MONEY #financialfail

“I Made $6 Million at Age 26—and Lost It by 28″

Dave Asprey
Dave Asprey

Dave Asprey, bestselling author of The Bulletproof Diet, confesses his greatest #financialfail: Not walking away from a losing investment

Not only is Dave Asprey the author of the recent New York Times bestselling book The Bulletproof Diet, he’s also a Silicon Valley investor and tech entrepreneur. His biggest financial fail, he admits, was being too greedy in his 20s and failing to get professional help with investment decisions. “I made $6 million when I was 26,” he says, “And I lost it when I was 28.”

Here’s how it happened, as told to me on my new podcast, So Money:

My career accelerated quite a lot at that time. I was the youngest guy at Exodus Communications, a $36 billion company.

I was in charge of due diligence for our mergers and acquisitions department. So, when we wanted to buy a company, I was the guy who’d go in and say, ‘Is this technology going to work for us? Yes or no?’

I attended board meetings. And because of that, I knew all of the upcoming acquisitions. So, I was blacked out [of trading stock he had received as part of his compensation]; it was illegal.

When those stocks started to teeter, what I should have done was quit my job, sell all of my shares and retire. Instead, I said, ‘I can’t do that. I might lose an additional $4 million in uninvested equity or something.’

So I stayed at the company. And the stock dropped from $60 a share to $5 a share.

In retrospect, I should have thought, ‘I have enough money. I can do whatever I want. I should just walk away today.’ I could have done that. But for six months, I didn’t walk away.

Every day, I was worth less and less in the bank account. And that was a grinding down, horrible feeling.

And there’s another thing. I don’t think I’ve ever talked about this: I was with some online broker—going back 15 years. It was a very cutting edge broker that let me do options and all this stuff.

Based on the reports it seemed like I had a couple hundred thousand grand in the account, at least enough to take care of my basic expenses. But there was a margin on that account that I didn’t even know about because I wasn’t managing the stuff tightly. I was too stubborn and fearful to hire someone to help me manage it. The margin ended up consuming most of the account before I even noticed.

Today, the advice translates to: Hire a professional to pay attention to the stuff that you’re not paying attention to.”

Every day, MONEY contributing editor Farnoosh Torabi interviews entrepreneurs, authors and financial luminaries about their money philosophies, successes, failures and habits for her podcast, So Money—which is a “New and Noteworthy” podcast on iTunes.

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MONEY renting

3 Smart Ways Renters Can Protect Their Finances

Shape of house made out of stacks of pennies and wallet
David Malan—Getty Images

Sharing an apartment requires taking a leap of faith. Make sure you have a safety net in place.

Millennials are a generation of renters—expected to spend some $600 billion on rent over the next five years. And the percentage of Gen Y making the transition to homeownership is not expected to spike anytime soon.

Of course, there are several advantages that come with not having a mortgage that may appeal to the average Gen Y’er who’s saddled with student loans, credit card debt and job uncertainty. Renting allows for a more flexible lifestyle, since you can pick up and move with no strings attached. Plus, you avoid property tax, mortgage insurance and all the other costs that come with homeownership.

The downside? If you’re shacking up with a roomie—whether it’s a friend or a random person picked off Craigslist—you are taking a leap of faith that that person will be as responsible with their finances as you are. If the person is not, you could end up paying, literally, since a landlord could hold you liable for the entire rent and your credit score could suffer from your flatmate’s missteps.

Help protect your finances with these three moves:

Pick a Roommate First, Location Second

In a perfect world, you’d find the perfect apartment followed by the perfect roommate. After all, location is key.

But if you had to prioritize one over the other, for the sake of your financial and mental well-being, be more choosey about the person rather than the place, says Matt Hutchinson, director of UK and NYC-based roommate site SpareRoom.

You want to pick someone you click with and with whom you have an easy time communicating. In your listing include details of what you do to relax, what your hobbies are, and where you like to socialize, adds Hutchinson.“You don’t need to be best friends with your roommates, but sharing an apartment with people you like will help you feel relaxed and at home,” he says. Making sure you’re compatible now helps ensure that you won’t find yourself back on the apartment market—and wasting money on movers, brokers and the like—too soon.

Even more important, an ideal roommate also respects the fact that there are shared responsibilities and obligations that need to be met on a timely basis.

The landlord should do a credit and background check on each tenant, but you’d be wise to ask your potential roommate in advance to show you his or her credit score to get a sense of how financially responsible he or she has been. You can purchase this from MyFico for $20; if your roommate doesn’t want to lay out the money, offer pay for it. Better to lose $20 now than thousands later.

Keep Rent to No More than 30% of Income

In expensive cities like New York, San Francisco and Washington, D.C., it’s easy to justify spending a hefty chunk of your salary on rent.

A survey by SpareRoom found that three out of four renters spend more than the often-recommended 30% of income on housing. Of those, 42% fall into the “severely rent burdened category” where they spend 50% or more of their pay on housing.

Do yourself a gigantic favor and keep your housing costs as low as possible, even if it means spending an extra hour per day commuting to and from work. Even if it means walking up three or five flights of stairs to get to your door.

And if you still can’t keep it to below 30%, consider moving home temporarily with mom and dad. There’s no shame in that if it means you’ll be able to use your extra income to save and pay down debt.

Get Your Name on the Lease

Nearly half (46%) of roommates in New York, a popular city for renting, admit that they’re not on the lease for their current rental, according to the SpareRoom survey. Another 6% have no clue whether they are or not.

People often think it’s better not to be on the lease, says Hutchinson.

“While this will mean you’re less accountable financially, it also means you have no legal rights or protections,” he says. “Your landlord or roommate can ask you to leave and there’s nothing you can do about it.”

If you’re subleasing from a tenant, make sure the landlord is aware, he says, and make sure you have written agreement in place with your roommate that covers at least the bare minimum, such as how much rent you pay.

Farnoosh Torabi is a contributing editor at Money Magazine and the author of the best selling new book When She Makes More: 10 Rules for Breadwinning Women. Her new podcast So Money features intimate interviews with leading entrepreneurs, authors and influencers. Visit SoMoneyPodcast.com to listen to the show’s inaugural interviews with Tony Robbins, James Altucher and Jean Chatzky. Follow her on Twitter.

More by Farnoosh Torabi:

MONEY Financial Planning

4 Financial Habits of Highly Successful People

multiple hands holding lightbulb
Joos Mind—Getty Images

Farnoosh Torabi shares some of what she's learned in reporting for her new podcast.

Stephen Covey, author of the wildly successful book 7 Habits of Highly Effective People, wrote, “Depending on what they are, our habits will either make us or break us. We become what we repeatedly do.”

It’s true. Habits—the healthy and consistent ones, that is—can make all the difference in helping us go from good to great in any area of life, especially our finances. (Bad habits can be just as powerful…in the opposite direction.)

For my new podcast So Money, I’ve had the privilege of interviewing some fascinating entrepreneurs, authors and financial pros, each of whom has generously shared his or her personal financial habits with my listeners. Here are four of the best:

They Flex Their Idea Muscle

Entrepreneur James Altucher, bestselling author of Choose Yourself, says one habit he practices multiple times a day is generating ideas—exercising what he calls his ‘idea muscle.” He believes ideas are the “currency of life.”

And the key is to share your ideas freely with others.

“I’ve been amazed how many times I’ve given out free ideas, and abundance has come back to me not just in the form of money, but in the form of contacts, connections and future opportunities,” says Altucher.

For example, he recently was invited to speak at Amazon’s headquarters in Seattle after submitting several ideas to the head of business development on how the company can improve its publishing (a connection he made via “a friend of a friend of a friend”). “I got to meet, essentially, all the people running their self-publishing division and they all showed me what they’re working on,” he says. “I didn’t get paid for it, nor do I expect to get paid for it, but who knows what future opportunity I’ll have when I self-publish my next book.”

They Tuck Away More than 10%

Forget the standard savings rule of thumb that says to save 10% of your paycheck for a rainy day.

Melinda Emerson of @smallbizlady Twitter fame and author of Become Your Own Boss in 12 Months says she habitually—and automatically—saves 20% of every paycheck.

“I also have an emergency saving account for my business for rainy days when people don’t pay on time,” she adds. “I put safeguards in place so I’m never ‘broke.’ Ever.”

They Set It, But Don’t Forget It

Setting up a savings and payment system is one habit highly successful people practice to keep their financial house in order. They automate their bill payments and money transfers.

But they don’t turn a blind eye once they set up the system. They know it’s important to still maintain awareness of where their money’s going. “I check my bank accounts every week just to keep a good pulse on where things stand,” says Shama Hyder, bestselling author of The Zen of Social Media Marketing and an international keynote speaker who’s been invited to share the stage with President Obama and the Dalai Lama.

Financial planner and founder of Financially Wise Women Brittney Castro chimes in. “One of the biggest tips I can share with people is to do a weekly money date…a time where you check in with your money every week. You’re reviewing your spending and maybe your budget. It just brings this whole new level of awareness.”

They’re Not Just Go Getters. They’re Go Givers.

Over 20 years ago, New York Times bestselling financial author David Bach heard self-made billionaire John Templeton speak. He said that people in life are taught to be go-getters, but instead should be “go-givers.”

“That had a huge impact on me,” says Bach, who is now vice chairman at Edelman Financial Services. “Since then, the bulk of my life has been focused on, ‘How can I be of the most service?’ with the belief that if I’m of the most service good things will come back to me—that life is a giant circle of karma, and that the more you give out the more it comes back. And that’s really been true in my life. Even when I’m overworked or overstressed or things aren’t going the way I want, [I remember that] I signed up for this attitude that I was going to live my life in service.”

Jacki Zehner, the first female trader-turned-partner at Goldman Sachs and now the Chief Engagement Officer at Women Moving Millions, echoes Bach’s sentiments. “Give generously,” she says. “I’m spending a lot of my time now, and I continuously challenge myself to think about at any point in time, how generous can I be, not only with my money, but with my time.”

Want to learn more financial habits of highly successful people? Money contributing editor Farnoosh Torabi has a new podcast called So Money that features intimate interviews with leading entrepreneurs, authors and influencers. Visit SoMoneyPodcast.com to listen to the show’s inaugural interviews with Tony Robbins, James Altucher and Jean Chatzky.

MONEY Love and Money

The 3 Most Important Things to Do Before Announcing You Want a Divorce

150109_FF_divorce_1
Jeffrey Hamilton/Getty Images

Ready to call it quits on your marriage? A little early planning can go far in helping you protect your finances

With “new year, new you” resolutions in full swing and the holidays finally over, January is one of the hottest months for divorce filings.

“Last year I saw a 10 to 15% increase in consultations in January, peaking at a more than 40% increase in March,” says Lisa Decker, a certified divorce financial analyst in Kennesaw, Ga. “I refer to January as the beginning of ‘Divorce Season.'”

If you’re among those who’ve decided that 2015 is the year you’ll go from married to single, make sure you’re ready for the financial toll that the divorce process can take by making these key move before announcing you want out.

Gather Key Docs

“Once a divorce has been initiated, financial information can disappear or become difficult to access,” says Carl Palatnik, a divorce financial analyst in Melville, NY.

With that in mind, begin gathering copies of any documents that verify assets, liabilities, income and expenses, including recent bank, brokerage and retirement statements, tax returns, and real estate deeds—and the prenup, if you have one. This step can take three to six months, depending on how accessible the documents are, adds Decker.

Having a paper trail saves stress, time and money. “You won’t be captive to your spouse, hoping he or she will provide things to you,” says Decker. Nor will you have to pay your lawyer to go after this information.

Stash Some Cash

Ideally you want to have a year’s worth of basic living expenses in a personal account prior to filing.

If all your money’s co-mingled and you have no way of opening your own account and making deposits without raising red flags, open a credit card with a low or introductory 0% interest rate, says Decker.

This step is important because divorce proceedings could take six months or more, during which time you may lose access to spousal support. Plus, you’ll need to lay out another $10,000 to $20,000 for an initial retainer if you plan to work with an attorney and/or financial advisor, says Decker. (If you earn significantly less than your partner or have no income a retainer could get a lawyer to petition to have your spouse pay ongoing legal fees.)

Sever Credit Ties

Finally, to prevent what my friend experienced, try to separate shared credit card accounts, says Palatnik.

If your spouse is an authorized user on one of your cards, ask the issuer to remove your spouse’s name. If you’re joint users, freezing the cards may be your best bet.

But wait to do this until right before making the big announcement. Otherwise, jig’s up as soon as your spouse swipes.

Farnoosh Torabi is a contributing editor at Money magazine and author of the book, When She Makes More: 10 Rules for Breadwinning Women.

More by Farnoosh Torabi:

MONEY Love and Money

3 Ways Couples Can Dig Out of Debt After the Holidays

illustration of a couple digging a dollar sign out in the snow
Taylor Callery

Overdid it on spending? Stop pointing fingers at each other and start taking action jointly.

For Michelle Argento and Brendan Diamond, bickering over holiday spending usually kicks off as soon as the Christmas tree goes up and lasts until they pay off their credit card bill in February.

While she’s a self-described “giver,” he doesn’t get her need to buy presents for everyone and his brother. “It’s a culture clash that drives us nuts,” Argento says. And tensions increase when the final tally arrives: Last winter the Chicago couple charged $1,630 over the holidays, more than twice what the average American spends.

Sound familiar? “People put good financial sense on the back burner around the holidays,” says Gail Cunningham of the National Foundation for Credit Counseling. And when couples need to face the music in January and pay down debt, she says, “that ugly finger of blame can come out very easily.” Nurse your holiday hangover as a team with these steps.

Take the blame together. Regardless of who spent what, accept that you’re both responsible. “You might not have swiped the card, but you were likely complicit, either by putting all the gift-giving responsibility on your partner or for not starting a discussion around a holiday budget,” says Brad Klontz, a clinical psychologist in Lihue, Hawaii, and the author of Mind Over Money. What’s passed is past, so move forward and focus on getting out from under.

Design a support system. Keep from getting on each other’s cases by making a payoff plan. Start by moving the debt to a card like Chase Slate, which offers 0% for 15 months with no transfer fee in the first 60 days. Then set up auto-payments to zero out the debt before the no-interest window is up, and use the ReadyForZero app (free) for an occasional nudge to good behavior. If you make a larger-than-normal bank deposit, for example, the app sends a notification suggesting an extra payment.

Cut expenses independently. Rather than try to pare, say, $300 from the family budget, assign each other a goal of $150 from personal expenses. That way you can both reduce spending as you wish—as opposed to how your mate insists.

Along the way, schedule (free) celebrations, like a marathon of your favorite TV show on Netflix when you’ve paid off half. “Having something to look forward to helps you stay on track,” says Kate Northrup, author of Money: A Love Story.

Work it off. Budgeting gives you the blues? The alternative is to raise extra cash. On evenings and weekends last winter, Argento and Diamond picked up jobs running errands via Craigslist and TaskRabbit. Their hustle got them back in the black before spring arrived. Now they plan to make it a tradition—ahead of shopping season. “It’s no longer about me buying gifts for my friends,” says Argento. “It’s about us using our business to pay for gifts together.”

Farnoosh Torabi is a contributing editor at MONEY and the author of the book When She Makes More: 10 Rules for Breadwinning Women. More of her columns and videos for MONEY.com:

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