Our Worst Financial Mistakes and What You Can Learn From Them

By Julie Rains. Last updated 19 November 2012. 51 comments
Photo: pedrosimoes7

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"Learn from the mistakes of others, because you can’t live long enough to make them all yourself." (Anonymous)

I’ve asked my fellow bloggers here at Wise Bread to tell you about their worst financial mistakes (and have included mine). Hopefully, wherever you may be in your living-large journey, you can learn from us. After you've read our story, we want to hear yours! Tell us your worst financial mistake in the comments and be entered into a random drawing for a $25 Amazon Gift Certificate! (See also: Common Money-Saving Mistakes That Can Cost Big Bucks)

UPDATE: Congratulations to Charile, our winner for the $25 Amazon Gift Certificate drawing. Thank you to everyone for participating!

Andrea Dickson

My biggest financial mistake was running up a huge credit card debt. The thing is, I did it three separate times.

I'm terrible with credit. I've known this for a long, long time. In fact, I knew before I got my first credit card that I simply could not be trusted with a credit card. That didn't stop me from getting one, though.

The first time I ran up several thousands of dollars in debt, my mom bailed me out, and then made me get a summer job to pay her back (I was a freshman in college). I worked the graveyard shift as a security guard for the summer — I'm not a night person. The worst part was that my mom had signed me up for the card herself, and her name was also on the card. She believed that the card would only be used for emergencies, but she soon learned that to me, "shoes" are an emergency, as is Starbucks.

The second time, I was 23 years old, and a boyfriend actually signed me up for a bunch of cards, using his own name to co-sign. I fought the idea, but he convinced me that he could hang onto the cards and that his good credit would build mine back up to acceptable levels. I managed to spend 5K so quickly that I'm sure his head was spinning. Incredibly, I managed to pay this off myself by simply digging in my heels and not spending any more money. I cut up the cards, ate ramen, and sent in a couple thousand every month. Mind you, I didn't have any significant payments that I had to make outside of rent at the time, so it was easy for me. I was leaving for China, so I wanted a clean slate for the trip. My then-boyfriend expressed regret at having convinced me to sign up for the card to begin with, since using my checking account had worked just fine for me up until I got the cards.

When I returned from abroad and found myself unemployed, I turned to those same credit cards (new ones had arrived in the mail). I treated the credit cards like debit cards, thinking that I would surely find a job within a few weeks and easily pay off the debt. When weeks stretched into months, and then into a year, I realized that I could not afford to pay off the debt. Over the course of 10 months, I rang up over 10K in credit card debt. I made all the payments, never delinquent, but when I realized how long it was going to take to pay down all that debt, I called a consolidation organization. They combined all of my debt into one big debt pool, lowered my interest payments, and charged me an ungodly monthly fee that was buried somewhere in the legal agreement that I signed with them.

I've long since realized that if I have access to money, even if it's borrowed money, I will spend it. That's why I've set up a system in which I can only spend what I have in my checking account, and money is taken directly from my paychecks and deposited into other accounts (for savings, mortgage, etc.).

It's sad, I suppose, that an adult can't trust herself to behave, well, like an adult, but that just happens to be the case for me. I've since sworn off credit cards, and in a way, feel liberated from their grip. I realize that all of my problems with credit stem from my own weaknesses and irresponsibility, so I don't blame the credit card companies because I rang up a huge debt. Don't get me wrong - credit card companies behave terribly. But there was no Earthly reason for me to behave as if I had more money than I did. I hurt no one but myself.

Lesson Learned: Credit cards can be dangerous; stick with the system that works for you.

Lynn Truong

LynnSigning up for beauty school.

It had been a year since I quit my full-time job to "figure out what I wanted to do" in life. I had been fooling around with gigs like background acting, and transcribing, and had run out of unemployment checks. My mom and friends were throwing pointed questions in my direction and I was feeling extremely lame for being unemployed. (See also: Feeling Stuck? 100 Ways to Change Your Life)

I'm also rather impulsive. I know this about myself, and so I've learned to mostly be able to distinguish the difference between things I know I'll get over in a few days if I ignore it and things I know I absolutely have to satisfy the drive for. Except in this case.

After getting an amazing facial one day, I suddenly decide that I want to be an esthetician. I think I would love to make people's skin beautiful. I don't think my anti-socialness would get in the way at all.

I do a quick search for beauty schools and find two good options. One is Citrus College — $1500 for a 600-hour course. I call for information. They tell me they're pretty full and it's hard to get in. I may have to wait a semester. The other is the Cao Institute — $6500 and their next class starts in 2 weeks.

I check the Cao out and everyone there is friendly and hip. The place is spotless and the students, dressed in all black, look stylish. They tell me they're more expensive because their classes are smaller, their teachers more qualified, and the owners have a lot of connections to help their students find jobs once they finish the course. The next class starts in 2 weeks and their deadline to enroll has already passed, but they could get me in if I sign up immediately. I sign.

Over the course of those 18 weeks, where I spent Tues-Sat, 9:30-5pm, I not only received a terrible education at a school run by completely incompetent directors, I decided I don't like giving facials, and wonder what in the world made me think I would like it. There were a total of 5 students in my class, and none of us went on to work at a spa.

Lesson Learned: Beware of offers requiring your immediate response, especially ones you’ve just uncovered and that cost $6,500.

Paul Michael

Paul MichaelIt was the fall of 2002. My wife and I had grown tired of renting, throwing our money away to help someone else pay for the mortgage. And although we’d only been married a short while, just over 18 months, we thought the time had come to buy a new home. That decision turned out to be the worst financial decision we have ever made, and we’re still paying for it.

We had not put together a plan for what kind of home we wanted, how far away from the city-center we wanted to be, what we could afford, we didn’t even have a down-payment. But no worries, you can get zero-down loans so why bother saving up all that cash? (Oh, how naïve I was).

We looked around for a few weeks and found a brand new home that had just come onto the market because the previous owners backed out of the sale at the last minute. I liked it (at the time) and thought it was worth the money. $188k for a new town home on the outskirts of Denver seemed like a good deal. We didn’t shop around to check, but what the hell. Real estate always goes up, we’ll stay in the house 5 years, cash in our equity and get a much nicer place. We rolled closing costs into the loan, too, and didn’t even haggle over the $20k of extras the previous couple had wanted in the house but that we didn’t really care for. The base price of the home was $166k, which I now realize we should have fought tooth and nail to get. I had no idea how much power I had at the deal by just getting up and walking out.

Anyway, it’s 5 years later and we’re still in that house. The housing market has slumped. It’s now worth less than $180k and we owe more than that. We have no basement and our family has grown from two to four. Storage is always an issue; we’re giving away all sorts of things to Goodwill and other charities on a regular basis to stop ourselves from living in a junk pile. We have done our best to decorate the place well, so that we have a nice cozy place to call home, but at the end of the day we’re paying a ton of cash each month for a tiny house that’s losing money every year. We want to move, but are afraid of making the same mistakes again.

What type of credit card are you interested in?
How much do you spend per month?
Do you carry a balance?

We know now is the perfect time to buy, the slump is favoring buyers. But we are also sellers. Do we wait until our own home is worth more than we owe (which could take years) and then buy a home that has increased in value 20% from what it is today? Or do we take advantage of the great deals around right now, but try selling our own home in a depressed and lackluster market for even less than it’s worth, just to escape? It seems like Hobson’s choice. And all because we just didn’t have the patience or the maturity to do our homework and weigh-up our options five years ago.

Lesson Learned: Research the market in your corner of the world and don’t feel pressured to become a homeowner just because it seems like the right thing to do.

Julie Rains

When my husband decided to leave his employer of 18+ years, he had a retirement savings consisting of an ESOP (Employee Stock Option Plan) and an ESIP (Employee Stock Incentive Plan), the company’s equivalent to a 401(k). He had company stock in both plans.

Now, I know what you’re probably thinking; “whoa, you had a concentrated position?” Okay, maybe you weren’t thinking precisely that but rather “don’t put all your eggs in one basket.” (A concentrated position means that most of your portfolio is in a single stock).

Though both my husband and I were business/finance majors, he thought it would be wise to consult a CPA and financial advisor with experience in handling the ESOP distribution and his pending displacement. By the way, most advisors and people with three or four letters next to their names will either 1) sweat and squirm at the prospect of having a client with a concentrated position or 2) rub their hands together greedily thinking of ways to make money helping you diversify.

Thankfully, our people (the CPA and advisor) didn’t get particularly nervous but they weren’t particularly helpful in looking at the big picture. Instead, they spent time figuring out the tax implications of receiving the ESOP distribution, which was important but…

We were so focused on the ESOP that we barely paid attention to the ESIP and the rules that governed the plan. We decided, independently since the advisor didn’t bother to discuss the ESIP as I recall, that we should diversify holdings in that plan. What we learned too late however is that when the ESIP transferred from my-husband-the-employee to my-husband-on-his-own, all of the shares of stock were sold immediately rather than being transferred or rolled over to a tax-deferred account or IRA, awaiting our sale of them. The stock price happened to be at low value on the transfer date; just a few months later, the price doubled and, from my perspective, we lost tens of thousands of dollars.

Lesson Learned: Pay attention to all aspects of your financial life.

Sarah Winfrey

My worst financial decision was choosing to take out grad school loans without thinking about what they would mean for my life after school.

I didn't have undergrad loans, due to an inheritance from my grandfather and my generous parents. But, when it came time for grad school, that money had run out. I signed up for loans right away — it seemed the only way to go. I wanted to go to school, and I wanted to finish relatively quickly, so I wanted to go full-time. I half-heartedly wondered if that was a good thing, and if maybe I shouldn't take one more year through school but earn a little bit more money, but that wasn't what I wanted. I wanted to go, I wanted to go NOW, and so I went.

Regarding other matters in my life, that timing was good. But $25,000 is a lot more than I thought it was 4 years ago. I have a job, I can pay, but they tie me down. I had to get a job after school, which means that I'm working outside my field until I can find something in it. I can't work as a teacher overseas unless they pay enough to cover my loan payment. They extend my financial commitment every month, making it that much harder for me to go freelance.

Overall, I'm not sure what I would have decided had I thought more. But I wish I had sat down and thought about it, or even talked to people who were paying off their school loans, before I clicked the button on the internet. That was part of it for me — it was so easy to apply and accept my loans over the 'net. In some ways, it would have been more real (and therefore worth more thought) if I had to sign my actual name to an actual paper with an actual pen.

Lesson Learned: Just because getting a loan is easy doesn’t mean paying it off will be easy.

Will Chen

My biggest mistake was my decision to stop living with roommates after grad school.

"I can't have roommates," I said to myself. "What if I want to cook naked? What if I have a bunch of women coming over all the time?"

Alas, I never really cooked and there wasn't exactly a traffic jam of the opposite sex. I did walk around naked a lot, though.

I recently did an informal survey of my friends who lived with roommates. They told me that not only do they save money from the obvious rent and utility sharing, but they also save cash by alternating the cooking, providing free entertainment for each other, and keeping each other accountable during their budgeting and personal development projects.

I thought living on my own was a sign of maturity. But in the end, the mature decision was to recognize that I need to make real sacrifices to achieve my financial goals, even if it meant putting on some pants once in a while.

Lesson Learned: You may need to make sacrifices to achieve your financial goals.

Feel free to join the party: In the comments below, tell us your worst financial mistake story and lesson learned, and you'll be entered in a random drawing for a $25 Amazon Gift Certificate. Deadline to enter drawing is 6/17. Don't forget to enter your email address in the field provided and only one entry per person!

UPDATE: The drawing has ended. Congratulations to Charlie, our winner of the drawing!

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.

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Guest's picture
Alfa

Paying big ticket items straight in stead of in installment in the past were my worst financial mistakes.

Back then, I didn't realize that the pros paying some of my major purchases using special installment plans far outweigh the cons.

Guest's picture
Chris

Okay, so I'm still feeling the burn of this one because it's so recent but so irreversible.

I just finished my first year of college. Scratch that- I just finished my first year that I had to PAY. The twist is that in high school, I had a very high GPA, sports, music, clubs, community service, the works.

My worst financial mistake? I was too lazy to apply for the full-scholarship which I most likely would have received.

Lesson learned: Spending a short amount of time (making smart decisions) now will save you from spending a long (really long) amount of time earning money later.

Guest's picture
Guest

i just did (or didn't do) the same thing and missed out on at least $7000. My family is very low income too, so I am feeling awful.

Guest's picture
Aaron

I imagine that I am not the only person to have done this but I feel that this is the one of the worst financial mistakes I have ever made. In college, I took out a number of loans to cover tuition, expenses, etc. There is nothing wrong with that but the kicker is that in January of every academic year, I had received a loan refund once the bills for the current and previous semesters had been paid. Instead of sending the refund back to the loan company or even paying rent and bills forward I took the money to the mall and engaged in a shopping spree for the ages. I bought 600 dollar shoes and 100 white tee shirts.

The lesson learned is that borrowed money is never personal money and that caution must always be used when borrowed money is used.

Guest's picture
shawn

...was hardly a mistake. It was the right move and I hope you'd do the same thing every time. The value could've just as easily been cut in half as doubled.

Julie Rains's picture

I see your point - but I wished I had known how the plan worked so that I could have made an informed decision. I had followed this company stock for many years and it would often lose 1/2 its value and then double its value over the course of a few months. Still, if the advice from the advisor on where to put the money (a well-diversified portfolio, which I followed very precisely) had generated some returns rather than stagnating for years, I guess it would not have seemed like such a poor decision.

Guest's picture
guest

My worst financial mistake was never really thinking about money or educating myself about it until I was 24 years old. I didn't know what a Stafford loan was and I honestly didn't even realize I had 17k in a school loans until my parents handed over the paperwork after I graduated. Sure I had signed stuff but I never knew for what amount or that I would actually have to pay it all back with interest, because I was naive, confused, and wasn't really paying attention. Fortunately my parents raised me to work hard and live frugally so I wasn't a big spender, but unfortunately they didn't explain much to me about loans, saving, investing, and how money works, so I wasn't a big saver either. It took temping in a financial aid office for me to wake up and educate myself about personal finance and my future. I was (and still am) embarrassed and frustrated that it took me that long and I wasted so many years without saving a dime or learning about money. I wish I could visit myself in high school to kick myself in the butt and tell me to pay attention to how much college will really cost, and to open a savings account and not touch it.

Guest's picture

I got my first credit card in college, and my debt immediately started to snowball. By the time I was 25, I had $30k in student loans and $20k in debt. And my job paid a measly $10/hour. I couldn't make my payments, and debt collectors started to come after me. I was a nervous wreck, and the debt hung over my head like a black cloud.

Thanks to a (financially smart) generous boyfriend (now husband), I got out of credit card debt. In some cases I had to "settle" the debt. The company accepted less than I owed just because they were happy to get something. My credit score was rock bottom.

Now we never carry a balance on our cards. But it was an expensive lesson.

Lesson Learned: Never charge more than you can afford to pay.

Guest's picture
Brittany

When I was 18 I bought a Chevy Cavalier to start building my credit. It was reliable and at the time I was driving 150 miles a day to school and work. Two years later I had already put 60,000 miles on it, which was the mileage for the warranty expiring. My fiance and I decided that we should get a Jeep Cherokee since, eventually, we would start a family. After finding a car that seemed reasonable, $18,000 which included the amount i was upside down on the cavalier, we decided to start negotiating the price. The finance manager said they don't give the low interest rates to people under 21, but that he would work with us. Four hours later, they had only come up with an interest rate of 22%. Not knowing how bad that actually was and since they had informed me they sold my car already, i signed. Total cost of the car ended up being $36,000, twice the sticker.

One year later my fiance and i broke up, I took the jeep to a friend that started working at another dealer and bought the Mustang i really wanted with a .9% interest rate. That Jeep was on my credit until 7 years later. I told them I'd rather have bad credit then pay them.

Guest's picture
Lise

The financial mistake that most readily comes to mind is getting bullied into signing up for a two-year gym membership that I couldn't get out of. Even when my 2-year contract was up, I had to send the place a signed affidavit just to close my account >.<

I sometimes wonder, however, if getting a new, better-paying job --> buying a house (with zero down) was a bad decision, though. A year later, I'm not exactly in love with the job, but I feel tied to it because I have this huge mortgage payment to tackle, and we can't pay it with just my husband's income. We pay extra every month, but it's a very large payment, and I'm uncertain how the value of the house has changed since I bought it. At least we like the house a bunch...

Guest's picture
DivaJean

I bought a house for myself when I was going thru a bad, emotionally charged break up.

The house was what I needed at the time- to have somewhere to call my own and nest myself- but years later, I could not get rid of it to save myself.

I tried renting it out when I couldn't sell right off the bat- which sounds better than it is. I had a total of 3 different tenants over 5 years- each of which did more damage on the home than they paid out in rent. I had to re-frame walls, buy new appliances, etc. One person was even a co-worker of my life partner- you just never know how people will work out as tenants.

Ultimately, I lived in the house 2 out of the 10 years I owned it; rented for almost 5, and paid the mortgage on an empty house for almost 3 years. Then the final blow- a rash of copper pipe thefts in basements in our area (central New York)left the basement flooded and tons of pipe work gone. I ended up having to do a short sell on the house- the bank was very displeased but there was nothing I could do. So besides the $800/month for 3 years, the lost money in rental disasters, upkeep on the house-- I ended up having to PAY $10,000 of an inheritance into pipework for someone to buy the house- and me walking away with nothing further owed.

Do the math. I have won this.

Guest's picture
Cheryl

By FAR...running up credit card debt in my 20's...that took me into my 40's! I thought it was SO cool to have credit cards and be able to charge things...what a dummy I was. Charging Christmas gifts, and all sorts of things that did not need, and no longer have..took years to get out of thet hole! If someone offers you a credit card - JUST SAY NO kids!

Guest's picture
Charlie

In 1964, I owned, free and clear, a 1957 VW Bug. I was in electronics training schools run by the Air Force in Mississippi making $200.00 a month as a 1st Lt.

A friend took me to a dealer where I discovered a 1960 Jaguar Mark {some Roman numeral] four-door sedan for sale...$2500 and my VW. Jaguar is now part of Ford, but in 1964 it was not. Such a deal.

I still owed $3,000 on graduate school loans. But living in the BOQ with meals provided I figured, "No problem!"

Not long after I became the proud owner, the Jaguar showed signs of a bad valve [a common problem I didn't see on the test run].

Unable to afford the cost of repair, I sold the car to a wealthier officer [more appropriate for his class level] and ended my military training going to class on a bicycle.

Guest's picture
Karla (threadbndr)

My worst financial mistake was not starting to save for retirement earlier. In my 20's I had a state job that was eligible for the equivalent of a 401(k). There was no matching, so I didn't participate. I wised up by the time I turned 30, but those first few years were lost forever.

Some saved earlier is better than more saved later *G*

Guest's picture
Yan

Guys/girls, I appreciate your openness. I love blogs because you learn directly from other people experience.
My worst financial mistake was to procrastinate with buying our home. We have been more fortunate than Paul in that respect that we did get the right sized house for our family but still if we did it one, two or three years earlier we would have saved a lot.
If I get to win anything, please donate it to your charity of choice.

Guest's picture
amy

Somehow, in spite of not having to pay for college, working full-time for a year following college, and going to graduate school with a stipend, I still haven't managed to save or invest a thing!

Guest's picture
Theo

I worked while I was in college, so by the time I graduated, I had enough money saved up to completely pay off my loans. Well, I payed them before they started accruing interest, but I later realized that my interest rate was low enough (2.3%) where I could have made more money by placing the funds in an online savings account while paying off the loan monthly. Also, I could have increased my credit score since I had no credit history while attending college.

Lesson learned: Not all loans are bad

Guest's picture
Liz

I made this one, too-sure wish someone would have explained this to me! My loans were at 3.5% and I came into a lump of cash-put it all on the student loans. Fast forward six years, and after a stint in the workforce I'm in grad school borrowing like I'll never have to pay it back, at 6.8%.

P.S. Everybody keep posting dumb grad school financing mistakes-I love the cold, scared feeling they give me.

Guest's picture
Ceri

When I was in high school I was flush with money. I had bad examples in my parents and my brothers, who ran up tons of loans, spending all of this borrowed money on vacations. When it came time for me to go to university (a decade later than my siblings), I entered with poor financial savvy. I spent all my hard earned money on ridiculous things, and trips, when I could've started saving it in a retirement savings plan, or used it to pay my tuition. Now I have almost $60,000 in education debt, but thankfully, no credit card debt, and it's going to take me thrice as long to clear all of it if I live like a pauper. And to think, I could've actually paid of all of my loans by the time I graduated, had I been more careful with my earnings (I also worked during University but squandered it on useless things). I treated my own earned money like it was a never-ending fountain, and treated my student loans as an open bank account.

Lesson learned: Before embarking on anything huge like going to University when you're paying for it on your own, or buying a house (in the future), research all of your options, get educated about financing and finances, and check to make sure you can afford it.

Guest's picture
vje

My worst financial mistake is borrowing money to family members.

About 3.5 years ago I borrowed $2,000.- to my sister inlaw and her husband to help them get back on their feet. We made no formal repayment plan, because I believed they would be responsible enough to do it on their own. Oh what a silly girl I was. :)

Over the 3.5 year period the payments were scattered at best. During that time they got their own place, went on 2 vacations, bought a new vehicle, got pregnant, borrowed more money from other people, and various other poor financial decisions. After they became pregnant the payments ceased.

They finally paid me back this past spring with part of their tax refund. The kicker was that they complained, while handing over the check, that there would be no 'fun money' left for them after paying me and others off.

Moral of the story? NEVER borrow money to family or friends, NEVER. Especially when there is a history of very poor financial decisions. The toll it has taken on our relationship has been difficult and has yet to fully recover.

Guest's picture
Guest

er, thats called loaned, not borrowed.

Guest's picture
Mary

Mine is a real doozy!

I graduated from college in 2004. Though I'd gone on job interviews, nothing had worked out, and the lease was up on my apartment. I moved back to my parents' house and then I got an email: "We have a three-month contract for you, you'll need to move to California to take the job." This company is pretty well-known in the geek world; they make entertainment products, and breaking into this field is very difficult. (For every job that's available, there are twenty or more qualified people.)

I ended up staying for two years. The company employed a lot of independent contractors, but a major problem was that the accounting department at the company was so resistant to these kinds of arrangements that they wouldn't even begin to process any independent contractor invoices until 30 days after they were submitted. (An improvement on their previous position of waiting 90 days, I guess.)

I had just moved 1,000 miles, I needed to get a place to live, but I didn't have any savings. Worse yet, I didn't get paid in a reasonable fashion during the entire time that I worked for the company. (I went from September 2005 to January 2006 without a single paycheck.) As a result, I ran up huge amounts of credit-card debt, and eventually had to borrow money from my parents, at the end, to pay my rent.

The mistakes that I made were numerous, but two big ones stand out:

1) Taking my slacker then-boyfriend with me, who fleeced me out of $2,000 when we finally broke up;
2) Getting a job as an "independent contractor" and not setting aside any money for self-employment taxes. Never mind that I was living in one of the most expensive areas of the country; never mind that I was always one and often two months behind on being paid. This past year, I owed $3,200 in taxes.

Moral of the story: Working for an entertainment company may sound great, but make sure you have all the facts before you decide to do it. Oh, and don't date losers.

Guest's picture
Michelle

I ever made was marrying a musician who didn't enjoy performing.

Guest's picture
jos

well, i have done some stupid financial things in the past, ive charged things(clothes, electronics,etc) that i could have paid for cash (maybe 2k worth of stuff that ended up costing me 4k) i "smart bought" a car that was out of my price range that is still hurting me daily... 20k car, rolled over 5k into it, 48 payments @ 412 month with a 14k buy out.... I was also unemployed for over a year because i quit a job without thinkign a head and trying to line a new one up, granted it was a horrible stressiful job, but it payed the bills, while i was unemployed i went back to school to "live off the loans", bad mistake, i know, but this is nothing compared to my worst, most costly, haunting mistake.

And that was borrowing over 80k for undergraduate level college. I was under the impression that it didnt matter, it didnt add up, no matter how much i borrowed i could play it back slowly at my own pace, for say $50 a month. I never expected to have a student loan payment that was equal to my monthly salary... yes, equal to my MONTHLY SALARY!!! how do they expect me to pay for rent? food? gas? electricity?
they dont care, student loan lenders dont take into account that different majors lead into different jobs with different salaries.

My education cost well over 100k, i got grants and schloarships and even worked for a few summers to pay for part of tuition and still i owe 80k.... and for what i dont even have a good job, i dont even make 50k... If someone would have explained to me just how much going to a 25k a year school was going to cost me, how much i would be paying back and for how long i would have seriously considered a state school. Not that I can change anything but if i would have gone to state school my grants, etc would have covered the cost of attendance.

Guest's picture
60 in 3

I have three:

1. Not really focusing on my career early on. My earning potential could have been a lot higher now with just a little bit more effort early on.

2. Taking on a home remodeling project without knowing what I was getting into. I ended up $60,000 in debt.

3. Quitting a job without having another one lined up. A year of unemployment later and my savings were nearly tapped out.

Gal

Guest's picture
Yanik

My worst financial mistake was believing my dad was an authority on personal finances.

Some parents teach their kids about saving, investing and wealth building but what happens when you start life thinking that money is bad?

For the record, my parents were two hard working, intelligent and responsible people who lived their life with integrity. They paid their bills on time and lived frugally. As children, we always had everything we needed and we were happy. My parents have a strange love-hate relationship with money. They have never owned a home of their own, they have never invested in anything other than their life insurance and have never splurged on spontaneous crazy things like a trip to Paris or a big screen TV (scratch that last one, they bought an HD TV last year...).

When I was a teenager, my dad was the single most important person in my life. He was my hero, my teacher and my friend. I respected him and I also feared his disapproval. As such, he had tremendous authority over me and my life choices and I accepted his influence freely and willingly because I knew that he loved me and wanted the best for me.

In retrospect, although I believe he meant well, my father was the worst possible financial advisor ever. It has taken me years to unlearn the lessons he taught me and I'm still discovering deep rooted money issues that affect my daily life. (In his defence, my dad was born during the Great Depression and it profoundly affected his relationship with money...)

Top 5 basic Money mistakes I learned from Dad.

1- Money is dirty. I learned my first money lesson at a very young age. My parents used to go ballistic when I would find pennies in the couch or on the ground. Don't touch that! Don't touch your face... money is dirty! Don't put that in your mouth! .. Do you know how many hands have touched that they would say as they briskly washed my hands and face. (Meanwhile they joke at how my sister used to scratch used gum off the floor and how it would make crunching sounds as she chewed it)

2- We're not made of money... or my personal favorite, you can't have everything you want. I'm a mom now, so I understand what they meant by that but I try to help my son understand that he has to make choices. I also tell him that he CAN have anything he wants but that sometimes, he has to be a little patient or I ask him if he really needs 4 spiderman action figures.

3- An allowance? What's that? My parents didn't believe in giving me an allowance in exchange for the chores I did around the house. The downside : I felt frustrated because my other friends all had their own money to buy gum or a bike, play at the arcade, or whatever while I had to beg my parents for a dollar or two. Plus, I was almost always turned down as my requests were viewed as wasteful. The upside : I started baby sitting when I was 12 and although I still had to argue about what I could buy with my own money, I felt more independant.

4- Being rich is a crime. I remember watching Lifestyles of the Rich and Famous one night and hearing my parents make comments about how disgusting and wasteful it was to live in such opulence. Is it a crime to be wealthy when so many have nothing? I am still struggling with this one.

5- Debt is a part of life. One day, I told my parents I wanted to be a multidisciplinary artist/actor. They stared at me in disbelief. -With a brain like yours why would you want to waste your life like that. You'll never make any money, you'll starve and live a life of misery. A higher education is the only path to personal freedom. (While it may have been true in his time, I've met plumbers and waiters who make more than University grads.) -But Dad, art is my passion. - You will go to University he replied. - Will you help me pay for it? - No. You'll work and get student loans, he said. - But I'll have over 25K of debt by the time I'm done... Don't worry Yanik, Debt is a part of life. Everybody has debt.

Ultimately, I think this was the worst piece of advice my dad ever gave me because it set the tone for how I viewed money and debt for the first 10 years of my adult life.

I left my parents house when I was 16. I went college and then University; I lived in poverty as a student and racked up a student debt that I am still paying for today. (more than 15 years later)

Later, I viewed credit cards as my safety net. I didn't care about debt because I had accepted that debt was a part of life. Although I was eventually making really good money, I was more interested in seeing money in my account than eliminating my debt. Furthermore, after feeling deprived for all those years, I rebelled (finally) and just wanted to be free to spend MY money (and then my credit) on whatever I wanted, whenever I wanted. Things were going great till the day I realized I was standing on the edge of a very slippery slope.

As I turned 30 and had my son, I realized I was a slave to my debt and had no real personal freedom. So after going through shock, denial, anger, and depression I decided to make conscious changes to the way I view debt, money and abundance. Having money is good after all!

I'm not playing the blame game...Dad may have planted the wrong seeds; but in the end, I'm responsible for my life and my finances. And so, the most valuable lesson I've learned through this is to check peoples credentials and assets as well as their own personal relationship with money before I accept their advice on how to manage my money. Now, I choose my teachers wisely and work hard at being a qualified teacher for my son.

Julie Rains's picture

I, too, am a child of parents who grew up during the depression (as is my husband). Their attitudes about money have definitely shaped me, though not in quite a negative way. Still it is hard to sort through, sometimes, why some of my younger friends don't seem to grasp the benefits of frugality while they must wonder why I don't grasp the cost of frugality!

Someone taught me an interesting term once: the concept of a counter role model -- people who you realize have somehow influenced you but in a way that you do the opposite of what they have shown you.

You are so right when you say you need to look at the person who is giving advice, whether it is about money, career, children. It is helpful to me to have some older friends so I can see how their story has ended (how their attitudes about spending have shaped their retirement or how their child rearing tactics have helped or somehow hindered their kids' development).

Thanks for sharing and best wishes on overcoming those attitudes.

Andrea Karim's picture

Thanks for taking the time to share that with us, Yanik. It can be tough to overcome bad money lessons that are drilled into you at a young age.

Guest's picture
amysan

My worst financial mistake - that I made twice (!) was to buy a timeshare. Yes, we fell for the high pressure sales tactics that are too good to be true and now are stuck paying an ever rising payment each year, that now that we learned to be frugal costs more than we would be spending on a vacation anyway. Plus we can't go to the places we want either because they aren't included or we never reserve them fast enough. Don't ever believe a salesperson who tells you that he will rent your timeshare for you so that you will make up the purchase price in the first year!

Guest's picture
Guest

This will be quite a long post, because I feel that most financial mistakes are really a series, or process of mistakes, that lead onto each other and compound the ill effects of each.

What follows is the story of the mistakes I made in the first few years of my post-high school life, in the related areas of university, work and lifestyle. I'm only just beginning to fix the damage now, almost ten years after I began sabotaging myself.

(Note: this all takes place in New Zealand, so some specifics my be alien to global readers, but the wider lessons are the same).

1) I finished high school and went straight to university, just like all my friends. The thing is, I didn't really know what I wanted to do, so what I did do (a B.A. in English and Media Studies), I did in a half-assed way, scraping by with Bs and Cs in my first year and a half.

2) I financed this first year and a half with my student loan: fees, books, living costs... not to mention the TV, VCR, skateboard, designer clothes, beer...

3) I also moved out of my parent's home at the first opportunity. I had a great time living independently, but I spent money I didn't have on rent, food, utilities etc.

4) Realizing I hated university, I dropped out and went to work. Not a bad decision in itself, but I now had half a degree and a hefty loan, which was interest free while I was studying, but started ticking over as soon as I left university.

5) I spent the next five years working in a variety of dead end, but enjoyable and reasonably well-paying jobs. I didn't save a cent, but instead got a credit card and maxed that out. CDs and books mostly (many off amazon, which is not a cheap option when you're shipping to New Zealand), and plenty of beer, of course.

6) In addition to my spending, I payed only the compulsory minimum payments on my loan. With the balance I had, this less than the interest and so it continued to grow. With the income I was on I could have paid the loan off in a year or two, but it never even occurred to me. I pretended the loan didn't exist.

So there I was, five years out of high school, with half a degree, a large and growing loan, credit card debt, hyper-consumerist habits, and a willfully ignorant financial outlook.

This was three years ago. Since then I've educated myself in financial matters, reversed my lifestyle from consumerist to frugalist, aggressively paid my debt and started investing, and finished my degree (and finished it well: straight As and scholarships). I'm looking forward to further study in a field I'm excited about (Museum Studies), and with a newfound solid and secure financial outlook.

I owe it all to three things: my fiancee, who inspired me to become a worthwhile husband and future father; my local and university libraries, which provided my financial education; and blogs such as this one, which provide me with ongoing education, inspiration, and assurance that I'm - finally - on the right track.

Guest's picture
Rebecca

Although I do fess up to a multitude of financial mistakes in my 34 years of life… the one that really hurt the worst was leasing a VW Jetta. My husband, graduated from college and after 2 years of working at jobs that were stepping stones to have experience in his field, he was offered a prestigious job in which we needed to move from Louisiana to Colorado. Our 1st car was a paid off 8 year old Honda Civic that still ran well but was a 2 door; which made it hard to buckle our babies in the back seat. On a high from landing what appeared to be a dream job, in a dream location, equipped with a dream salary we leased the Jetta to be able to have a better car than we could in actuality afford… trading in our very paid off… very reliable Civic and gladly accepting an additional $289 month lease.
The job turned out to be the worst ever and caused my husband such horrible mental anguish; in which he was contemplating suicide daily. I had just gotten a job that paid half of what his salary was but convinced him to quit his “nightmare dream” job as I was sure he could get something better soon and we had my pay to fall back on. It took almost a year for him to find another job and my pay wasn’t nearly enough to continue making payments on the lease. We were able to get a clunker to get around in and I called the leasing company advised them of our financial hardship ahead of time and advised they should pick up the car as we were no longer able to afford the lease. They did pick up the car, charged us the price of the car brand new, put it on our credit report as a default and then sold our car to get double $$ on it. We had to pay off the default amount and have it on our credit for over 7 years because they keep it on your report 7 years after your last payment is made… Our credit has been in the toilet because of this bad decision and once you have a serious mark on there like that; it is hard to bring up your score. In hindsight… we should have kept the Civic, after all it was no payments required.

Guest's picture
C.N, McKinney

We are now in our 23rd year as renters. Just typing that makes me sick. At first, it was because we had a total of five lay-offs in the first seven years we were married. Then, interest rates were at 12-17%. Now, we can afford the interest rates, but housing has doubled or tripled in price and our income has not. Even if we could get a house now--and we can't--, we'd probably be dead before a 30-year mortgage is up. I feel like the biggest idiot/loser on Earth.

Julie Rains's picture

I think many of us (me included) feel as if we missed out on the housing boom. There are quite a few sides to the homeowner debate: some say owning a house is not necessary to building wealth (you can still invest whatever you might have left over each month), some say that a home is more a consumable item than an investment (you have to keep pouring money into it to keep it up so that in the end your capital gain is just the result of a stream of payments over time), and still others say (though this sounds more like a relative of mine than an expert), who cares if you have a mortgage when you die? (as long as there are not loved ones who must cover the debt).

Andrea Karim's picture

DO NOT feel like a loser. Housing is bloody expensive. I wouldn't have been able to afford anything if I hadn't had some inheritance to use as a down payment. Even now, I get help from the 'rents with my mortgage, because it's sky-high. We're not living in times where your average couple with average jobs can easily afford to buy a home.

Julie Rains's picture

I am amazed when I hear about housing prices on the west coast (also some parts of the east coast, usually the northeast). Where I live you can find decent houses (1500-1800 sq. ft., nice yard, safe neighborhood) for approx. $200,000 though you certainly have to look and they are not new. On occasion, I meet people who have moved to my town because they could not afford housing where they moved from (California, for example).  

Guest's picture
C

As of yet, I have not made too many costly blunders. I have to thank my father, who was born poor and delivered papers to help his family. I also have to thank my mom who taught me the importance of spending frugally, but learning to pay more for quality so you don't have to keep repurchasing.

Of course, now I'm in grad school, making a little less than my husband who doesn't make much, and had to buy a new car because his died. We have a savings, and try not to dive into that or use our credit cards. And now he's unemployed.

I can thank my frugal spending and consistently re-evaluating every bill to save a dollar here and there will help. But being 26 and married, it still keeps me up at night. I know we'll make it because of the savings, but now we may not be able to buy a house next summer, or go on a vacation we've wanted to take. But those are the sacrifices I'm willing to make so that we can make it through.

Lesson learned: Sometimes parents know what they are talking about and to read all of these blogs to learn from others

Guest's picture
zoom

It's a toss-up.

1) Starting to smoke: I can't even bear to do the math on how much this addiction has cost me over the years, but I imagine it could have bought me a house instead.

2) Putting a boyfriend through school instead of paying off my own student loan. (We broke up shortly before he graduated.)

Ellipsis's picture
Ellipsis

My mother's worst financial mistake is sort of an ongoing larger mistake -- she never deals with problems until they're impossible. She neglects her house, so now it needs thousands of dollars of work instead of the minor costs of upkeep. She refused to fix her windshield wipers (which costs what, fifteen dollars?), and when an emergency trip came on a rainy day, we had to take a car with shoddy brakes that collapsed on themselves, with a total cost of four hundred dollars. I'm still repairing some of her easily prevented disasters. An ounce of prevention is worth a pound of cure, kids.

Guest's picture
adora

My old fashion family taught me never to buy anything, except the house and other assets, unless I have the cash. So I don't have debt at all. I feel uneasy to have negative revenue. (How can my boss enjoy his vacation knowing the bill is all on the credit card?)

I don't have debt, but I do nagging mini-problems. My worst financial mistake is Procrastination! It doesn't sound like a big deal but it does add up. Video rental late fee, library fines, credit card bill late fee, penalty fee of all kinds. I didn't set up retirement until after 6 years of working. All the years of tax and company matching... Procrastination is very expensive!

I procrastinate fixing my car as long as it doesn't break down on the spot. Small problems turn into larger problems. I just spent $950 flushing the entire cooling system and replacing some parts because I waited 6 months to fix it. The gluey substance had spread throughout the entire cooling system. It would have been in just the coolant tank.

While I still procrastinate, I did learn to prevent problems from reoccurring. I made everything automatic if available. Auto-payment to avoid late fee, auto deposit for savings. Using no-late-fee-mail-rental services. Set up email reminder to nag myself to do stuff. I have just fixed up all the problems with the car and intend to act immediately in the future. Feeling hopeful!

Guest's picture
Peg

I was fortunate to work summer jobs/internships and managed to save a decent (for a high schooler) chunk of money, which I then proceeded to use to purchase some stocks. Too bad I forgot to proactively keep track of my investments. Nearly 10 yrs later and I'm sad to say I've lost money on some of those investments. If I'd paid more attention, then I could have sold stocks to avoid significant losses- or just put my money into a boring but safe CD or interest-bearing savings account.

Guest's picture
Tug

eToys.

Sure, a lot of us got burned in the dot.com craze, but I fell for a cute girl who worked for eToys. I put in $5,000. All I got in return was a hat and a t-shirt, which are both worth more than the stock.

Guest's picture
Anan4art

Charity.

It's like trading with god. Let's see, trading with people, business owner can earn 10 to 30 percent earn. Trading with god -you don't have to be a business owner to do this- you'll be guaranteed a 1000% earn (that's a return worth 10 times money you spend).

*real deal*
My mother is my best example person at this area.
Every time she gives (cash) for the less-unfortunate around her. Not long time after that she will get a bonus from her boss exactly 8 to 10 times amount of her charity. She learns it as a pattern and never stop do this stuff and give the lesson to her children.
Another example when she donates these brand-new ordinary school-bags, school tools, books for orphans, a week later she gets a gift: European-made luxurious travel bag from her relatives worth ten times plus another souvenirs. Gifts are tax-free.
My father is fully supporting her acts. He loves her so, can sense it by the way he looks at my mom.

*sacrifice*
You have to set your mind, though. Switch mind to "I do this for god's generosity" or "Only god and-no-other could repay my sacrifice" and stuff like that. Don't do charity as a showoffs or a indirect showoffs. Some people will do the charity after they (think) are wealthier. You'll never feel you're richer. Whenever humans get richer their needs are also broader.
Indeed, some charity-engaged person announce their charities but let's not make this an accusation that they're showing off. Maybe they do that so their deeds interpreted like a role model or an example. I'm sure their mind already switched to earn god's blessings.

Remember, those 1000% won't return to you as pure wealth. Sometimes it is granted as health, which is more valuable. You got sick (illness or accident) you'll lose wealth, sometimes lose skill or gain disability but worse is you lose time -we cannot replenish/regain time we spent.

Millionaire has greater chance to enter heaven. Greatest chance are poor with generosity in charity. It is the law at judgment day.

Great luck with charity.

Guest's picture
graphicslena

I never post to blogs but I have been reading all of your posts and although some come close, none are as stupid as the series of personal and financial mistakes I have made in the last 10 years. Seems like my bad decisions just kept snowballing. It starts in 1990 with borrowing 25k from my mother to divorce my cheating husband. I gave him 1/2 the value of our little 2 bedroom house in the suburbs that my grandmother had given to me. Plus, I could have and should have fought for a 1/2 of his pension because we had been married 10 years but I did'nt. Back to the house story...I lived in the house for another 10 years after the divorce and made $10k worth of improvements. The taxes were extremely low because the house had always been in the family so I managed to build my savings account to $150K. Then my mom died leaving me about 100k. Then my job changed location and I found myself driving 70 miles back & forth to work. This was stressful so I felt I needed to move closer to my job. I had 250k saved up, and a house I owned... that should be enough right? I decided that I wanted to live somewhere with a lake view and chose to buy an affordable wreck of a lake front house for 160k in the country (50 miles away) with beautiful sunsets, and remodel it. After all, I had a money in the bank and I thought a lakefront home would only appreciate in value...especially newly remodeled, right? I interviewed and subsequently hired a series of architects and builders, all with differing opinions on what should be done. This was the heyday for builders and each nickled and dimed me to death (soil boring tests, septic tests, this that and the other thing) to the tune of around 20k...before any remodeling had even begun. Add to that, fees and permits from the township's building department who (after 9 months of submitting plans, paying for variance permits, soil erosion permits, this permit and that permit and tons of misinformation) said they would not approve a remodel only a new build (more $ for them). I could not get anything done from afar because of all the untrustworthy workers would lie about doing the work so I felt I needed to be closer to the project. So, I sold my nice little, paid for, low taxed, house in the city for $116k and bought a little house for $120k on the same street as the lake wreck to be close to the building project. I managed to find a local builder with 1/2 a brain and so the project began. He made alot of mistakes that me and my partner had to fix and so, to make a long story short, the project took 5 years, alot of sweat equity and cost me every dollar I had plus everything I had earned at my job. This past September we passed final inspection (yippee) and got the occupancy permit. Now, I am virtually broke, living from paycheck to paycheck, and have less than 10k in savings. The taxes on my new house are a whopping 6k per year. To add insult to injury, last week, right before Chistmas, a letter from the tax assessor arrives. They are billing me for back taxes and penalties (12k) because THEY mistakenly gave me a homestead tax credit for this house while it was under construction! The fun never ends! By my calculations, this project has cost me at least 600k already and I can't even afford to even live here. Oh yeah, the job I moved up here to be closer top is losing it's main client and I will be out of a job in April. Plus, this is in Michigan, where the housing market is the worst in the country right now. Also, I hate living in this location with no sidewalks, dirt roads that are always muddy, higher prices on gas and groceries, so I will look forward to selling in the spring and getting the heck out of here, and starting over somewhere else...probably out of this state.

Julie Rains's picture

Welcome to the club! You know I enjoyed writing about a man I met many, many years ago in his pre-billionaire days; what I learned from that research (and a bit I knew already) is that everyone makes mistakes. One of his dad's not-so-great moments (starting and running a bank that became insolvent) helped him create significant wealth. You might also enjoy Bruce Mau's Incomplete Manifesto: my favorite is #34 -- Make Mistakes Faster (allowing me to learn faster!)

Hopefully you'll sell the house and move on to great new things soon. 

Guest's picture
Katy

My worst financial mistakes were not taking financial responsibility and putting all finances in my husbands hands. I closed my bank accounts and got joint checking because "we're married!". At tax time, I was afraid of taxes.(I had taken my ez form to h&r blok.) so when he said, 'we're married, just sign your name' I said 'Yay!' 'My husband will take care of EVERYTHING!'

Years later, when we divorced, the IRS did not believe I was an 'innocent spouse' - he never paid the taxes.

Oh, and when he left, he cleared out the bank account. there was under $2 left. I couldn't buy food without a credit card.

(The lie that he never converted to Judaism and said he did all the requirements is another matter I discovered when I tried to get a 'get' - but I digress. - who asks the man they love to show paperwork from rabbis).

Lessons learned: keep your eyes open, communicate about money, know everything you're responsible for - and do it.

Guest's picture
Guest

I sold my oil stock to loan money to my sister for the down payment on her house. The mistake was not buying the stock again as she made monthly payments back to me. Oh, and I'm so boring. I never buy more with my credit card than I can pay off at the end of the month. I only missed one rent payment in 30
years.

Guest's picture
Guest

I have racked up 165k in student loans over the last decade. And what do I have to show for it? A master's degree that, at best, is worth 40k.

To make matters worst, I wanted to use my experiences to help high school students avoid the same mistakes, in the form of a financial education book,(Now Hiring: A Financial Guide for High School Students Preparing for College)

I was disappointed when the book only sold 10 copies (one was sent back). What bothered me most was that concert tickets sell out in seconds, and recording artists sells hundreds of thousands of copies in days, but no one wants financial education until they're on the brink of suicide.

I have no credit card debt, no car loans, but I am in serious student loan debt.

Lesson learned: Parents know what they're talking about, debt robs you of freedom to fulfill your purpose, and going to a community college is the same as going to prestigious university.

I have begun to attack my debt, and have paid $12,500 already.

Guest's picture
liz44

Wow, all of these stories have really opened my eyes to financial mistakes that are so often made because we do not educate ourselves enough. I am a young expecting mother and I would say that my worst financial mistake so far has been not saving money. I recently was let go from my job because it required me to take x-rays which i cannot do while i am pregnant. Soo.. now I'm in the position of paying rent and living off unemployment. That isn't so bad but knowing that I have this little gift on it's way which I know will be a huge expense is pretty scary.. I just wish that I saved more... It seems that the common feel among all these posts is EDUCATE yourself!!! I found the following website that lays out some of the top financial mistake people make and how to avoid them.
http://www.e-personalfinance.com/article/Top-10-Financial-Mistakes-Made-...
I found it pretty informative and helpful in educating myself for the future because there is nothing we can do about the past.

Guest's picture

When you are in a not good position and have got no money to move out from that point, you will need to receive the loans. Just because that will aid you emphatically. I get sba loan every year and feel myself fine just because of it.

Guest's picture
toma danut

well i am from romania.a litle country in S E europe.my biggest mistake was this:i took a credit of 100000euro from a bank where i have in mortgage my apartament my parents apartament and a land that i bought .it wasn't enough for me so i asked one of my colegs to take a credit for me and i will pay for it every month.this credit was about 30000 euro.this wasn't enough too so i asked another of my coleg to do the same thing.he gave m 7500euro.this wasn't enough too .i tooked from another three friends a total of 26000 euro.so now i own 163500euro.every month i have to pay 1200euro at the bank for the next 30 years.i am 32 years old working in a bank where my pay chek is 500 euro/month.after the work i am a taxi driver for about 6 hours a day making another 200euro/month.i have rented my home for another 200euro/month and the rest of 300 euro.are from my mom and dad wich are inmates,and they win 500 euro/month toghether,leaving them 2 live with 200 euro/month.shame on me.you will wonder what have i done with all tis money?well i helped a friend by giving him 50000euro.i knew him since we were kids and he sad that he is gone pay back the money,but he left the country with his wife and i don't know nothing about him since 2008.50000euro invested in a bussines a tir wash company but because of the actual crises i had to declare myself bust.the rest of 63000 euro are invested in my apartament and the land wich are both mortgaged.you might say sell all.yes but now everything that i own worth about 80000euro,and i can't sale because the bank won't let me.so i am condemned to work almost all my life to pay for this mistakes.i was married but my wife left me after 14 years 5 of them tied up becase she couldn't stand this endless presure.so i had to stand the strain of being alone too.now everything that i do is work and pay work and pay.waiting for a miracle to happend,crying 3,4 times a day were no one can see me and trying to move on.SO DO NOT TRUST NOBODY.thanx for taking the time to read this.

Guest's picture
Guest

for me, taking money out of a 401k and paying interest and penalties. And spending all the money. dumb. never touch your retirement money until you reach retirement age. don't even touch this money to pay down debt. BAD idea. leave this money alone until you reach retirement age.