finally started to see the light at the end of the tunnel.

However, as I mentioned in point three, along came my gambling mania, which sent my debt spiralling out of control! By 1998, I had three personal loans and thirteen credit cards, with my salary barely covering the minimum repayments on these debts. After chucking all my money at this debt mountain (including selling shares that I'd painstakingly acquired over the years), I finally got back into the black.

These days, I've become a fanatical anti-debt campaigner, and I won't 'do debt' again. I pay off my credit cards in full every month and don't have a personal loan. Also, I'm rather proud of the fact that I haven't been overdrawn since 2003, not by a single penny for a single day. Debt is now firmly part of my murky past – my bright future lies in saving and investing!

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6. Losing a pension

Loss: £1,000+ a year from 2028 onwards

Back in 1999, I was working for one of the UK's largest insurers. This long-established company may have been the market leader in its field, but it was a dull place to work. When a smaller firm tried to poach me, I was only too eager to jump ship. Sadly, I handed in my notice too hastily and, when I left the company, I'd only completed 23 months' service. As I hadn't been a member of our non-contributory final-salary scheme for the required two years, I lost my entitlement to my pension - worth at least a grand a year from age sixty onwards. More haste, less dosh, was the lesson this taught me!

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So, despite working in financial services since 1987 and being mathematically minded, I've made a complete pig's ear of my personal finance affairs. But even the worst of us can turn the corner: since discovering the Fool, I've come on in leaps and bounds, so don't pity me, because my future is looking rosy!

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