investing

How to recover from bad financial decisions

"Focus on what you can control. Your net worth does not determine your self-worth. Treat the bad decision as a learning experience and as an opportunity to help others avoid making the same ones," Losey says.

Laura Stover, president of a Bryan, Ohio-based financial and retirement planning firm, says the financial flub can be part of the learning process.

"Much success can come from past failures," she says. "The journey of a thousand miles begins with the first step -- education." To her, that means seeking professional guidance and empowerment through knowledge.

Some people still will need the ongoing support, advice and coaching that a fee-based or fee-only financial adviser can provide in helping avoid future mistakes, Losey says.

Ask the right questions

"When it comes to making mistakes or taking risks, it's what we don't know, or what questions we don't ask, that could be costing us severely," says Brad Zucker, president of Las Vegas-based Safe Money Advisors Inc.

"Historically, we may have purchased investment and financial products first and then discovered how they affected our income and tax planning later," Zucker says. "The correct course of action is to discover your true needs and desires, and build the proper plan first, just like you would if you were building a house."

That means learning the right questions to ask, digging deep, and getting all the critical facts before making any purchase or taking other action.

Brobeck says the key to minimizing the chances of making bad money decisions is to think hard about how you spend, borrow and save, and to recognize that if you're not saving at least 10 percent of your paycheck, you're placing yourself at risk.

Careful consideration is also protection against product purchase mistakes. Brobeck advises deciding specifically what type of product makes the most sense for the situation, such as a savings account rather than a stock mutual fund for your rainy-day fund.

Tresidder reminds that it's most important to focus on the finances when making money decisions as opposed to focusing on lifestyle or relationships. Yet, he says, you still should acknowledge that decisions affect many areas of our lives.

Just don't go too far in avoiding mistakes. "After making bad financial decisions, I've seen people become overly cautious and avoid risk," Losey says. In the other extreme, he has seen people take excessive risk to make up for mistakes -- also not a good idea.

"There are many potential risks," Stover says. "One needs to find balance and define the goal of their money to achieve the proper safe-to-risk ratio."

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