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Mr. Money Mustache’s Big Mistake

The problem with Mr. Money Mustache”, some people say, “is that he has led this blessed and privileged life where nothing ever went wrong for him! He never makes any mistakes, and that’s just not the case for most people.”

I can see why you might think that, since I tend to write to you about only positive things. It’s a habit I picked up about twenty years ago after reading The Magic of Thinking Big, and I’ll never let it go. People who know me will notice that I’ll never say “I’m coming down with an awful cold”. Instead it will be something like “I’m just recovering from a bit of a cold, it should be on its way out by tomorrow morning”. You simply get no benefit from telling others about the problems in your life. At the borderline between useful and non-useful things to talk about, you might mention a life problem you’re working on solving, while talking about what you’ve accomplished so far in your plan to fix it.

But since you asked, I think it would be educational to share the story of The Biggest Fucking Mistake I’ve Ever Made In My Entire Life. Just to show how even a BFM doesn’t have to ruin your life, and indeed you will almost certainly come out happier in the end after you get through it. So pull a log up to the campfire and start roasting a marshmallow – because this is a scary one.

It was the year 2004. I was happily working as a software engineer, and my new wife and I were living a great life. We had no kids, great friends, great jobs and we were busily ‘stashing and just a couple of years from financial independence.

“This is fantastic”, I thought, “What will I do next, after finishing my regular working career?”

One day, while passing the time between flights in an airport bookstore, I picked up a discounted copy of “Rich Dad, Poor Dad”, by Robert Kiyosaki. Despite the more recent widespread criticisms of that book and its author, at the time the book screamed to me, “You should start your own business and lead a big exciting businessman life!!”

To me, starting my own business meant turning my most cherished activity into a post-retirement job, which of course meant building houses. I already knew a few custom house builders at the time, and they were all doing great business here in Boulder County buying empty lots in good locations, and building luxurious but not overly large houses on them. When I reviewed their numbers and toured their houses, the work and the profits looked great, so I decided to jump in as well.

I happened to have a very good friend at the time, let’s call him Dean. Dean and I had met five years earlier, when we randomly ended up as cube neighbors in a high-tech company in Boulder.  We had both come to Colorado at the same time in the fall of 1999. He was just off the plane from San Francisco and I had arrived from Canada. We had a good run together in that little company, working on innovative projects together and mocking the more Dilbertesque aspects of our company’s senior management. We bought houses at the same time and helped each other with the renovations and hosted alternating parties almost every weekend.

Even after I moved on from the Dilbert company and started a more serious engineering job in the same city, we remained close friends. We hiked, biked, and snowboarded together. And we both had entrepreneurial dreams, inventing dozens of hypothetical plans together and working out sketches of the business ideas.

So it was natural that when I decided it was time to start a house building company, that I’d invite my best Colorado friend to be a partner. I thought he would do great, because he had a beat-the-system attitude that I valued. He was the one who taught me that you can argue with credit card companies to have charges removed, that you can buy whatever you want at the hardware store and just return whatever doesn’t work out, and that you could call the town council and ask to have a rule changed instead of just obeying it.

Of course, looking back I can also see the obvious warning signs that I was blind to at the time: he was also the one that taught me you can slack off at work, and still get paid the same amount. He used to award himself extra vacation days as “comp time”, even while his regular working hours were 9:30am – 4:30pm with plenty of time for personal phone calls and web surfing in between. He even told me of some youthful moneymaking adventures at earlier jobs that seemed to surpass anything I had attempted in my own non-innocent childhood.

“Wow, that sounds kind of illegal”, I thought at the time, but I figured it was many years in the past and it was just a typical young person’s testing of society’s boundaries. And he justified it all with such intellectual and socially-responsible explanations. He did volunteer work and helped out friends in need. Wiser readers will at this point recognize the signs of a shifty and sociopathic character, which I now see in retrospect.

But at the time, I was just star-struck, as we took two-hour lunches to eat Jamaican food on sunny Boulder restaurant patios and play basketball with our coworkers in the court behind the building, in the time I’d normally assume we should be writing software.

So when I presented my new House Building Company idea to this adventurous guy, he immediately latched onto the idea and the planning took off. He persuaded the owner of perhaps the hottest New Urban Design neighborhood in the country to sell us two plots of land despite being unproven new builders. I negotiated with one of the best and most well-known architects in Colorado to take us on as a customer at a drastically reduced rate. The owner of the firm had a soft spot for the young fresh-faced businessman with the same goals as he had – to build housing that was Human and Earth-friendly instead of ostentatious. We teamed up with a sagely old builder as a mentor to watch over us as we built the first house, to prevent newbie mistakes. We were on a roll as we signed on subcontractors to help out, selling the dream to everyone and pre-selling the house before we had even finished building it.

But in the background, little warning signs were continuing to pop up. Our financial agreement was that I’d bankroll the whole downpayment for the project, while my friend would only put in the $20,000 or so he happened to have sitting around. We worked on arrangements for compensating me for my increased risk in the project, until he came up with this “brilliant” idea:

“Well what about this, if the company loses money, we’ll share the losses equally, so you are NOT at any more risk than me. I’ve got my 401k as a backup plan, and I’ll cash it out in the worst case if we get into hot water”.

“Good idea”, I thought, “Now we can just be equal partners! I sure feel good not being the only one at risk”.

Ahh, naive little Younger Money Mustache. Trusting to a fault. I never thought my best friend would go back on his word – we’d done everything together for the last half decade!

So the project went on. I put in a heap of my own cash and also took out a $90,000 line of credit on my house. I poured every paycheck into that company for a year, to minimize the outstanding balance on the high-interest construction loan. “What could possibly be safer than investing in your very own company at a guaranteed return?”, I thought.

One day, an email came from my friend, entitled simply “Need 17k”.

It turned out he wanted to move out of the place he was renting and buy a house instead.  I expressed some concern about this, since it would take his investment down to zero even while mine had now reached about $200,000. He pooh-poohed my concern, reminding me that I already owned a house, and of course it was only fair that he should be allowed to have one too.

We worked like DOGS on that construction company. Well, I did anyway. I snuck time out of my office job to answer emails and work on marketing materials. I worked every night until midnight on budgets and material selection and design ideas. I negotiated a four-day workweek from my employer and started spending every Friday building alongside with the framing crew, to learn, prevent problems, and speed the house along in any way I could. I worked on the site with a carpenter friend on weekends to get even more done.

My business partner seemed devoted at times as well. He made some good contributions throughout the project, and he was a smart and organized guy. But I couldn’t help notice that he was still taking weekends off, still volunteering in local organizations, and he happened to take two trips to the Caribbean during the first year of the company. While I worked on our company’s house, he worked on renovating his own new house, drawing a handy monthly salary from our company even while I made contributions to it every month.

But our success masked these problems. We sold our first project before it was even complete, for our full asking price. My own labor had cut our costs considerably, leading to a healthy profit margin. But then a long argument started about dividing the profits. I had kept track of my labor hours, and I suggested that I be paid for them at a low rate, since I had used them to reduce the cost of outside contractors. He disliked this idea, thinking that the profits should simply be split 50/50. “It’s not an hours competition”, he said. “We each contributed in our own way. What you brought to the company was your ability to work like a workhorse, and what I brought is strategic ability. If I make a phone call to the city that saves us $2,000 in re-zoning fees, and you do fifty hours of work that saves us $2000 in contracting fees, should you get paid more than me?”.

Of course, my own phone calls, such as the one that I made to the architect that saved us $30,000 in architecture fees, and other similar efforts negotiating with subcontractors and materials suppliers, were somehow not considered equal to his own strategic brilliance.

By this point, I realized that our partnership was not meant to last, but our company still owned one more plot of land and we were already building the second house on it. The housing market was strong, and I figured we could finish it, sell it and I’d be out of this little situation. So I gritted my teeth and tried to smile.

But it happened to be the year 2006, and the US housing market was just about to take a plunge into the shitter.

The second house went up beautifully, and problem-free. My now-semi-friend did a competent job at repeating his role in organizing the contractors. And being fully retired from my day job by this point, I was able to spend every day at the site watching over things and building. Potential buyers toured the house every day and we came close to selling it several times before it was done.

Then the recession hit, and the house began a long period of sitting on the market. It was shiny and new and luxurious, with its airy, empty superinsulated rooms and cool thermal mass effortlessly battling the hot dry summer of 2007. Then its huge South-facing windows and bright halogen lighting and warm bamboo floors challenged the cold winter of 2007. So much work and care went into that place, and yet there was absolutely nobody interested in buying it. And every month we were going $3000 further into the hole.

We got desperate and rented the house out to a group of tenants who eagerly promised to buy the house very soon, as soon as their current financial problems were resolved.

Chase Bank backed out of their promise of an open-ended construction loan and insisted that we refinance into a mortgage. This would be no problem, they explained, as long as I could pay down the principal by another $67,000 so it would be a conforming loan of $417,000. At a 7.25% interest rate.

My friend was of course grateful that I was able to come up with the $67 grand, since he was in debt from having to live on the low pay our company had given him for the past two years. I noticed, however, that he did not offer to move out of the house he had renovated for himself, or even to sell the top-of-the-line stainless steel LG appliances he had purchased for himself with money drawn from the company. His wife still worked, of course, and her former condo which was now serving as a rental house for them, was also not up on the auction block. “Her finances are separate from mine”, he explained. My wife surely wished she had thought of that trick.

Tenants came and went from this house. We kept trying desperately to sell it, and dropping the price. For every showing, we had to visit the house and clean up after the tenants in hopes of having a presentable house. Every month, we split the difference between the $3,000 mortgage payment, and the $2,100 rent, in order to keep the house out of foreclosure. He reminded me often of how ethical he was to keep making these payments, despite his own financial hardships.

This went on for a little over two years, but it felt like twenty. But somehow I adapted to the “new normal” and managed to lead a happy life, focusing on raising my young son and taking on carpentry projects to help rebuild my savings. We cut our family’s spending drastically and Mrs. Money Mustache increased her work schedule to increase income as a precaution as well.

Finally, in late 2009, we caught a lucky break. A wealthy US businessman who was returning from a long overseas corporate position fell in love with our house. He toured it extensively, spent hours running his eagle eyes over any potential flaws, and eventually made us a lowball offer. He was a shrewd negotiator, but given the state of the housing market at the time, his offer of $450,000 was not that far below market value (which was  in turn about $200,000 below our original budgeted selling price). But after the hell we’d been through, I was ready to make a counter-offer and get the deal done.

But guess what Dean said?

“Ohmygod, guys, my accountant just told me that because I’ve taken so much out of this company, I have a negative tax basis in it. If we sell this property, I will owe over THIRTY GRAND in income taxes, and I just can’t handle that. I’ve already got 50k in credit card debt!! Since I’m a co-owner of this property, I’m not going to sign off on the sale. I think we should hold onto it for a few more years, and sell it for $650k instead. Then I will get enough share of the profit to pay my income tax bill”.

“Umm.. Buddy”, I said, “Do you realize my wife and I have over two hundred thousand lost already in this company, and you have about negative fifty, and that you have proven yourself less than faithful in coming through for the company when it is in financial need?”. “I would firmly suggest that you fuck off about your petty thirty grand, sell your LG appliances or your rental house, and let me end the personal hell that we’ve all been battling for the last several years.”.

“Well shit”, he said, “That’s just like you, MMM, always thinking everything has to be your way. I wish you could see things from something other than your own perspective. I wish you could hear yourself right now!”.

I actually recorded the three-hour conversation where he said this – our final business meeting for that company. Someday I’ll listen to it again, but for now the very idea still upsets my bowels.

To make the rest of this long story shorter, I hired a lawyer friend to apply the necessary pressure to have him sign off on the deal. Even so, the deal still required me to pay off the mortgage on this property because both of our names were on it. To accomplish this, Mr. and Mrs. Money Mustache had to scrape together a final $409,000 in cash, the outstanding balance on the mortgage, and pay it to Chase Bank.

Dean would still owe me over $100,000 because of the difference between in our investments in the company, but he quite confidently informed me that he did not intend to pay me back, because he was already on the verge of bankruptcy. He reminded me that if he did file for bankruptcy, his creditors would very quickly lay claim to the house we had built, because he was a part owner. My lawyer confirmed that he was right, and that I had no legal way to force him to keep his original promise of splitting the company’s losses. The best we could do is get him off the property’s deed to avoid further problems. Dean had an opinion on this as well:

“I can’t sign off ownership on the house”, he explained, “while my name is still on the mortgage. That could be disastrous for me.”

Yeah, we wouldn’t want a disaster, would we?

But then an interesting thing happened. The SECOND we all signed those final papers at the title company, shutting down the home building company, wiping out the mortgage, and separating my fate from Dean’s forever, I felt a weight equivalent to the entire chain of the Rocky Mountains lift instantly off of my shoulders.

Finally, the emotional damage could start to heal. During the peak of the crisis, I had lost my ability to sleep, lost my appetite, and lost 25 pounds of bodyweight over a period of just a few weeks. I could think of nothing but rage, revenge, and worry. To fight back I read several books about stress, its underlying causes, and how to deal with it. I also learned more about happiness, and started keeping a journal where I’d write about my level of worry and my goals for the next day – one day at a time, and then one week at a time.  I was feeling better every day, even before the underlying problem was solved.

After the deal was done, all this preparation and research compounded with the natural relief of the situation and made me a freakishly happy man. And when I say happy, I mean jumping up and down, sprinting around the block, and then punching a punching bag while laughing out tears of joy until you collapse, happy. I’ve continued to be roughly this happy for the two years since then, taking a life that was already pretty good, and ending up with one that is as good as being a an immortal superhero who lives on a cloud playing a Golden Grand Piano while his best friends accompany on the bass and drums, as the entire population of Earth gathers  below the cloud every evening at sunset for an all-night dance party*.

And the financial damage has slowly healed too. Extra work, frugality, and even a small boost from the developer of the neighborhood who took pity and decided to forgive a loan my old company owed him, all contributed. I took good care of my expensive new rental house, the rental market grew strong, and I found great tenants who now pay reliably even as they add gardens and lovingly maintain the house as if it were their own. It took a long time, but we’re now finally ahead of where we were before making The Big Mistake.

In the end, I spent somewhere in the range of $200,000 on this educational experience. But in the long run, I would dare to say that I’m going to make a huge profit on it when measured over a lifetime.

I learned mind-altering lessons about business, law, personal character, and hardship. I learned how to be more frugal and button down when a storm hits. I learned how to be happy even when on paper, very shitty things are going on in your life. And I learned to appreciate the incredible good fortune I have now that I’ve come though that hard time.

I’m also working on learning about forgiveness. My goal is to someday be able to see this “Dean” character, pat him on the back, and say “Hey man, I’m sorry about the hard times we went through together. I know it was a tough time for you, and I forgive you.” I’m not yet at this stage, since I still have the odd fantasy about breaking his neck in the crook of my arm after stabbing 450 ballpoint pens several inches deep into his eyes, abdomen, and neck while calmly reciting a poem I would write about how selfishly he handled our business situation. Oh yes, it would be an event that would have Hannibal Lecter himself taking notes**. But over time, as I become wiser and more mature, I will grow past this, and I’ll be a happier man, and a better father and husband, for it.

The best revenge is living well. So I make a point of exacting this type of revenge with gusto every day that I live.

So why, you ask, has Mr. Money Mustache, the Commander in Chief of the No Complaints Nation written this novel-length complaint to you?

It is meant to be an example of how even bad situations can turn good, how pain leads to happiness, and how expensive lessons can still lead to riches. You just have to keep working at it, and hammering through it, one day at a time. Just make sure you end up a bit further ahead each night than you were when you woke up that morning, whenever you can.

Your problems WILL. BE. CRUSHED!!!

 

*I do not mean to imply that I am anywhere near as cool as this hypothetical piano player, just that I have been roughly that happy.

** Update: Over three years have passed since I wrote this, and the anger has almost completely faded. I still have no desire to ever see the guy again, but feel that with my new life as great as it is, there is really no reason for anger or regret over anything in the past.

 

 

 

 

  • Frank C. Modica February 1, 2012, 9:14 pm

    Wow, I was feeling whiney about teacher stuff today, and reading your blog put things in perspective.

    I’m glad that you didn’t end up in jail, a psych ward, or the hospital because of all that stress and aggravation.

    Reply
  • PavelR February 1, 2012, 9:28 pm

    Awesome post, MMM! Read most of your postings so far, really enjoyed this one, kudos to you for being able to benefit from this experience. Keep up the great blog.

    Pavel
    (former Torontonian now living in Seattle)

    Reply
  • Dark Sector February 1, 2012, 11:06 pm

    I’m intrigued by the thermal engineering you put into the house:

    “It was shiny and new and luxurious, with its airy, empty superinsulated rooms and cool thermal mass effortlessly battling the hot dry summer of 2007. Then its huge South-facing windows and bright halogen lighting and warm bamboo floors challenged the cold winter of 2007. So much work and care went into that place, and yet there was absolutely nobody interested in buying it.”

    One of the problems with our house is that it’s really old with 3 metre ceilings and huge windows. I can get replacement windows wholesale for $150 each, but I’m really turned off by the idiocy of traditional window design. It is not that difficult/impractical/expensive to add more panes. Why should I have to buy two whole window frames for each window opening to enjoy the benefit of 4 pane windows?

    At the same time it’s a big hassle and irritation to have to buy and install special window plastic every winter to add another (yet still insufficient) thermal layer to the windows.

    We’re subjugated to commoditized inefficiency because that’s the characteristically conspicuous American Way. What did (do) you do about your windows?

    Did you also thicken the framework of the exterior walls for insulation purposes? I suppose that 2×6 stock and R19 can’t be much more than 0.3 of the standard 2×4 and R13 budget. This would be a one time investment that preserves decades and generations of occupants from unnecessary thermal frustration.

    Reply
  • Marie February 2, 2012, 2:37 am

    Youch, that was a painful read. There are so many lessons in that story, as above posts point out. For me, I take away the hard earned life lesson of learning to recognize and avoid toxic people. I, like you, am very grateful for my happiness and my job and I’m especially awed by the good fortune of having a wonderful man in my life. We live together and often say to eachother, “wow, we are so lucky to have met eachother”. We have great friends, a bunch of crazy cats and good jobs. What more could you ask for?

    But it came at a cost. For years I was a naive overly generous friend, stepmother and wife to people I finally realized were so toxic they were sucking the life juice out of me. Financially and emotionally. It took me years before I finally left but I was pretty depressed and my ex took full advantage. He talked me into not getting a divorce lawyer and guilted me out of getting any part of the retirements savings (over a mill) by saying over and over how he was older than me and didn’t have years to make up lost retirement savings. My friends were appalled and months after the divorce one of them left a glossy magazine article my office chair. Seems my ex was seeing a wealthy divorce lawyer while we were divorcing and six days after the divorce they bought……….a multimillion penthouse together and married shortly thereafter. The magazine had a full oooh-and-aaaahhh feature spread on how lovely it was.

    That was a costly mistake, but I learned so much from it. Buckets and buckets of wisdom. And happiness. I am surrounded by wonderful friends because…..now…..when I meet someone I have the experience to know if they are great people….or not. You can’t put a price on that ability.

    Love your blog. Totally honest and lots of great information. Thanks for the link-sharing to dividend mantra and others. I enjoy all of them.

    signed, use-to-be-dumb-boo-boo-bear.

    Reply
  • poorplayer February 2, 2012, 6:54 am

    You deserve a lot of credit for sharing this story. Thanks.

    Reply
  • JaneMD February 2, 2012, 8:27 am

    Great story. I have a feeling my husband went through a similar situation which he won’t talk about. Right before I met him, he was also 10K in credit card debt . . . from what I’ve heard he was helping a ‘friend’ who never paid him back and won’t reveal any information about who it was or what things it entailed. His father bailed him out and I only learned about it from a passing comment from his father. We discussed it once and, while he won’t tell me anything, he assured me that he would never make any mistake like that again.

    Some people would say I should press harder and find out the truth because our futures are together so I should know all of his past. I’ve chosen not to because that is now almost 6 years ago. He has a clean credit score, is extremely frugal, and I pay all the bills. He’s never given me a reason to doubt him and you have to respect someone who won’t tell which person ‘wronged’ him in order to keep others from judging them.

    Reply
  • Ken February 2, 2012, 8:56 am

    Hey MMM,

    Very great read/post. It is very inspiring to me how you managed to stay positive and got thru this mess. I know “Dean” and maybe one day you all will be cool again…maybe not. That is life. You learned a huge lesson.

    However, I thought you would be playing golden drums…with some good buddies playing some bass and guitar. haha.!

    Thanks for sharing this, MMM.

    Reply
    • MMM February 2, 2012, 12:12 pm

      That’s a good point Kenny. My Superhero-Musician-On-A-Cloud fantasy would be much more realistic and attainable if I had mentioned an instrument I actually play like the drums. Playing jazz on a golden grand piano would take many more years of practice.

      Reply
  • Mike February 2, 2012, 9:08 am

    Great post. I offer this is from today’s Word a Day:

    Mistakes are part of the dues that one pays for a full life. -Sophia Loren, actress (b. 1934)

    Reply
  • copycatobe February 2, 2012, 12:16 pm

    Since January 1st 2012,I have given up listening to all news and have stopped reading all newspapers-I have decided to create my own “positive energy” journey towards FI ,(without the constant negative drip feed from the media on the state of the world).

    Naturally reading your blog everyday is a vital part of this positive journey.

    This post is the first time I have ever commented on a blog-it just blew me away.Now I really know that everyone can sort their “crap” and live a life of freedom. It’s just a choice.

    Thank you for my everyday motivation.

    Reply
  • MMM February 2, 2012, 12:17 pm

    I just wanted to give a GIANT THANKS to all of you for the kind and understanding comments above. I had hesitated to write this post for a good part of the last year since it’s a long, scary, and personal one.

    But to see all these great and supportive people coming out of the woodwork – WOW – the Mustachians are indeed a force to be reckoned with. BEST BLOG READERSHIP EVER!!

    Reply
  • Rolf February 2, 2012, 12:27 pm

    Hello MMM,

    just curious, which books about stress management would you recommend?

    My stoic calm needs some support from my body, which is refusing to accept what is not under my control..

    Reply
    • Boon Doggle September 17, 2013, 10:55 am

      Wondering this too. What are you of the stress management books you found helpful?

      Great post. Thanks.

      Reply
  • Hils February 2, 2012, 1:22 pm

    I really need to start writing a blog for myself, which I imagine will manifest as a sort of appreciation collage featuring you, Mrs MMM, Brave New Life, Nerd Fitness, and several others who are inspiring me not to give up on turning my finances (and physique) around. My default nature has always been melancholic, but reading your posts gives me a bracing feeling of realistic good cheer. Thank you, Mustache Family! And commenting mustachians!

    Reply
  • JaneMD February 2, 2012, 2:05 pm

    This type of post makes it easier to relate to you as a person. As that article from your blog that got featured on MSN, it made it seem like your path was superhuman and relied on being phenomenally luck in the housing boom too. It often came off to some as you were a person who did some planning and got in and out at just the right times – not knowing the economy was going to fold. The reality, obviously, is quite different and not so smooth.

    It’s good to see this type of truth in general. For example, though Larry Winget’s over the top attitude/tough love approach is hard for some people, he’s very upfront and honest about when he had to declare bankruptcy for investing all his personal funds into a business that failed. (His book “You’re broke because you want to be” is generally too much of a beginner level for the average MMM reader)

    Reply
  • economically humble February 2, 2012, 2:36 pm

    Makes for a manly mustache!

    Reply
  • Carrie Hetu February 2, 2012, 5:05 pm

    wow, thanks for sharing this story it is an awesome testimony of what one can overcome and I agree, the best revenge in a situation like this is coming out on tiop and living well!

    My favorite post to date!

    Reply
  • Dee February 2, 2012, 6:27 pm

    Thanks for the candid post, MMM! Learning about your obstacles — your very real, very monstrous, obstacles — makes your whole approach all the more inspiring. It humanizes the process of FI and does give me greater belief that I, too, can do it!

    Reply
  • Market Timer February 2, 2012, 8:14 pm

    Bravo! Your best post yet.

    Reply
  • Financial Samurai February 3, 2012, 12:46 am

    Wow…. hilarious ending and I can feel your pain! Partnering is BRUTAL in tough times!!!!

    I’m impressed with that one line that you “had to scrape together $409,000 CASH to pay the bank”. I’m impressed you had $400,000 in cash lying around! How’d you do it?

    Sam

    Reply
    • MMM February 3, 2012, 8:06 am

      That was tough even for Mr. and Mrs. Money Mustache, given that we already had 200k sunk into that company and we generally keep zero cash lying around!

      We had to sell our two other rental houses, liquidate a good chunk of stocks in our taxable accounts, work extra hard for a while, and top it all up from the line of credit on our main house.

      Reply
  • Lara February 3, 2012, 10:19 am

    Ty for posting. Made a mistake in a similar way 2 yrs back. Reading this made you more human, and an easier role model to follow.

    Reply
  • Monevator February 3, 2012, 2:35 pm

    As others have said, this sort of thing is what makes MMM such a read.

    Also, even if you’ve never spoken about your mistakes, they frame the things you do speak about. We’re all wiser for our mistakes.

    Hey, you should write to Dean and thank him! Maybe cut him in on MMM, with some useful posts on strategy or similar?

    ONLY KIDDING!

    ;)

    Reply
  • smedleyb February 3, 2012, 9:30 pm

    MMM, that was the single most inspirational piece of blogging I’ve ever had the pleasure to read. We all got a Dean in our lives and the scars to prove it. It’s how we navigate the treacherous waters that counts.

    Reply
  • cashflowmantra February 4, 2012, 9:22 am

    Great story. Glad I took the time to read it and know that I am not the only one who has made big mistakes. Actually, this makes mine look a little bit smaller. I am still fighting my way out of mine, but the education was worth it as well.

    Reply
  • AGil February 5, 2012, 12:40 pm

    Wow that’s so bad ass. Thanks for the incredible article! Makes one look at their own financial situation and say, hey this is no problem at all!..Seriously though, I’m still going to pretend MMM is super human and incapable of mistakes. It’s easier to make financial decisions when you are trying to compete against a super money hero.

    Reply
  • 5inatrailer February 7, 2012, 10:54 am

    Thanks so much MMM. I found your blog off of a link (millionairejourney.blog)Its an unreal story and not too un similar…
    A friend told me; once firemen and teachers start getting into condos to flip them somethings not right out there…I did the same but managed to keep a friendship (after much cursing and hexing).
    Mine was an expensive education but I managed to keep my shirt. I learned how to tile/ pound nails etc but more importantly the value of friendship, the dangers of ambition, the value of charity and the price of contentment (priceless).
    Keep it up dude.

    Reply
  • Elaine February 9, 2012, 12:38 pm

    Wow. I’m really sorry this happened to you. Hopefully the lessons were well worth it and, who knows, the real estate market may eventually come back and reward you with some appreciation. (pun intended!)

    Reply
  • Ben February 10, 2012, 1:18 pm

    interesting example of happiness achieved through adversity. Its remarkable that you haven’t ‘acclimatised’ back to you r original happiness level after 2 years. You should read Haidt, particularly his chapters on adverse experiences, if you haven;t already – fascinating stuff

    Reply
  • Bella February 13, 2012, 8:43 am

    We have a saying in our house “Some lessons are more expensive than others”. Great read

    Reply
  • jaliscokid February 16, 2012, 3:50 pm

    The upside is the fast weight loss! Take that Jenny Craig!

    Reply
  • Heidi February 17, 2012, 4:13 pm

    Wow. I am glad that you are over it, and grateful that you shared it. I have a BFM we are still in. Decided to save money we would sell our house, buy 5 beautiful acres in the woods and completely remodel an old mobile home. At this point it is almost finished, and probably worth $85,000 – $95,000. We moved closer to work 6 months ago. We probably spent around $150k on it. $20,000 septic system, etc. It made sense in the planning stage. It was actually very well researched. Obstacle after obstacle hit, and I wish I hadn’t wasted 5 years living in a construction zone in that house. Now it is rented, but hopefully we’ll sell it this year. I’d rather just never see it again.
    Heidi

    Reply
  • pachipres March 1, 2012, 1:37 pm

    Hi MMM,
    I have been waiting a long time for you to post this on your blog. I had emailed you privately awhile back asking you to do an article about experience with lending friends money. We are now 8 months into having loaned a friend 13k and he promised he would pay us back. We were very naive and foolish to have trusted him. I have had to work through many emotions-one of them being guilt because we haven’t even helped out our own children with their university education. It still is a process I am working through. Like you said in your article, the warning signs were there-for me too. I choose to ignore them which makes me quite responsible in the whole mess. I have learned so so many valuable lessons. I am told that they will come in handy especially with my own adult children as my younger ones grow up. I agree with some of the other comments-get it in writing first. Also, I like the tip someone gave awhile back, start with $50 loan and go no more till they have paid it back. If I had done this, never would have this loan grown to $13,000.00. I totally understand that level of stress you have endured. Maybe not the weight loss but the agony day in and day out wishing I had never even met the frined at times. I have tried to not forget the good that was in the relationship. I grieve the loss of the friendhsip at times. I wished I would have stopped at the first loan in 2009 and left it at the $1600 not the 13,000 it became in 2011. I have learned I needed to forgive myself as well as forgive my husband for being involved in okaying so much loaning. I feel very free now being out of the relationship. We now make payments on our line of credit of $250.00 per month to this person’s debt. It will take me years to get his debt cleared off. I was thinking of even getting a part-time job to help pay this debt off sooner.

    Anyway, thank you so much for being so brave in posting this article MMM!

    Reply
    • chc4444 May 11, 2013, 1:13 pm

      pachipres: I know it’s been a year since you wrote this so your situation may have changed but a friend once said something interesting to me that I really took to heart. “If you loan someone money and then expect them to pay it back, you become the bad guy to them.” That really sunk in for me because I know it’s true. So if anyone asks, I’m sorry but my money is tied up. Our children are young adults and I’ve set up a borrowing account of $10,000 each that they do not know about. Should they need money they can easily borrow that money from me but then there is no more money available until that account is paid back by them. For the rest of their lives they can borrow from that stash but only when there is money in it, which would be the money they had paid back into it. They’ll never know about these accounts unless they want to borrow more and there is not money in the account because they haven’t repaid a loan. At that time I’ll have a talk with them about the accounts .

      Reply
  • Dmitry March 9, 2012, 10:02 am

    Thank you for sharing! When you got to the “stress and no appetite” part, it reminded me about my own ordeal – the upside-down condominium rental in Colorado, while I was living in Texas.
    It was a low-key pain in the ass first, I was only losing $200-$300 a month, but then HOA fees go up, fridge goes out, repairs need to be made… So it was jumping higher at times. Still not too bad, I thought. I just need to wait for the market to rebound and then sell it. However, the SHTF at the end of 2008 – beginning of 2009, tenants flaking out on me and just plain screwing me over :). Soon enough, it culminated into a true nightmare that lasted for about 7 months. During these 7 months, I dumped about 6 grand into the deal, plus lost another 8 or so in the form of mortgage payments and HOA fees. I couldn’t sleep and was so badly stressed out that I started getting physical symptoms – like body aches, strange abdominal pain, headaches, etc. Needless to mention, I was severely depressed. I really could not do my job anymore (“sit on my ass in a cube”, IT job).
    By mid-July, the above events triggered me to say 2 words: fuck it. I quit my job rather than wait to be fired and stopped making the payments, both mortgage and HOA fees. Instead, I began trying to pull my health from the dumps, exercise regularly, camp, and visiting bro (who at the time happened to live in Colorado ;). Then the situation kinda resolved on its own – one realtor guy I knew learned about the story and said they could handle the shortsale of the property. The above shortsale was a done deal about 5 months later in Dec 2009.
    I came out of it alive, though I truly was losing hopes for that at times.
    By now, I have rebounded and feel more or less normal plus enriched by the experience. :)
    All in all, I lost about 40-50K in this deal – when all the negative flows are totaled up into one huge disgusting negative stream. That may be less than what MMM lost in his venture, but I’m a smaller-scale guy, both in terms of pay and savings! Although, we may be of the same caliber in terms of frugality…No, wait…I’m growing my vegetables and rarely buy any…At least I’m stingier in that respect! :)

    Reply
  • Joy April 29, 2012, 9:36 pm

    Please, please forgive my multitude of comments recently, as I’ve discovered your blog. Still, your experience resonated with me, and I had to comment.

    I was in an intimate relationship with a person like this, and am happier now since he chose to exit it than I have ever been–living version of “negative visualization.” There are some things that no amount of money can ever, ever buy.

    For once, even the debt that came in the wake of his choices and my subsequent ones is worth it, to live a sane, whole life again.

    Thanks for sharing.

    Reply
  • A Dom July 11, 2012, 8:59 pm

    http://oyc.yale.edu/economics/econ-159/lecture-4

    I think this might help further everyone’s understanding. Personally I’m going through all the courses.

    Reply
  • AnnW August 20, 2012, 3:26 pm

    What a shame. I hope you never speak to Dean again. Careless people like that make me furious. He probably blames you for everything. My husband and I decided about thirty years ago, never go into business with friends. I forgot the rule once and it kicked me in the butt, but I didn’t lose much money, just got a lot of angst. I have also been generous with relatives who resent my generosity years later. Especially when I don’t continue it. Do you think I’ll ever learn? I’m all for cutting toxic people out of my life, even if I’m related to them. Ann

    Reply
    • Kelley September 11, 2015, 7:36 pm

      Yes when certain family members want money and you look at how they treat their own finances you know they won’t pay it back, so you try and limit the amount (just enough to appease them) but not enough that you feel bad about it. You can treat it like a gift and be done with it. Unfortunately, people will try and take advantage and see you as their “personal banker.”. But family members can also be hard to cut out of your life.

      Reply
  • JYves August 21, 2012, 4:03 am

    In my line of work, we would probably say that this is a narcissic perverse. Meaning, he can only see his own benefit, (he is the center of the world, basically) and he can return every situation to his advantage. You ask him to look at your situation, he answers that you are selfish. Typical.
    The bottom line is : if you meet this type of person, RUN, STAY AWAY. Don’t even try to convince, argue etc. It is impossible for them to see your point.. It is too scary. You cannot win.
    These people (there are plenty out there) leave behind them a path of misery, destruction and anger.
    I fell for them a few times, It takes years to recover. Now, I have learn about these situations and feel more ready to spot them earlier, in there “nice” phase.

    Anger is bad, but it is so difficult not to feel that. For more info on that
    http://www.amazon.com/Stalking-Soul-Marie-France-Hirigoyen/dp/188558699X/ref=sr_1_1?s=books&ie=UTF8&qid=1345543142&sr=1-1&keywords=marie-france+hirigoyen
    and
    http://en.wikipedia.org/wiki/Marie-France_Hirigoyen
    Cheers. Tks for sharing.

    Reply
  • Jennifer September 13, 2012, 3:18 pm

    Been reading through all the posts since the beginning this week, and this is my favorite so far. Since I found your blog in July, I’ve cancelled cable, planning to cancel cell phones, sold my 2011 Golf TDI to pay off its big loan and bought a used 2006 Jetta TDI, reduced my monthly spending on things like stuff and dining out, and sent my husband copy after copy of your inspirational posts. I’m so glad you’re here sharing your experience and wisdom. You make me want to be a better person. All my talk (and my husband’s talk) for years about paying off our credit cards and our student loans has never come to fruition, but we’re doing better in the last 2-3 months than we’ve done since we met and married 8-10 years ago. Thank you Mr. MM and the whole MMM family! I want what you have, with my husband and my two very young boys. I’m doing it ten dollars at a time!

    Reply
  • Erica / Northwest Edible Life September 23, 2012, 12:24 pm

    Good tale. Living well and a 30,000 Alexa Traffic Rank platform to tell it like it is when you get fucked over are both *excellent* forms of revenge.
    In a slightly more Zen Mode, a good friend likes to say, “Resentment is like swallowing poison and waiting for the other person to die.” Sometimes when I get my own stick-a-ballpoint-pen-in-their-eye feeling I remind myself of that phrase.

    Reply
  • TS October 9, 2012, 5:35 am

    As someone who has had a sociopath wreak damage on their family’s life, I can assure you, don’t struggle with getting to the point of forgiveness.

    You’re basing that concept on dealing with normal people that have empathy and remorse. You can only forgive somebody that feels these things, which this person clearly doesn’t. Sociopaths don’t, and that’s what allows them access to ruin so many people’s lives – we keep judging them based on how we’d feel about something, which puts us at a disadvantage.

    What happened is the same as having a tree crash on your uninsured garage in a storm – you can’t forgive the tree, and it’s not worth hating either. Perhaps, in hindsight, there’s something you could have done to avoid having the tree crash on your garage in the storm, but there’s nothing you can do about it now and all you can do is learn from it and move on.

    If that person came up to you one day, expressed genuine remorse and guilt, and then made an actual offer to try and make up for the damage done, then struggle with being able to forgive.

    Until then, chalk it up as a learning experience, make sure you learned as much about being able to identify a sociopath as possible, and NEVER let one of them get anywhere near you again.

    Reply
  • Rich November 11, 2012, 1:26 pm

    Just reading this again, since you recently linked to it, and I’m stumped by one part of the story. It sounded like you sold the second house to the wealthy businessman after you hired a lawyer to get Dean to sign off on the deal… but you couldn’t have, because you paid the mortgage off yourself and kept it as a rental house… right? Wich was it? As it reads now, “the deal” your lawyer got Dean to sign off on was the sale to the wealthy businessman. Maybe there’s a sentence or paragraph missing…?

    Reply
    • Mrs. Money Mustache November 11, 2012, 6:03 pm

      That guy didn’t end up buying the house. The “deal” was Dean signing off on ownership of the house and dissolving the business. So, the house just belongs to us now and we have it rented out. It was a very happy day in the MMM household.

      Reply
  • Paula Howley January 11, 2013, 12:32 pm

    Man, you’re a good writer. I LOVED reading this. I am all over your mindset. I am determined to become a Moustachian too. I will be reading faithfully and letting you know about our family’s successes.
    Love, a fellow ex-Ontarian

    Reply
  • Segmond January 20, 2013, 10:21 am

    Partnership is a very fragile proposition when it comes to business. Even the other person putting up half or more doesn’t necessary make it any better if they are not willing to work just as hard and bear the burden equally when the going gets tougher.

    Reply
  • Flo March 21, 2013, 6:26 pm

    I’m a new reader and wanted to thank you about this blog spot. I survived a similar situation and that’s good to hear that even after what happend, you managed to get good things out of it. Very motivating :-D

    Reply
  • henry lie May 16, 2013, 8:05 am

    Thanks for this article. It’s amazing. it’s so encouraging. It’s so down to earth. This is probably your best writing.

    Reply
  • Vivian June 26, 2013, 9:34 pm

    Wow! I just reached this article hitting on the “Random Article” above and your history really touched me.
    Although I feel bad that such a thing have happened to you, I am pretty sure that this incident only got you stronger and the great lesson you learned with the whole experience will follow your life forever.
    Thanks for the sharing! Wish you the best!

    Reply
  • Carolyn July 25, 2013, 9:25 pm

    So, I think I read through all of the comments, plus the blog itself, and I’m curious – whatever happened to ‘Dean’ after the partnership was completely dissolved? Did he indeed entertain bankruptcy? Feels like the epilogue to the blog is missing…

    Reply
  • Joe August 30, 2013, 12:44 am

    Very nice Article, being backstabbed by a friend you trusted is one of the worst things that can happen to someone. I am on the verge of starting my own 50/50 partnership thing with someone knowing full well we’ll be working more like 70/30 (me being the 70) but without the 30% he’ll contribute there would be nothing. Sometimes you just have to accept injustice.

    Reply
    • Bruno September 25, 2013, 3:32 pm

      Great educational tale.
      I am surprised that Mr. & Mrs. MM didn’t follow or know the greatest business advice ever: Under no circumstances, never, ever, ever have a 50/50 partnership. How come or do I misread your story?
      (Same for Joe’s comment above.)

      I once had a trusted employee rack up a $7k tax bill (unintentional), which came to light 1.5 years after the filing deadline. And the feds are not happy about such incidents. Luckily the guy is a honest bloke, and I still consider him a friend today. Great learning experience for both of us.

      Reply
  • Reed V. January 20, 2014, 4:49 pm

    Nicely done! I really like this article. You had to really grow, and I wonder if your readers (especially those who have never been through something like this) are able to grasp what it was like to feel the strong emotions that you were feeling. I felt that emotion when you wrote “I had lost my ability to sleep…” and “I could think of nothing but rage, revenge, and worry.” Brother, you went through some real shit and came out the other side, maybe not unscathed, but definitely wiser. The period of time you speak of (the housing crash) was a very dark and foreboding time for many. Thankfully, we are in better times now. Here’s to your continued growth and emotional strength. Cheers!

    Reply
  • marciaB January 29, 2014, 4:03 pm

    I help people run businesses for a living, and have seen many partnerships destroy friendships (and families). I always discourage it because no two people have similar enough ideas about the value of their labor (mine is always more valuable that yours, right?) let along what an “hour” is (60 minutes of solid work? 60 minutes where a personal phone call or two is okay? 55 minutes of actual work and then 75 minutes put on a time card?). And then there’s the issue of who agrees to pay for what and all that…DON’T DO IT!!

    Reply
  • RakuRay January 30, 2014, 8:58 am

    This reminds me of the time I was a newly minted process control engineer working for the first time as a commissioning programmer in a new steel mill. I was sitting in the back room writing and testing some macro code to stop and start a huge electrical motor on the shop floor. This thing was many hundreds of horse power and I proceeded to test my code that started and stopped the motor, something that process control engineers do all the time.

    As I was calmly working in the computer room I could hear an ‘awful noise’ coming from somewhere, I didn’t know or care, I was too focused on my software, setting and clearing bits. All of a sudden my supervisor came rushing in yelling and screaming at me about this motor that was ramping up and down at a terrible rate and was literally rocking back and forth on it’s foundation. My face went red hot as I realized that my perfect code was actually the cause of the ‘awful noise’ and causing the concrete to crack and start to break apart, a very dangerous situation.

    Well the next day I was called into the plant managers office. He looked at me, I looked at him and it seemed like two hours of silence. Finally he told me that my perfect code had caused fifty thousand dollars worth of damage. Again he sat silent. Finally I timidly asked, ‘so I suppose this means I am fired?’ His reply was a quick decisive question, ‘why would I fire you after I just spent fifty thousand dollars on your education?’

    He was right and I thanked him. Lesson well learned and valued the rest of my life.

    Reply
  • Ryan February 23, 2014, 8:02 pm

    “And when I say happy, I mean jumping up and down, sprinting around the block, and then punching a punching bag while laughing out tears of joy until you collapse, happy.”

    I laughed out loud when I read this. I also got angry as I read about this man. How frustrating.

    Thanks for sharing this. It’s nice to know that the Mustache Man himself once made a mistake. :-)

    I just recently got my wife sold on early retirement and we’ve become big fans of your site. Keep up the good work.

    Reply

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