Three Major Money Lessons You Can Learn From My Most Costly Financial Mistakes

Recently I read if you want to connect with your audience you should talk about your mistakes rather than your accomplishments. People identify with your humanity.

Fortunately, my mistakes greatly outweigh my accomplishments leaving me with a bounty of topics to write about.

The financial mistakes I have already made in my (short?) lifetime will cost me millions. I laugh to keep from crying, friends.

Here are my three dumbest money moves. Well, the dumbest ones I’m willing to share with the public.

I Didn’t Start Investing Earlier (or Consistently)

I got lucky. My first few employers had an ‘opt-out’ versus an ‘opt-in’ retirement plan. I was automatically enrolled into my first retirement plan at age 22. I didn’t start making active retirement planning decisions until age 27. That is when I opened my first 401k. I enrolled in a retirement target date index fund.

I’m running from behind as a result of my slow start, but somehow I’ve managed to Forest Gump my way into a decent amount of retirement savings. I’m not alone. In a study of which investors did best, Fidelity found the accounts that performed best were owned by people who forgot they had an account. So, when I’m down about your retirement plan, you should apparently set it and forget it.

Lesson Learned

Start saving as soon as possible! When I finally signed-up for my 401k, it took less than a 30-minute consultation. It was also free because my company covered the consult. For context, I spent 5 years avoiding a free 30-minute conversation that could have potentially made me millions more over my lifetime.

Another study found just $50/mo saved starting at age 20 will make a substantial difference: adding up to nearly $24,600 after 20 years, $56,700 after 30, and $119,800 after 40. That is still not enough to retire on, but it is $119,800 more than $0. The best time to start saving was yesterday. The next best time is today.

I Bought a New-ish Car

Dave Ramsey might personally offer me the fade if he knew I was the writer behind an award-winning personal finance website for Best Millennial or Gen Z Blog while I had the audacity to own a new-ish vehicle with a car note. See, what had happened was…

First of all and technically, it was used! Secondly, MG didn’t even want a new car!! Thirdly and finally, he only wanted a used car with new features! But that’s the good thing about finding used cars for sale, you’re able to purchase newer cars for much less money. This means that you can enjoy having a new car with all the new features, and no one would even know that your car isn’t brand new. You also get a lot more choice with a used car, since it doesn’t matter how far it is from where you live. You can simply get it shipped over, using a company like Cars Relo. This means that you don’t have to spend a fortune on a brand new car (since it’s value will drop significantly the moment you leave the garage), and you can save money by getting a used car.

I did (almost) everything right: I kept the monthly payment under 10% of my income including insurance coverage just like the experts recommend:

  • I financed with a great low rate thanks to a local credit union who offered me 1.99% APR and a full 2-percent under the dealer’s “finance deal.
  • I traded in the completely paid-off vehicle that I drove for 10 years and 186,000 miles to further lower the monthly payments.
  • I even patiently waited until December to buy (slow car sales and year-end deals lead to better dealer incentives).

Related: #AskPB: When is it better to buy or lease?

As the saying goes, “everyone has a plan until they get punched in the mouth.”

The road to hell is paved with good intentions and the road to dealerships is paved with well-intentioned budgets. Yet, this year a record 7 million Americans were 3 months behind on their car payments. Further, the fact remains that vehicles are a notoriously horrible investment.

On average, cars and trucks depreciate 20-percent as soon as you drive off the lot. Sure, I went to the dealer fully expecting to purchase a used model from three to five years prior, but actions speak louder than words. One “deal-breaking” feature later, and suddenly I was negotiating for a one-year-old model. I made an impulsive decision to buy. Forty-five months later, I am quite literally still paying for it.

Lesson Learned

I love my car; some might even say uncomfortably so. Logically I know I should sell (I won’t. It’s my first child). Like many financed purchases, this was a completely preventable mistake. Financing is designed to fool us into thinking we can buy more than we can afford, however, just because you can buy it doesn’t mean you can afford it.

I get to enjoy my vehicle 30-days out of the month. One day a month, I wallow in self-pity as a reminder of my impulse decision will arrive 60-times in the form of a monthly car payment. While I do plan to drive this car 10 years and 150,000+ miles, my goal is to pay cash for my next vehicle or restrict myself from buying any car that I have to finance more than 36-months. What if that makes the monthly payment too high? Again, just because you can buy it doesn’t mean you can afford it.

I Paid Off A Significant Other’s Debt Before Securing My Own Finances

According to JLo, love don’t cost a thing. Well, love cost me about $18,000.

This isn’t the story of some 90 Day Fiance catfish gone wrong. This was the simpler version that plays out every day of the week. Boy meets girl. Girl meets boy. Boy (or girl) pays off their partner’s debt? Boy and girl don’t work out.

Related: My Wife Spent $45,000 From Our Joint Savings Account

The abridged version is that although I had just paid off my own $30,000 in consumer debts, my girlfriend at the time still had debts hanging over her head. We do this a lot with family and friends. In an effort to valiantly save everyone else from the rising flood of debt, we end up drowning ourselves.

Related: How to Have Essential Conversations With Your Parents About Their Finances ft. Cameron Huddleston – PB127

I should have focused on securing my own financial stability with a fully funded six-month emergency fund, build positive personal savings habits, and develop a sound financial plan that included our future financial goals. Basically, I should have followed Certified Financial Planner, Rianka Dorsainvil #FinancialNugget tip, “put your own oxygen mask on first.”

That would have been the smart thing to do! I chose the dumber path. Whereby I immediately transferred my girlfriend’s debt into my own name, paid off an outstanding tax lien she owed using my savings account, and I agreed to fund all of the household expenses on only my income. Chivalry might not be dead but my budget was on life support.

As you might have accurately predicted, I failed miserably. Financial conversations are difficult. Yes, even for couples (and “personal finance experts“). They still need to happen.

For instance, when I pointed out each monthly trip we took to visit home was about $1,000 (two airplane tickets, rental/Uber, hotel rooms, food, etc.) she usually heard “I don’t want you to visit your family and friends.” Rather than hash out the conversation like adults, it was easier to ignore the exploding cost of these frequent trips by returning to familiar financial infidelities: using credit cards to bridge the gap between our incomes and our (non-existent) budget.

Lesson Learned

Have an open and frank talk about your finances with your partner. If you don’t know where to begin, listen to From Money Dates to Money Moves ft. Couple Money’s Elle Martinez.

Specifically, I should have secured my own financial insecurity before taking on the baggage of another, even if that weight came from a person I saw a future with. People like myself often confuse debt freedom with wealth. Just because you don’t owe someone else money doesn’t mean you are suddenly financially independent. These are two stops along the same journey, but they are not the same destination. There are three levels to financial freedom.

In hindsight, I now recommend the financially secure person still leave the debt in the other person’s name rather than making any transfers in responsibility (especially if unmarried). If part of your plan as a couple is to help pay off each other’s debt, that is great! However, this should be done through joint monthly payments or through an account you both agree to fund.

You Can Overcome Almost All Financial Mistakes

I’ll end with the good news.

With a little patience, discipline, and correction in your current spending habits, you can overcome almost all the financial transgressions of your youth. I’ve repeatedly demonstrated that you don’t have to be very smart to make smart money moves; sometimes you just have to stop making the bad moves. Another reason I like to share my mistakes here is to give credibility to the fact that even self-inflicted wounds heal over time.

I paid off $30,000 in debt by simply changing my approach to how and why I spent money. When I was younger, I would spend until the money ran out. It was only after I reached rock bottom that I finally turned my financial life around. There are times when the priority of your goals don’t become clear until you’re focusing on them from the bottom up.

“There is never enough money to do things perfectly, but there is always enough money to make a start.” – Budgets Are Sexy

Even in all the above examples, no one mistake has set me so far adrift that I can’t make another comeback. The same is likely true for your financial missteps. Be forgiving to your past self, know better and do better starting today.

But, you have to start somewhere and refusing to make a financial plan is not a (good) plan. Don’t spend another day procrastinating on what you can start fixing today. If you’re ready to correct the financial mistakes of your past, start here.

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