While enjoying this journey of life many of us have made mistakes that we wish we could undo. I am no exception. Although there is little that I would change about my life overall, when I think of all the money mistakes I have made in the last decade I cringe.
I know that what’s done is done, and you can’t actually go back and change your past. However, reflecting on past mistakes and learning from them can be very helpful. Therefore I’ve decided to list a few money mistakes that I have made and what I would have done differently. By doing this I hope to avoid making these same money mistakes in the future.
Money Mistake #1: No Financial Plan
Not having a financial plan in place has been one of my biggest financial sins. I feel as though my wife and I have worked just to survive and have very little to show for it. At the end of each month we wonder where all of the money has gone.
In the past we’ve tried to create a monthly budget. However, one stumbling block has always been my income. Nearly half of my income is commission. This makes for a very inconsistent income stream and thus has created problems for creating a realistic budget. After a few years of trial and error, I think we’ve found a system that may work for us (I intend to share it once most of the kinks have been worked out).
For the first time ever, my wife and I have a realistic budget in place for 2013. I know that one week hasn’t even passed, but we are very excited about finally having a plan. We’ll be able to tell our money where to go rather than wonder where it’s all gone.
Money Mistake #2: Whole Life Insurance
At 23 I moved out. I didn’t have a roommate and my girlfriend (now my wife) didn’t live with me either. With virtually no safety net I often felt scared and alone. When looking back I often wonder how I financially survived on my own.
During this period in my life I thought that it would be wise to buy life insurance. Honestly, I’m not sure what my reasoning for this was. I didn’t have any dependents and I never had anyone co-sign a loan for me. If the unthinkable happened I wouldn’t have left anyone in debt.
Being ignorant of the various kinds of life insurance, I allowed a smooth talking insurance salesman with colorful charts to talk me into purchasing a whole life policy for $50 a month. I could have purchased a twenty year term policy for $10 per month that would have paid five times the amount of the whole life policy.
Two years later I wised up and cashed in the policy, receiving only a fraction of what I paid into it. In the end I learned the importance of researching something before you make a purchase.
Avoiding Money Mistakes
I could have easily avoided these money mistakes by planning ahead and researching. Edison may have said that, “Genius is 10% inspiration and 90% perspiration,” but knowledge is still power. Without planning ahead and having knowledge, it doesn’t matter how much perspiration you have.
Have you made any money mistakes that you regret? What would you have done differently?
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Glad I’m not the only one. Made some right mistakes as a student, as did my wife. We’ve back on track and have certainly learnt a few lessons!
Jamie Dickinson recently posted..Shopping Via Your Mobile
It’s a shame that our culture doesn’t emphasize financial responsibility more. We’re taught the skills that allow us to make money, but not those to help us handle it.
My major mistake was not being passionate enough about my own future. Once I saw the light at the end of the tunnel with the possibility of an early retirement I cared enough to devote my full attention to the plan.
Once I was invested in my future, working out the details has been enjoyable (for the most part). I bought things that I thought made me happy – they were financial mistakes. Things like new TVs, games, computers, a car etc.
I feel like I have a good grasp now on what makes me happy and I’ve discovered that it has nothing to do with spending money. Naturally this realisation has made it very easy to save much more money than I used to.
James @ Free in Ten Years recently posted..New and Improved Monthly Report: December 2012
I feel the majority of young people don’t realize the value of compounding interest. The more that you save now means less overall that you’ll have to save. A lot of people don’t realize it until it’s too late.
My wife and I have been contemplating life insurance over the last few months, but as a part of our retirement package we are forced to take part in compulsory life insurance and so there just didn’t seem like much point getting a second insurance plan.
It is probably a big mistake not to move to a different fund and get separate life insurance that is cheaper, I might have to look into it now.
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Whole life insurance was something I bought without knowing what it really was. All of those pretty charts and smooth talking got me. After I took a hard look at it I realized it was a terrible choice for me.
Glad to see I am not the only one in the same boat.
My biggest mistake was with credit cards, and that’s one I’ll never be making again.
John S @ Frugal Rules recently posted..Working From Home – A Mom’s Perspective
While credit cards can be a useful tool, using them as an extra source of income is bad. I feel into using them as an emergency fund and am paying for the lack of preparedness.
We are in a lot of student loan debt that is kind of a burden (I say kind of because we have become accustomed to the monthly bills..similar to becoming accustomed to automatic deductions to your 401k, etc.). I suppose going into a lot of debt for education could be a mistake, but it honestly has motivated me to work harder at my career, start a website, develop skills, and look for side income (such as the basement rental at our new house). All you can really do, though, is learn from your mistakes.
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I don’t think people in our country really think about the consequences of education debt before they take it out. You can make a lot more money with a degree. But some people take degrees at expensive private schools that don’t end up paying for the cost of the education.
Thanks for the tip on the whole life insurance. I am looking into buying term for my boyfriend and I and have heard that thats the best way to go. Always good to hear it from someone else.
Debt and the Girl recently posted..Review of 2012 and PF Goals for the Year Ahead
Everyone’s situation is different. In my situation it was definitely a mistake. Actually, I don’t think I should have had any life insurance before I was married because no one was financially dependent on me, But that’s another story.
Hey! No 2 is an easy mistake… Luckily my work offers a good death in service payout so it is not something that I worry about!
I wish that it was something that more people knew about. Some salespeople can make it seem like a no brainer. Sadly, when I looked at the actual numbers it didn’t make sense.
I’m sure we have all made some dumb mistakes from time to time. I bought a $25,000 car once with no real way to pay the payments. Luckily I figured out a way to pay without ruining myself. I definitely learned from that one.
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Wow. That would have been a pretty scary financial situation. I’m glad that it worked out for you. I’m guessing that’s a more common occurrence than you would imagine.
My biggest money mistake was using my credit card too much, way too much. I also regret not using a budget earlier in life and getting control sooner. You live and learn!
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Yes. Those two seem to go hand in hand. When you don’t budget you can sometimes spend money without meaning too. Adding in credit cards can compound the problem.
I have made many mistakes, one of them was buying a piece of property without doing my research properly. It turned out fine but thanks to luck and not careful planning. It could have been really costly.
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Buying property can be very tricky. After our home inspection there were a few things that made me question purchasing the property, but the inspector and agent said that things were fine. Sometimes I wish I had listened to me gut though.
Oh my goodness, money mistakes? Where do I start? We spent the first 15 years of our marriage bumbling along with no plan and no budget and no communication moneywise. Now we’ve finally made a plan and are on track to un-do all of those past mistakes.
I guess the take away here is: forgive yourself, make a plan, and move on. It’s never too late!
Great post!!!
That’s a great point Laurie. Some people think it’s too late for them to change. But I agree with you that it’s never too late.
One of my mistakes would be not starting to save for retirement in the first year missing out on employer match. We has 6% matching. I hate its like leaving money on the table.
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Missing out on that match is something you’ll never get back. I remember when I first found out about my wife’s match. It was like discovering you’ve been leaving a stack of $100 bills on the ground and walking past them.
I would need a full day to write out all the money mistakes I have made. But I’m human…we’re human. That’s life…just gotta try and learn from them (sometimes more than once) and move on!
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Those were two of the mistakes I felt the most foolish about making. The first mistake could be considered the cause for the rest. The second was lack of knowledge. Planning and learning about money can really help you avoid making mistakes.
I made mistake No 2 also. I was told how Whole Life was this great investment opportunity and how it would practically pay for itself after only a few years. After about 5 years of drinking the kool aid, I finally switched up. That great investment I was building up? I got NOTHING in return after fees of course!
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I think I got back a few hundred dollars. It definitely was not the investment vehicle they said it was.
Congrats on your budget for 2013. I like the word “realistic” – that is the key for my wife and I as well.
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Thanks Kyle. When I tried budgeting before I tried to use templates that suggested a certain percentage. These templates didn’t fit with my lifestyle. I’ve learned that you need to create a budget that works for you.
I think everyone has made a mistake or two, though the degree to which the moves where bad probably varies a lot from person to person. I made a few moves when younger, where I didn’t take job opportunities that could have helped me a ton in the long-term but instead focused on short term needs. Live and learn!
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Some of the best lessons have to be lived in order to be understood. Mistakes are only made by people who are trying to step outside of their comfort zone
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That’s a good philosophy to live by.
Hi Justin,
A lot of people commit these mistakes. Your ideas are well presented. It is really important to have a sound financial plan. Moreover, we all need to avoid money mistakes through advance planning.
Mine would be neglecting insurance, along with a few others! I wrote more about this last year: http://nzmuse.com/2012/05/friday-five-my-worst-financial-decisions/
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