Mistakes. Nobody wants to make them, but we do, and by the time we realize it was a mistake, it’s probably too late to do anything about it. And, financial mistakes are some of the worst, because they don’t just affect you. It involves your family, your current income, and your future savings.
I’m a 40-something woman with a family, and I consider myself to be somewhat intelligent in most things. By most things, I mean just about everything but politics, and finances. I didn’t know what I didn’t know about finances, saving money, and investing until very recently. And, I still don’t know a LOT about any of it, but I’ve put my best foot forward to learn as I go, so that’s what I’m doing. What else can I do?
Financial Mistakes are Embarrassing
I’m going to share what I consider to be mine and my husband’s biggest financial mistakes. There are many more than just these 5, but these were the most damaging to our life, and to our future together. We very much regret the way we mishandled our money and are trying to get on track to set things straight, and get ahead. Every cell in my body knows that we’ll accomplish this lofty goal, but my patience will definitely be tested.
I hope that by sharing our financial mistakes, we cause you to pause. Whether it’s to guide you away from certain things or makes you rethink a plan, then it’s worth my embarrassment. And, make no mistake, I am embarrassed. When your mother tells you to think things through, you really should take heed.
Purchasing the Wrong Home, then Remodeling
This was one big financial mistake, but we sure learned a lot. Hindsight is 20/20, right? Many years ago, we bought a beautiful home. Acreage, a huge garden, spacious and private. We had the money, but not much else. We were excited and in our 30s, which is pretty normal for first-time buyers…maybe even a little late.
The problem with this purchase was two-fold – we didn’t have a stable income and we wanted to “improve” the house. We went way over budget on the remodel and two years later, had to sell the house. We didn’t even break even, as the housing market crashed and we went in the hole due to the remodeling costs.
RETROSPECT: We should have waited, or at least shopped around more, and purchased a smaller home that was more suited to our needs at the time.
Using Emergency Fund for Non-emergencies
We have become used to living a certain way, so because our income can have it’s ups and downs, financial stability can change quickly. When it was good, it was really good and we stocked some money away, but when it wasn’t, we went back to our savings to live on it. Now, some would say that’s what an emergency fund is for….to lean on. Unfortunately, we didn’t lean on it, we relied on it and emptied it.
In other words, we still went out to dinner, bought the kids new clothes, and traveled, even though we, technically, couldn’t afford to do any of those things. We didn’t trim the fat when it was required. There was nothing frugal about our thinking back then, and that prevented us from saving more for our future together. Although we regret our inability to curb our bad habits, we know better today, and we’re working on building better financial habits.
RETROSPECT: Obviously, if I could go back in time, I would have lowered our cost of living by way of rent and monthly bills in any way I could, ditched the fancy coffees, cooked more at home, and bargain shopped a lot more, among other things.
Living on Inheritance Money Instead of Investing
I am going to go out on a limb here and say that this was, bar none, the biggest money mistake we ever made. This could have been a financial turning point for us, but it wasn’t due, in part, to selfishness and guilt.
Have you ever felt like no matter how hard you worked, you could not afford to give your family what they needed or wanted? It feels awful. This is where we were mentally when a substantial (to us) inheritance came our way. Financially, we were hurting and not even making ends meet.
We talked about what to do with the money. Debt settlements were discussed, vacations, savings, business needs, housing, everything. We argued. We made lists. I so badly wanted to pay off debts, and he so badly wanted to spoil our children and do things to make us happy. We tried to do both, while catching up on just about everything, but within the year, the money was gone. We had squandered it away.
RETROSPECT: Of course, we should have been practical and caught up for the month, paid off ALL DEBTS, given ourselves enough for an emergency fund (and used it correctly), and then invested the rest long-term.
Using Credit Cards to Fund our Business & Life
We’re, regrettably, still paying for this mistake. We did what most people still do – used our credit cards to keep paying for things we couldn’t afford. That got us into a world of debt trouble. Double trouble, because we each had our own credit cards. We also had to keep our business afloat…with a credit card and a few lines of credit.
We were in deep, and although we’ve managed to pay off almost all of our debt over the years, the ones used for the business are still knocking at our door. Honestly, I’m not thrilled that we lost control of our spending with credit cards, which also hurt our credit scores, but I don’t regret using it to save our business… because it’s now thriving.
RETROSPECT: Credit cards carry a lot of risk and responsibility. This was a hard lesson and we haven’t hand any credit cards since. They can help AND hinder, and sometimes it’s hard to tell the difference. We should have left the personal credit cards out of the situation altogether and got a business loan instead. It would have been more economical in the long run.
Upgrading to New Cars Instead of Buying Used
Should we file this mistake under obsession? It’s so strange because we didn’t have a choice but to buy used cars starting out, but after our first new car, we just couldn’t stop. We kept upgrading before they were paid off, one loan after another. We lost so much in depreciation, it’s hard to talk about. On top of that, we were paying out in interest too. It was a lose-lose situation. Granted, we had a nice reliable car, but at what cost?
Yes, they were bright and shiny, and smelled heavenly. But lesson learned! We finally paid off our last new car recently, and man, were we pleased with ourselves! Yes, it’s a tad worn, but it runs like a champ and we love it. We will never buy a new car again. It’s just not worth it.
RETROSPECT: We probably could have saved tens of thousands of dollars over the years. We bought a LOT of new cars – easily 7 in 12 years! In the future, we will do our research and buy used. Pinky swear.
Is it really okay to make money mistakes?
Yes and no. Making mistakes is part of life, but if you’re making big ones like these, ones that can be prevented, then you’re doing you and your family a great disservice. And some of these mistakes can dramatically shape your future – whether it’s for the worse or not really depends on the size of the mistake and how well you rally.
Believe me, I know you can’t see every obstacle coming, but you can be smart, think ahead, and plan. Then, think again.