If you read their books or listen to them on TV, you might be inclined to think that financial pros never make a financial blunder, that they've never bought a bum stock, run up credit card debt or made a bad real estate deal.
But the fact is even the best money minds haven't always made all the right moves. We asked six experts to fess up about their biggest financial blunders, and what we all can learn from them.
Financial claim to fame: Best-selling author of "The Difference: How Anyone Can Prosper in Even the Toughest Times," financial editor of NBC's "Today" show and host of a daily show on Oprah Radio.
Big money mistake: Years ago, Chatzky racked up $6,000 in credit card charges at a brutal 18 percent APR. At the time, the sum represented about six months' salary, she says. Despite the debt, she was diligently stashing money into her savings account, which earned a paltry 3 percent rate. Even though she had more than enough in her savings to cover the full amount of the debt, there was a psychological component to her poor financial decision.
"I felt safer with the money in the bank," she says.
How she changed: Chatzky finally did the math and paid off her debt with savings.
"I basically wiped out the emergency cushion to pay off the credit card debt," she says. "But I knew if I had an emergency and needed to buy a plane ticket for a flight home to see my parents, for example, that I would still be able to put it on my credit card."
Lesson learned: Don't let savings goals interfere with paying off credit card debt. With credit card companies slashing credit lines, she says she might be a bit more conservative today than she was back then, perhaps leaving enough in savings to cover a month's rent. But the general advice still holds.
More Stories from Bankrate.com:
- How to Plan for Retirement
- Asset Allocation Explainer
- How to Tell if Your Retirement Plans are on Track
"It really doesn't make sense to keep money in savings while you're paying money on high-rate credit card debt," she says.
Financial claim to fame: Author of "I Will Teach You to Be Rich" and blogger of a site by the same name.
Big money mistake: When Sethi was a high school student, he earned plenty of college scholarships, including a $2,000 scholarship that arrived as a check made out in his name, instead of the school's. Sethi immediately came up with a plan.
"I took the money and invested in the stock market," he says. He invested in any company he thought might get hot, but his picks were anything but.
"I lost half the money almost immediately," he says.
How he changed: The quick, dramatic loss made him change his entire approach to his finances. "I realized that I had no plan and no context for what I was doing," he says. "If I had spent even two hours reading one personal finance book, I would have learned a lot."
The loss prompted him to spend a year of learning about money from books, magazines and TV shows. He also began studying the way that psychology affects how we spend, save and invest. Instead of gambling his money on individual stocks, he focused on the many less risky ways of improving his bottom line, from automating his savings to negotiating his fees.
Lesson learned: Understand risk and reward. There are a lot of ways to end up with more money in your bank account without gambling your cash on individual stocks.
Financial claim to fame: Host of the "Dave Ramsey Show" and author of "The Total Money Makeover."
Big money mistake: Ramsey jokes that when it comes to his personal finances, he's "done stupid with zeros on the end." When he was in his 20s, he started buying and flipping real estate.
"I was making crazy money, and by the time I was 26, I had acquired more than a million dollars worth of property," he says. "The problem was that most of it was in the form of a short-term note. One of the local banks that held one of my notes was bought out and decided to call in my note (requiring full payment). Other banks started catching on, and over the course of two-and-a-half years, (my wife and I) lost everything we had. We were sued, foreclosed upon and, ultimately, went bankrupt."