My Biggest Money Mistake I Wish I Could Go Back and Change
Do you have a huge money mistake you wish you never made? Chances are you do. If it makes you feel any better, there are plenty of other people out there who have major money regrets. The biggest financial mistake people have often involves not finishing (or completing) a college education.
A recent survey conducted by personal finance comparison website finder.com revealed 21% of respondents regretted not finishing college. The second biggest regret respondents had was letting their partner control all the household finances. Roughly 19% said they made this mistake.
The Cheat Sheet asked a few people to share some of their biggest money mistakes. We’ll also share some interesting examples from around the internet. So, sit back, grab a beverage, and learn from these money disasters. Here are some of the biggest money mistakes people wish they could go back and change.
I gave in to lifestyle inflation
My top money mistake was to let lifestyle inflation creep out of control over the years. Every few years as I made more money, I spent more money. I realized three years ago that I was living in a million-dollar waterfront house that I could easily afford, but it was excessive for my needs. I sold the house, then downsized, paying cash for a third of the cost. That removed a huge monthly payment and put a lot of money into my investment account. Had I continued to maintain a steady lifestyle earlier in life and instead put higher earnings into an investment account, I could have easily retired in my 30s.
Brad Kingsley, financial fitness coach, MaximizeYourMoney.com
I didn’t save my raises
My biggest money mistake was not saving my pay raises. This is a big mistake people make that perpetuates consumer debt. If you get a raise, you should take that extra money and make it work for you instead of buying new toys. Instead of spending your salary increase, it’s better to invest your raises, start a side business, or pay down principal on your mortgage, for example.
Glenn Carter, founder, The Casual Capitalist
I bought a home I couldn’t afford
We [gave] our home back to the bank through a deed in lieu of foreclosure. A home of your own is the American dream — or at least that’s what I’ve been led to believe my whole life. Unfortunately, I wasn’t given the skills to know how to actually achieve this goal growing up. Instead, my husband and I got ourselves into a pickle that we couldn’t get out of unless we gave up our home. … There were two major mistakes and a lot of bad luck that led us to this point. We bought the home with a zero-down mortgage, and we weren’t informed on how to successfully navigate the home-buying process to ensure we didn’t end up with a stinker of a house.
Lindsay, written on her blog, Notorious D.E.B.T.
I became too focused on making money
Money is not everything, and it’s not worth sacrificing your health, family, friends, or other experiences for it. I have spent too much time over the past five years working 80-plus-hour weeks and trying to make and invest as much money as possible. While I have been able to achieve my goal of becoming a millionaire millennial, it has been at the expense of some of my personal relationships and health (gaining almost 40 pounds over the past five years).
I have lost a few friends and strained other relationships because I’ve spent too much time staying late in the office or hustling on the weekends. Even though I truly believe that having money is freedom, money is really just a tool to make experiences in life possible. Don’t put making money first — it’s just not worth more than your relationships or experiences. Since I stopped putting money first I’m a lot happier, healthier, and living a wealthier life. Remember there is a difference between being rich and being wealthy.
Grant Sabatier, written on his blog, Millennial Money
I put all my money into one asset
In 1998, I officially entered my midlife crisis, kicked the dust of the corporate world off my boots, and moved my family to Aspen, Colorado — one of the most expensive housing markets in the country. Though I knew how important diversification was, I chose to buy a house that became most of my net worth. I had spent nearly two decades working hard and living frugally and essentially bet everything I had worked for on an unspectacular house in a spectacular location.
While I could afford the payments, I knew our financial future was largely tied to one asset. That, combined with high maintenance costs, kept me awake at night. A couple of years later, we sold the house at a profit and moved to Colorado Springs, where real estate cost only about a tenth of what it did in Aspen. Not too long after we sold the Aspen home, the housing market declined. Had I waited another year, I’d have seen my nest egg plunge. I violated the cardinal rule of diversification but got really lucky.
Allan Roth, financial planner, as told to AARP
I let fear stop me from investing
I stopped investing for an entire year during the financial crisis. I was young, had a very limited understanding of market cycles, and freaked out when my investments lost a chunk of their value. While I was squirreling money into a savings account, I missed out on some seriously good deals. Even worse, I bypassed the chance to earn compounding returns on fresh capital for a whole year. Now, I think long term and plan to ride out future market corrections by always continuing to invest.
I blindly followed advice
I blindly followed what everyone told me to do in terms of education and careers, rather than ever actually stopping to think about what would mesh with my personality, ambitions, abilities, and limitations. Because you know what? Corporate law only pays well if you stick with it for more than two months.
At this point, I’m 30 years old, and I’m just now taking the time to sit down and ask myself, “What can I actually do for a living that will be sustainable in terms of my lifestyle?” If I would have asked myself that at 18, I’d probably have close to a decade of steady paychecks under my belt right now, versus a spotty work history and six figures in student loans.
A reader from Billfold
I lent money — and never saw it again
My husband asked for a loan to cover a cash-flow crunch at his start-up architectural firm. Blindly, I gave him the money even though I didn’t: (a) know much about his financial past; (b) ask about his business plan; (c) get a proper IOU; or (d) follow up to see how the money was spent. One loan became several, and in the end I lost my entire life savings. Plus, the marriage imploded.
I made an early withdrawal from my IRA
My first college teaching job required a daily 64-mile round-trip commute from my home. I was driving a semi-reliable used Ford LTD with a big, gas-guzzling V-8, so I decided I needed a different car. I didn’t want to buy another used car, but I didn’t have much money to spend. The Yugoslavian-built Yugo had just come on the market, and at $3,990 it seemed like a good deal. After the trade-in, I still needed $3,300 to complete an all-cash deal. I had little money and didn’t want to go into debt with an auto loan, so I raided the IRA that I’d opened three years earlier.
Given the average rate of return over the ensuing years, the $3,300 that I pulled from my IRA would have grown to nearly $50,000 by my normal retirement age. The Yugo was great in the snow and always reliable — until the timing belt snapped at 86,000 miles. That mishap bent several valves and damaged the engine so badly that it wasn’t worth the cost of the repairs at that point. I ended up buying another small car — a used car because it was all I could afford. At tax time, I also had to pay ordinary income taxes on that $3,300, along with a 10% penalty. And I’m also $50,000 poorer in retirement.
Timothy G. Wiedman, D.B.A., PHR, SHRM-CP, retired associate professor of management and human resources, Doane University
All of us make financial mistakes from time to time. Thankfully, there are tools out there to help us learn how to manage our money better, so we don’t continue to make the same errors. Here are some helpful resources:
- Personal Finance for Dummies
- Why Didn’t They Teach Me This in School? 99 Personal Money Management Principles to Live By
- The Total Money Makeover: A Proven Plan for Financial Fitness
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Read More: 5 Money Mistakes to Avoid at All Costs