There are moments in life when we think, “I have made a terrible mistake” or even, “Oh God, things could not get much worse.”
Queue the doomsday music!
That sinking feeling is not a pleasant one, and some people are so afraid of that emotion – of doing something wrong or taking a course of action that they may regret – that they avoid risk altogether.
Imagine if Warren Buffett or Richard Branson had taken that approach?
Avoiding risks so you don’t make any mistakes is no way to go through life.
We all need to learn to put errors into perspective and to realise not all mistakes are terrible.
In fact, some of them are really important for our continued growth — both as investors and human beings.
The problem is that the really good mistakes — I know how odd that sounds — get lumped in with the terrible mistakes that people should avoid making.
So how do you tell if your mistake is one of the really bad ones?
Here are a few foolproof signs.
1. They don’t teach you anything
The reason meaningful mistakes are meaningful is because we learn off them.
Just say you get yourself into credit card debt, and, after cursing yourself (and reading all our previous posts on why credit card debt is to be absolutely avoided), your partner or family pays it off for you.
What have you learned from this mistake?
Not a whole lot, most likely, because you didn’t feel any real consequence for your actions.
2. They’re compulsive
Sometimes we claim to have learned from our mistakes, and then, despite swearing to change our ways, we end up repeating them.
Over and over again.
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That’s when a mistake stops being a learning experience and starts becoming a compulsive behaviour.
Many would-be investors fall into these compulsive traps because they have never been taught how to have a healthy relationship with money.
They get a little bit of it and go wild, spending big on expensive cars or gambling it down the drain.
Depending on how severe the compulsion is, this can be a very costly compulsion that can lead to full-blown gambling addictions or serious debts.
3. They damage your life
Here is a good tip: be wary of the person who downplays their mistakes too much, who seems a little bit too relaxed about them.
Often these people can be hiding the damage that their mistake is causing to their life out of shame or denial.
If your mistakes are costing you friends, relationships or work opportunities on a regular basis then these are not meaningful mistakes.
While it’s true that sometimes people have to lose everything to find out who they are, this is not something anyone should be aiming for.
Regular mistakes are instructive and helpful, but they shouldn’t damage your whole life.
4. They prevent you from trying
I’m going to get a bit psychological now and say that some people use mistakes as a way of justifying never trying again.
They store these little errors in the back of their mind and they draw on them when they face a challenge or a hurdle that places them outside their comfort zone.
On the flip side of the coin, meaningful mistakes:
- Point you in the right direction
- Educate you on a new way of doing things
- Answer questions you may have had about a certain path
- Provide psychological growth
- Make you a better investor and more successful
Knowing the difference between those destructive, repetitive mistakes and the ones that change the course of your investment journey for the better is very important.
So the next time you make a mistake, it might be worth asking – is this a costly mistake or a meaningful one?
Only you will know the answer.