4 Real DIY Financial Planning Horror Stories to Avoid

Hindsight can be crystal clear when looking back on painful financial planning mistakes. The investment that once made your giddy seemed like a good idea at the time, but today, it’s something your older and wiser self would never consider.

GOBankingRates talked with people who recalled their bad financial experiences, what they did to turn their fortunes around and how some professional financial guidance would have helped when it mattered most.

Keep Reading: 1 in 4 Americans’ No. 1 Daily Thought Is Money

4 Financial Disasters and How to Avoid Them

1. When Real Estate Turns Unrealistic

John Crabtree decided to invest in real estate less than a month after he and his wife had their first child. He quickly realized their budget was too squeezed to afford the house.

“At the time, I thought I was making a wise move to get us started in the real estate business,” he said. “I had depleted the vast majority of our cash reserves to do this and had not accurately estimated how much the repairs to the house would be or how high the taxes would be.”

Crabtree bought the property at a tax auction and found that restoring the three-bedroom house took considerable time, effort and money. He decided to sell the house a short time later but said he was unaware that the property had unresolved title issues. Sorting it out added more costs to his investment. “In the end, I sold the house two years later for about what I paid for it, locking in a loss of around $5,000.”

Crabtree, who runs his website Action Economics, said he’d be more realistic if he were to pursue a similar project today. First, he’d learn how to handle the selling and closing processes better. Then he’d come prepared with a bigger budget. And most of all, he’d seek out professional financial advice.

“I am sure any objective person, especially a certified financial planner, would have strongly advised against making this investment,” he said.

2. Big Eyes, Small Budget

Some celebrities, entertainers and athletes experience overnight success, blurring their financial judgment and spurring frivolous spending. Brett Helling experienced this first-hand after he developed his first website on the side while working full-time.

When the site began gaining traction and bringing in more money than he’d anticipated, he went wild.

“I earned more on that site than I did the entire year at my full-time job,” he said. “With my recent success, I bought a new car, new clothes, and began making impulsive and reckless investments. Instead of saving for the future, I decided to live large.”

Regretfully, Helling said, the money he earned quickly disappeared. He cited youth and inexperience as the culprit. Since then, he’s developed several more successful sites including  RideShareApps.com. He’s also been much more practical in his ventures and with spending.

“Looking back, I should have been wiser with my money, consulted a CFP, and invested it for my future,” Helling said. “But I did take something away: an experience that I learned from.”

3. Coping With Fraud

Bill Fish has seen more than his share of financial successes. One of the projects he co-founded, Matomy SEO, was valued at $25 million three years ago, he said. In 2007, Fish was part of what he called the biggest and best deal he’d ever seen — and one of the most financially draining.

Fish said that his employer, who owned a boutique financial management company, pursued a private equity deal in which Fish and his coworkers were involved — and it turned out to be fraudulent. His boss is in a federal prison, he said, “and I’m still in a lawsuit with a particular person.”

Fish said he used his ordeal as an opportunity to start a business that helps other startups and businesses protect their reputations. He founded the site ReputationManagement.com. He looks back at his situation as a learning experience.

“At the time, I had just turned 30 and was far too trusting, and made a mistake that has negatively impacted my life to this day,” Fish said. “While it was extremely unfortunate, I learned a great deal from the ordeal. It could happen to anyone but should be a lesson for everyone out there as well.”

4. Climbing Out of Debt Twice

Tai and Talaat McNeely amassed crippling debt not once, but twice. They managed to climb out of it both times.

Talaat McNeely brought to the marriage $30,000 in debt, accumulated from what he called reckless spending. With Tai McNeely’s banking and finance background, and some marital teamwork, they were able to pay it off. A short time later, they got caught up in the housing crisis just as they bought a home to flip. They were stuck paying for two homes, their primary residence and an investment property.The debt from that failed real estate deal amounted to $250,000.

“I didn’t consider that debt because it was equity on our home, and I felt like, in my mind, I had no doubt we were going to turn around and flip this house really fast and pay that off,” Tai McNeely said.

The couple managed to pay off that debt. Today, through their website HisAndHerMoney.com, they teach others how to remain financially solvent. Tai McNeely credits Dave Ramsey’s approach to tackling debt as a strong influence. She encouraged others to learn about debt regardless of their financial status.

“If you don’t have any debt,” she said, “don’t think that you can’t learn.”

Watch the McNeelys talk more about their journey in and out of debt:

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