The biggest check I’ve ever written was given to the wrong person

Pay yourself first. Image: Flickr/David Goehring

Sean McLaughlin is an independent options trader.

Sometime during March or April 2000, I hand wrote a check for $50,000. Writing out “fifty thousand and 00/100” and scribbling my chickenscratch signature was a surreal experience. This was by far the largest check I’d ever written (then and now!). And as I sweated through tearing the check out of my checkbook, the recipient of said check was waiting outside my apartment in his car, engine running.

With a hint of trepidation, but mostly a cocksure swagger, I confidently strode down the steps, walked across the parking lot in the hot spring sun of another beautiful South Florida afternoon feeling like a budding tycoon, and with the proudest smile of my then 25 years on this Earth, handed over the $50,000 check — no envelope:

Sean: “Here you go!”

John (not his real name): “Thank you. I knew you could do it.”

Sean: “No, thank you. Thank you for giving me the opportunity.”

I had no idea then or for many years to come that at that very moment I had just executed a trade that may have been the worst trade of my career. I had just calcified a bad habit that would haunt me for the next 17 years: I forgot to pay myself.

I began trading in 1998 at what was commonly called at the time a “trading arcade.” These were offices that were popping up in the usual places — Manhattan, Chicago — but also around the country, especially in Texas and Florida (probably the favorable no state income tax environment!). These were offices that were set up for any unlicensed Joe with disposable cash (usually a minimum of $50K) to come in and set up a retail brokerage account and be given intra-day leverage on their money, reasonably cheap commissions, computers with fast internet connections (internet speeds available to most homes back then weren’t as fast as today), and all the Yoo-hoo you could drink (oh man, I miss that chocolaty burst of cocaine in a can…).

As the internet dot.com stock boom was kicking into high gear — a bull market for the ages that makes the current one like an afternoon 3:30 Ramp — every 20-something kid with a trust fund or a rich daddy was lining up with $50K to put on deposit and stake their claim to bull market riches.

I, of course, did not come from means nor had more than five bucks to rub together. I was a typical 22-year-old recent college grad. Only broke-r.

But through following a friend, a bit of lucky timing, and a little bit of pluck, I fell ass-backwards into a situation where the owner of the office knew a guy (a former Tampa Bay Buccaneer All-Pro football player) who’d put up $50K for me to trade and we’d split any profits 50/50. Yes, me, a nobody with no wall street experience and only a periphery of knowledge of the business due to an ill-fated brief employment at MetLife as a “mutual fund salesman.” I put that in quotes because what they really wanted (and incentivized me) to do was sell life insurance. As I said before, this was when the internet stock boom was really beginning to heat up. People were crazy. Everyone thought we’d all be instant millionaires with just a little bit of work.

And you know what? They were right! There were so many kids — yes, these guys in their 20s wearing shorts and flip-flops to work every day were all kids — in this office that ended up pulling down $20–30–50–100K a month. Consistently.

Sadly, I was not one of them. At least not as quickly as everyone else.

But eventually even the blind squirrel gets lucky and through (what I’d like to consider was) hard work — after 18 months of struggling through losses and clawing back to even — I finally broke through and started to make some serious coin like everyone else.

And after seven months of crushing the market with multiple mid-five-figure profit months, I now found myself where this story began — handing over a $50,000 check to the middleman between me and my financial backer (whom I’d never met).

This check was to free myself of my profit-split arrangement with my backer, and put me squarely on my own. Setting myself up to keep 100% of my future profits. All mine, baby. I’ve made it!

Little did I envision that what I’d actually done is ensure that I’d be absorbing 100% of the losses that were literally just weeks away from beginning.

Instead of taking my 50% cut of ongoing monthly profits and tucking a goodly portion of them away in a proper savings vehicle or investing in a house for myself or some cash-generating real estate, I decided to immediately pay off my supportive backer in full at the soonest opportunity, blindly confident that I’d had it all figured out.

This habit of letting it all ride on a future uncertain outcome, which was cemented in myself with the hand-writing of a fifty thousand dollar check, has been a plague upon my professional trading existence ever since. Almost like a curse that has followed me around every corner. I’ve gone on numerous additionally profitable runs since these heady times of 1998–2000, but I’ve repeated the same mistake over and over in every. single. instance.

We’re often told to “invest in yourself” or “reinvest in your business.” And I thought I was doing what I was supposed to do — when I’m going good I’m supposed to step on the gas. Don’t pull out money… attack! Go for the big score! Why retreat now when everything is going so well??!

Perhaps that might work for some traders. But not this trader.

They say “the best time to start saving is yesterday. The next best day to start is today.” Well, I’m not here to tell you I’ve solved my problems and I’ve kicked my habit of not paying myself first. But awareness is the first step and I’ve made two small deposits into my savings account in recent weeks (a percentage of my trading profits from recent trading activity) for a rainy day. It’s a start.

Pay yourself first. Or you won’t last.

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