Photo (cc) by croarty
During his lifetime, author F. Scott Fitzgerald reportedly made $8,397 in royalties from “The Great Gatsby.” (That would be about $139,600 now, converting from 1940, the year Fitzgerald died.)
Gatsby probably spent more than that in the book’s first chapter.
Those of us who’ve read the book (or have seen the latest big-screen version) know that Gatsby’s excesses and reckless shortsightedness became his undoing. Still, we could learn a thing or two from the old sport.
Here are mistakes he made that — translated to the personal finance realm — can lead to financial ruin:
1. Don’t diversify
Gatsby did everything to capture the heart of Daisy, and he put all his stock in her (you can tell where I’m going with this). Don’t be single-minded when it comes to investments. You need a diverse portfolio. Get some tips from “4 Ways to Invest Without Much Money” and, for inspiration, check out Money Talks News founder Stacy Johnson’s portfolio.
2. Have no end game
Gatsby wanted Daisy’s heart, but didn’t have a plan for what came after. Translation: Making gobs of money isn’t enough. You need a plan for managing your money throughout your life and for building your retirement funds. Set up automatic deposits from your paycheck into a 401(k) or other retirement account. And if you want to get the most out of your 401(k), don’t let your employer do all the investing for you.
And remember: The first step to saving money and building wealth is to set realistic, obtainable goals that are rooted in your core values.
3. Try to buy love
Sure, money talks, but it won’t get you everything. Gatsby didn’t work to foster relationships with people. Instead, he tried to buy friends, love and respect. All that gets you in the end is a funeral that no one attends.
4. Confuse wealth with success
Gatsby had a mansion, custom suits and fancy cars in the driveway, and threw extraordinarily lavish parties every weekend. But he wasn’t a successful industrialist or businessman who accumulated a large fortune by working hard and investing wisely. He was a crook, and he got no respect in the end.
5. Ruin your future for someone else’s gain
Daisy ran down Myrtle with Gatsby’s car, and Gatsby tried to cover it up. Things didn’t end well for him. The moral here: Be careful what you’re willing to do for someone else — like lend money to a friend, or co-sign a loan. We all want to help the people we care about, but we shouldn’t allow ourselves to become saddled with their mistakes.
6. Buy property for location alone
Gatsby bought his pricey lakefront property because it was directly across the water from Daisy’s home. Buying based on location alone is one of the stupid moves that new homebuyers can make. Others include not cleaning up your credit and getting pre-approved for financing before your search begins and not getting the home of your choice inspected. The worst mistake is buying more home than you can afford.