Did you ever make a really bad financial decision that affected your life in a negative way?
Sadly, this happens to a lot of good folks out there who made a bad money decision for one reason or another…and the aftermath can be pretty ugly.
Here are some stories about really bad financial decisions from people on AskReddit.
“I’ve had a client where I noticed this guy’s credit debt always remained hovering $13k to $15k.
I asked him why he only makes minimum payments on his credit card instead of paying it off, because I see he has roughly $11k sitting in a bank account. Interest per month on that credit card bill is roughly $250, and according to his repayment patterns it will take him roughly 19 years to pay it all off.
His answer to me is the bank charges him $7.99 per month for his bank account if his balance dips below $10k… So to save the $7.99 per month this guy is paying $250 in interest on his credit card.”
2. Do your research.
“What I’ve seen, countless times, is someone who started a business with ZERO research, no understanding of what running a business involves. (Here’s a hint: practically every business involves paperwork and deadlines.).
The business models come in waves… for awhile it was Barbecue shacks, then it was cupcakes, then house flippers, then food trucks. I think they see it being done on TV shows that make it look fun. It isn’t fun when they come to me with debt, tax levies and lawsuits.
IRS and state labor department and health department on their backs, and suppliers taking them to court for unpaid bills. Some of them cashed out their retirement account to buy a business; others put their house up as collateral for an SBA loan. it’s a nightmare.
If they had come to an accountant first, we might be able to help them (or even better, dissuade then). I usually see them after 18-24 months of screwups and by then it’s usually too late to rescue them.”
3. Uh oh.
“An older gentleman came in worrying about a ton of overdraft fees on his 18 year old sons account. The fees added up to a hefty amount and he was worried that the charges were fraudulent.
Upon looking at the account history, every recent purchase was to OnlyFans. The fees were happily waived and no detail was given as to what OnlyFans is, as the kids old man clearly didn’t know.
I think about that kid often. I wonder how he’s doing.”
4. Car problems.
“Claims Adjuster here, and I see it happen all too often – trading in vehicles with negative equity.
Why? Why can’t you be financially responsible and pay off your vehicle instead of rolling the leftover loan onto that new shiny machine you just can’t resist, and rinse/repeat a couple of years later. Your loan is just getting bigger and bigger.
I had one client (recent, otherwise I had more than that) – who totaled his vehicle. He blew pass a stop sign and collided with another vehicle. Guess what friend, out of that $70,000 you still owe to the bank because you’ve traded in 4,5 vehicles over the years – we are only covering you for what your current vehicle is worth today, around $25,000 or whatever it was – depreciation applies unless you have the proper endorsement in place. That means you will be paying the bank for the leftover loans of some vehicles, none of which you own.
Own one vehicle, one loan – if you ever totaled your vehicle, insurance will provide you enough to cover the loan. If it doesn’t quite cover it because of high interest, it sure as hell isn’t a $45k loan left.”
“I had my former boss decide it was a great idea to buy land in Texas, our company was based in PA, in the middle of nowhere because he talked to another business owner who told him it was going to take off.
Myself and my co-worker advised against it but things were slow and he didn’t listen. At first it was going to be a place of operations but then he decided we would just rent out rooms to the people who worked down there in the oil industry. Dumped loads of money, time, and blood, sweat, and tears into it for it to just go bust not even a year later.”
6. Play nice.
“Worked in a family law firm.
Way too common of an occurrence is a client ignoring the lawyers advice for a balanced separation agreement and instead ambushing their spouse with an agreement that says they are getting everything.
Now instead of a relatively amicable breakup and maybe some mediation to sort out some sticking points it’s tens of thousands if not hundreds of thousands of dollars in litigation costs.
If you are going through a divorce play nice. The only ones that win in a bad divorce are the lawyers.”
“I audit larger companies so I don’t work with individuals. However, my friend’s dad mentioned that he pays 3.5% annually in advisor fees to his financial advisor, and that’s not even including the fees that the mutual funds he’s invested in are charging him.
So annually, he’s paying out in the ballpark of 4.5% of his portfolio. That’s right, every freaking year. I tried to explain to him that these fees are potentially costing him millions more than a reasonably priced advisor who recommends low-cost mutual funds would charge him throughout a lifetime. He just kind of shrugged and told me that he felt comfortable with the guy.”
8. Time to mitigate the damage.
“A 94 year old woman withdrew a $540,000 annuity that she THOUGHT was a TAX FREE life insurance policy. She owed the IRS over $90,000 and the State of Michigan $14,000.
When I explained it was an annuity and not a life insurance policy she panicked. What was done was done and we just had to mitigate the damage.”
9. That’s not good.
“The parents of a young woman bought her a condo. They paid cash so she wouldn’t have a mortgage. She sold it so she’d have party money.
Not only did she no longer have a place to live, she owed taxes on the gain. But she’d already spent the proceeds so didn’t have money to pay the taxes.
Oh, and she didn’t have a job because it would interfere with her partying schedule.”
10. Family drama.
“Grandma pulls 50k to help grandson pay off college debt. He blows all the money, steals another 10k from her.
She won’t file police report because “they are family”, daughter steps in, grandma is furious with daughter for telling police what happened. Grandma takes daughter off as beneficiary, replaces her with grandson.”
11. “Still haunts me…”
“I’ve seen plenty that made me cringe, but the worst one wasn’t because there was a lot of money involved.
So I’m working at this bank branch years ago, I was tired of being stuck in the drive thru so I made a lateral move to be a floating teller among other things. But occasionally I’d have to fill in at the old branch, which sucked because the manager there hated me.
Anyway, during my time there I became acquainted with an older gentleman, he was a world War II vet and was always wearing his navy vet cap. I talked to him every time I saw him and he was always really nice, had a great sense of humor, and even in old age he was still mentally sharp.
So this one day I’m filling in at the branch covering for the new accounts person. This guy walks in and I immediately knew something was off. I greeted him and asked how I could help him, and what he said broke my heart. He told me that he wanted his daughter off of his account, that she had been taking advantage of him and his money was being wasted.
I did my due diligence and brought up some history and asked him about specific charges, I remember there were a bunch for a couple of salons, so clearly those weren’t his transactions. The last few times I had seen him, there was a younger woman with him that I hadn’t seen before, and he was pulling out cash and giving it to her.
It dawned on me that each time I had seen him, he was there with someone else that did all his stuff for him, and that this time he had come in alone, which never happened.
So while looking at his account I noticed that his daughter is an owner on the account, meaning he can’t just remove her, she has to consent to it. When I asked him if he thought she would agree to that, he said no and started crying.
Normally we weren’t supposed to keep pushing a situation like this, but I really wanted to help him. I told him I couldn’t get her off the account, but I could open him a new one where he would be the only one on it, and then we could transfer the money over.
I could tell he was relieved when I said that to him, so after a few minutes I took care of everything for him. I specifically remember that after I finished, I gave him my business card, and told him that if he had any issues he could call me. A few minutes later he left happy, and I briefed the manager on what had happened.
A day or two later I’m working at another location when I get a call on my cell from my boss, she asked me if I had helped an older gentleman with his account when I was at my old branch. It turns out that after I had helped him, his “daughter” had tried to use the account to pay for more of the sh*t she was wasting his money on, and the card was declined.
She had gone into the branch and raised hell, screaming at the employees there and demanding they bring her the person responsible. The business card that I had given the man didn’t have my direct number on it, the number went to my boss. She had screamed at my boss and demanded that I be fired for what I had done.
My boss as well as the branch manager that hated my guts had both defended me and neither of them would give in to her demands. But I found out later on the next time I saw my boss, she had forced the old man to either move all the money back to the old account or to make her an owner on the new one. When anyone asked her about the situation, she just claimed that he had dementia and didn’t know what he was doing.
I honestly hope she was telling the truth, but I never saw that man again, and had moved into another role and then to a different company not long after. I went to anyone that would listen about what happened, but no one could do anything because elder abuse is so difficult to prove.
The whole thing still haunts me, I saw an old man asking me for help and did the best I could for him. In the end he either made the decision to keep her around or was forced to, and I worry I just made things worse for him.”
“My brother had a long standing client of around 10 years get married after only knowing a woman for 12 months. He was almost 55, she was in her early 30s.
55 y.o. man wanted to add her as a signatory on his retirement account. Basically giving her 100% power over the account. A quick soft credit check showed she was not good with money. My brother offered up many different options as to how to give her access to the money but with limitations. He even straight up refused to do it, saying that he needed to think about it for a few days.
The guy came back in the next morning saying he would file a complaint against him if he didn’t set it up. My brother said that he would need to get the documents notarized, and sign a waiver that this is against the institutions advice.
The guy comes back in later that day and finalizes the deal.
You can guess what happened within about 6 months.
The account had around 600k in it to begin with, and she had managed to run off with about 65k before the account was frozen by my brother for review of withdrawals.
The man was p*ssed and tried to lawyer up twice. Neither time did it even go to court.
His advice is that if you are married and have investment accounts, just keep them separate unless you REALLY have a reason to give them access. You can totally notify the agency about your marriage, and sometimes in certain situations the spouse can get limited info confirmed for medical bills and such.”
“People who make over $250k (sometimes WELL over), no withholding, not paying estimated taxes throughout the year, can’t afford the tax bill with the return EVERY YEAR, then b*tching because they can’t afford the installment payments on the taxes they owe from two years ago.
Motherfu*ker, sell your gaudy McMansion, take your teenage daughter’s credit card away, let your drunk driving son stay in jail and get a public defender, and tell your wife to stop spending all day at the tennis courts sipping mimosas.
Get your sh*t together and pay taxes throughout the year like the rest of us. You aren’t being persecuted by the IRS, you’re just an idiot.”
“I work for a bank.
One of our branches had a customer who was basically homeless. Then, he wins the lottery! Over the next few months, the staff watched him come in to withdraw thousands of dollars every day to spend on extravagances.
Everyone tried to convince him to sit with a financial advisor to help him make the most of his money. Less than a year later, he’s in slightly better shape than when he started; he’s at least able to live in the car he bought.”
15. You gotta pay your taxes.
“Had a client who was extremely wealthy about eight years ago tell us he was no longer going to use our services. Last year we get an extremely angry phone call from his wife asking us why we haven’t been filing their taxes.
We showed her the paperwork where her husband said he was no longer going to use our services. And then sh*t hit the fan. This dude apparently just decided he wasn’t going to pay taxes anymore and didn’t file a return for eight years and had been lying to his wife.
They were rich and owed almost 1.4 million dollars in taxes not including interest and penalties. And oh yeah they got absolutely fried by the IRS. If you are in a relationship with someone you need to be involved in financial decisions.
Never let one party handle all of the money and make all of the decisions. That is how bad things happen in both business and in relationships.”
“Saw a guy invest about 600k in a start-up. He confirmed in the 1.5 pages agreement that he was fully informed about everything going on.
Please if you invest in that size, ask a lawyer to at least review the agreement.”
17. Didn’t take your advice.
“I had one client that had the money to pay for his kids college without taking out any loans. Instead, he decided to take out a loan on his house to pay for college in order to claim a deduction on his tax return.
When I explained to him that the benefits he’ll get from claiming the interest deduction on his return would not outweigh the amount he spends on interest he was certain I was wrong, even after I showed him the total amount of interest he’d pay and compared that to the expected tax benefit he’d receive for it.”
18. Big winner.
“I had 1 client that won the lottery. It was a $10,000/month annuity FOR LIFE, give or take. Pretty sweet deal, right?
Well, he never went and claimed the prize because he didn’t want to pay the taxes. I told him f*ck the taxes, he can retire and never work another day in his life while still earning $120k/year. Nope, he’d have to pay the taxes so he didn’t go claim the prize. I think he even threw the ticket out.
Dude makes like $60k/year and he turned down the lotto winnings. Like, if you’re not going to claim the winnings because you’re THAT against paying any sort of taxes why bother playing the lottery at all?”
19. A bad move.
“I had a client in her 70s put her whole savings in Tilray stock.
At the time it was trading above 150 per share. I told her it was a terrible idea to put all of her savings in one investment but she told me I was wrong. She argued with me for a good 15 minutes until I relented and said okay, it’s your money. So she put 300k in.
Couple weeks later it starts dropping, I call her and get no answer. It’s sitting at 6 dollars a share now, her account is down to about 12k. Last time I spoke with her I took no pleasure in telling her she’s no longer my client.”
20. He was warned…
“A client who tried to time the market with the coronavirus drop back in March.
He was 55 and had a 7 figure amount in his 401(k) and was 90:10 equity:bonds. His plan was to time the market by shifting his entire allocation to a money market/ bonds, wait for the market to drop more, and then shift back into equity.
This was at the end of March. I tried to warn him. He didn’t answer my subsequent calls.”
21. Credit card hell.
“I’ve had SO MANY people with credit card debt who talk about investing/ saving for a big purchase, but they have 5 figures of 20%+ credit card debt. “I’d rather focus on investments for this call” well you’re gonna get 10% in the market if its a decent year and you’re paying 26% in interest so you’re losing money.
You have a 50% debt to income ratio, you can’t get a mortgage. Yes, I know the kids really wanted a pool this year, but you have $50,000 of CC debt to pay down before it makes sense for you to start saving for their college. 90% of the time they seem irritated and ghost me because I don’t have some magic solution to make their credit card debt disappear.”
22. No understanding.
“I had a client who wanted to know how to give away her 401k because her and her husband’s pensions were already enough for their lifestyle and she didn’t want to be in a higher tax bracket.
She was in her 60s, worth millions, and did not understand how marginal tax brackets work. Or even basic math. She wasn’t looking to get a deduction through gifting stock.
She (clearly) was nowhere near that level of understanding taxes. She just spent her entire life working hard and being extremely frugal, which led to her being a millionaire who lacked a basic understanding of money. Not really a bad decision but I found it really interesting.”
23. A scam.
“Former manager at a credit union.
One seemingly smart lady in her 70s got one of those lottery scam letters saying she won, but needed to send them money to process her winnings. They kept getting her to send more and more money. We were telling her it was a scam from day 1, but we couldn’t stop her.
She burned through her IRA which had about 200k. Took out a loan against her paid off house for another 200k. Sold her jewelry. Probably paid out 500k total before finally realizing.
We truly did everything we could. Got her family involved. Several of us would confront her every time she came in and would plead with her to stop.
It was sad but at some point you have to cut your losses and realize it’s a scam.”
24. Listen to your accountants, people.
“Best friend is a CPA, and when he had his own practice, he had some pretty big-name clients (Senators, musicians, pro athletes, etc.)
One of the biggest mistakes people made were thinking they were smarter than an accountant. His biggest challenge were the people who heard about the “sovereign citizen” nonsense. To no one’s surprise, a random guy on YouTube doesn’t know more than an actual CPA with 40+ years experience.
At least a few of these new-found “sovereign citizens” ended up doing time for tax evasion.”
25. Lost everything.
“Watched a client walk out of my office after I explained the risk in liquidating his 401K to start his own business.
He started it with no management experience or business model, real “fly by the seat of his pants” kinda guy. Wanted to start a career flipping houses in a college town, turn them into upscale rentals. Did it in a bad neighborhood and lost EVERYTHING.”
26. Gold coins.
“I had a client Buy numismatic gold coins with an entire retirement account. She bought 266k worth of coins at almost double the price of bullion.
I got the gold salesman on the phone and asked him to justify the reasoning and I he said it was because the dollar was paper money and worth nothing and that gold was going to go to 10000 a coin. I asked him what he exchanged this gold for and he said “well she paid me dollars”.
Then I said “why would you accept a worthless currency for your rapidly appreciating gold currency?” He cursed at me and hung up and said I didn’t know what I was talking about.
I still haven’t met a gold salesman that can answer this. Their whole pitch is that the dollar isn’t worth anything but they happily take them in exchange for gold coins. The whole thing is sh*t. Poor lady. She can’t sell them now even with gold bullion as high as it is for anything close to what she bought them for.”
27. A shame.
“Former bank teller here.
Had an older gentleman who would typically only come in once a month and pull out a few hundred dollars for living expenses, nice old guy btw. One month he comes in twice in two weeks and pulls out $5k which was bizarre for him. When he came in the third week in a row I planned on asking him if he was remodeling his home or something but I didn’t have to.
He came in to get another $5k out and told me he had won the lottery but had to pay the taxes on his winnings, some of you already know what’s going on. He had received a letter that he won around $3mil from the Kentucky state lotto, we were in Florida, but before he could claim it he had to pay the taxes on it. His account was setup that you could only withdraw $5k a week hence him coming every week.
I tried to explain to him that he was being scammed and to stop sending them money. He was no longer a nice old man when I said that. He accused me of being jealous of his winnings and that “he’d show me” when he deposited his millions in a different bank, then he left. I talked to my manager who then talked to the cops and they said there wasn’t much they could do since it was out of state.
His family even contacted us and begged us not to give him anymore of his money when they found out what was going on, which we cannot legally do. The only thing we could do was close his account because we didn’t want to have any responsibility in his downfall. He came in the following week, manager explained what was going to happen, and he left with a cashier’s check after quite a few more expletives.
Found out a few months after that the scammers got another $50k out of him before his family was able to get power of attorney and control over his finances. Not sure what happened to him after that but it’s a d*mn shame.”
Now we’d like to hear your stories.
What’s the worst financial decision that you’ve seen someone make?
Talk to us in the comments!