I already told you about the money mistakes that make me crazy. From fancy wheels on clunkers, to financed boob jobs (that last one didn’t make it earlier, but I’m adding it now) there’s a lot of money mistakes that make my skin crawl. Now I’m going to tell you about some money mistakes that I’ve made—in the hopes that you won’t do the same.
All of this said, there’s a lot of things I’ve done right that I’m still thankful for. Some of these items (buying my house, for example) were mistakes, but they ended up working in my favor. I’m attributing this to luck though, not any good planning on my part.
Here’s a few of the money mistakes I’ve actually made…. Some of which will be giving me heartburn for years.
- Buying my car new. I did this because–get this–at the time I couldn’t afford a used car because the interest rate would be too high. You may stop laughing now.
- Buying our home before we were ready. Our first year of marriage our income tax bill was $11,000. Holy SMOKES! We were BROKE, and needed some tax deductions, so we bought a house. We stretched knowing our incomes would be going up in the near future (and they did). We didn’t buy all the “house” that we could for fear of stretching too far, but the mortgage on our zero-down condominium right outside of Seattle was pretty oppressive. Within months, a serious flaw was found that had been missed in the inspection. We spent $5,000 re-building a bathroom—studs and everything. Having a condo didn’t negate all of the home maintenance costs that we thought it would. All that said, it’s been a good investment (it had doubled it’s value, and has since depreciated a bit but it’s still worth at least $125k more than we spent) our mortgage is now comfortable, but it really was a premature and risky gamble.
- Taking a Home Equity Loan. “Hey look how much the house has appreciated—that cash sure would be handy, wouldn’t it?” Wait! That’s not cash—that’s equity, which can go up and down…. Dramatically! It was at 8%, so not punishing, and the loan allowed us to make some dramatic, positive improvements in our life, but we really should have just waited and saved with real money.
- Consolidating our 2nd into our first. Our first mortgage was 5.25%, our small second mortgage was at 8%. So we consolidated them at 4.25 (now 15 year) to save on the interest. We should have refinanced the first, and debt-snowballed off the second. Stretching a small and manageable second over 15 years was just dumb.
- Not shopping around. I used to buy everything new. Tags on, warrantee intact, and all that. Then I got “smart” and started only buying things on sale. Now I scrounge. I get four to five prices on items over $50 before I buy. I try thrift shops, pawn shops, online sales, craigslist and freecycle for things I need. I wish I’d learned that years ago. The convenience of picking up everything at the mall just isn’t worth it—especially when you tack on the $7 at Cinnabon that can’t be resisted
- Staying in jobs too long. I once kept a really bad, outrageously-low-paying job for three years out of loyalty. I didn’t like the job. I only liked the people. I shudder to think of the income lost as a result.
- Not leveraging alternate income sources soon enough. I’ve got a number of “side hustle” projects. Freelancing, blogging, for a few years I sold books at gun shows! I stopped doing all of this when I became a mom, and didn’t start again until last January. I missed out on four years of relatively unobtrusive income opportunities.
- Living on college loans. My tuition, room and board were paid for under my scholarships and financial aid. I took loans for living expenses and books. I should have taken a second job. I was only working 10 hours a week. I could have easily worked 20-30 and lived on less.
- Not learning to budget soon enough. This is especially true once my monthly income became variable and when we started the business. I roughly knew how to budget—money in, money out, etc., but I didn’t know how to plan cash-flow. Learning this has been critical to our success.
- Not saving enough before starting our business. We started the business out of necessity, but didn’t plan enough cash to last us through the startup costs plus 45 days of receivables plus payroll. If I were to do it again, I’d save twice that much first, just because a new business is likely to have some payment problems from new clients if they’re not familiar with screening new clients. I was really fortunate (lucky) not to have a single bad invoice in my first quarter.
{ 12 comments… read them below or add one }
I disagree with #4. That was a smart move. If you want to pay off the 2nd, just make extra payments until the amount of the 2nd in the principal is paid. And in the meantime, you would have saved on interest because you’re paying 4.25% instead of 8%.
If they went from 30 to 15, their payments already went up. If they could afford the 15 with the second, that is what they should have done. Then apply whatever you can towards the second right away. After that you have all of that extra to apply towards your first if you want to pay that off.
While what you say is true as far as interest rates go and if you follow what you suggested, how many people are lumping on to their first instead of spending somewhere else? So, if left as is, the interest would be more over 15 years at 4.25% than over 5 years at 8% (if that is what she had left…more if she had less than that left).
Bummer, but the good thing is, now you know all your mistakes, and you’ll never make em again! Nice
I made the same mistake in buying a house too soon. If I would have waited 1 more year, I would have been able to put 20% down on the house.
Great advice! We are in the final throes of paying off our credit with the snowball method promoted by Dave Ramsey and look forward to having just over $1,000.00 more dollars to spend each month when it’s all said and done. Can you say European vacation!?
I’ve made so many money mistakes, I don’t know where to begin (of course I do have a few more years on you to have made them!). The important thing is that you recognize it and don’t make the same ones again.
#1 is a killer, I hate cars, way to much money.
Disagree with the mortgage, cheaper than rent, it’ll be good in the long run. Great self evaluation.
Spread the word — Casey Serin should be imprisoned and subsequently deported and/or executed. Pass it on.
I appreciate your article as it brought me back to all my money mistakes that I’m paying for today. You should pat yourself on the back for taking responsibility for your situation and working to make it better. I wish you the best! Good luck!
Wow, #7… its good to know the welfare of your children is number 2 when there are ”unobtrusive income opportunities” out there.
The welfare of her children were not #2. She’s fortunate she didn’t have to work; would working mothers be putting the welfare of their children second by going out and earning an income to support them? Spare me. All she’s saying is that she could have made money without interrupting her ability to properly care for and mother her kids. Not a bad assessment to make.
Michael and Ronnie, this is one thing that really cracks me up, though I’ll admit, my perspective is warped. I grew up in a house with multiple businesses and two full-time work at home parents.
Now I’m a work at home mom, and we have two small businesses and a non-profit run all or in part from our home. Yes, I work full time, perhaps more, but I also home school our two kids, and we participate in all of the sports, language and culture programs and all the other fun stuff any kid could enjoy. That doesn’t hamper my ability to work or parent. We never employ the use of a babysitter or daycare. Nor do we use a school as such (we have none).
That said, I won’t begrudge any parent who works as they parent. It shows children the value and reward of hard work. I love having my business at home because my kids SEE and EXPERIENCE work in their formative years. (I can testify to this because that’s how I learned–I actually remember learning how to set up bulk mailings before the age of nine! I don’t “employ” my kids in my business in any way, but I could easily teach them the business to do on their own as they grow older.
After all, as a parent, isn’t it our goal to eventually launch healthy, well-adjusted, financially-responsible, and productive young adults into society? It’s certainly my goal! I think we can best do this by modeling the behavior in a visible way for them to experience as they grow.
I will be able and more than willing to support my kids through their college education (if they choose that) but after that point, I want them off my payroll–and it’s my responsibility to make sure they’ve got the life-skills for it.
I personally, don’t want to raise the kind of children that were mothered every minute of their growing lives. (I remember meeting some of these types in college–rather bizarre IMHO–it must have been a very difficult transition for them). Monitored, observed, supported–yes, absolutely. Those kids will successfully launch into the world.