I recently read a blog post about the biggest money mistakes that people make. I was shocked to see that I had done almost all of them.
No, I take that back. I wasn’t shocked at all.
I wasn’t embarrassed either.
I was just pissed off.
I wonder how I could have been so ignorant. How did the high intelligence that I supposedly have (as was once evidenced by an IQ test) never enter into the equation when I was thinking about finances?
So I’ve been thinking, what stupid things have I done that I wouldn’t want even my worst enemy to do?
1. Think of credit as free money.I really can’t believe how naive I was when I spent money on credit cards. I regularly thought “I’ll pay it off next month/when I make more money/when I get my tax return. And you know what, It NEVER happened. I always found something else to spend my money on.
2. Charge more on a credit card than can be paid off each month. When I first started using credit cards, it never occurred to me that I shouldn’t charge anything more than I could pay off each month. I can actually remember thinking, “If I could pay it off each month, what’s the point in using a credit card? Why not just use cash?” I really just didn’t get it.
3. Live without an Emergency Fund. I didn’t know what an emergency fund was until I first started looking into controlling my finances in 2003. Prior to that, I had thought of savings accounts but it was always saving for something. Something to buy. Stuff.
4. Go to College via Student Loans Yep I did. Not once but twice. When I went to school as an undergrad, I got a couple of small scholarships and a grant due to my parent’s income levels but the rest was funded by student loans and the mindset that “I can always pay it off when I have a real job.” I have since gone back to school, again thanks to student loans. My situation is a very rare one and I don’t think it was necessarily the right choice for most to take but I did it to get out of my mom’s house and back on my own.
5. Go on a trip/buy a car/furnish your apartment with money from student loans. I can’t say that I have done this with my student loans specifically. But I did take the maximum in student loans so that I could have extra money along the way. I remember people in school saying “I’m taking an extra loan out so I can go to South Padre (or Daytona or Mexico, take your pick).”
6. Cash in your retirement for a life event. Yep I did this too! I cashed in my first retirement plan when I chose to stay home with my first child in 2003. It wasn’t a lot of money after the penalties and we didn’t use it for anything smart, I’m sure. But if I had kept it in there, it would probably be $15,000 by now and that is $15,000 I don’t currently have saved for retirement. I know someone who has cashed in every 401K he has ever received. He’s now 44 and has nothing saved up for retirement. As a single dad with two kids to care for, that is sad and quite scary too. He’ll be working the rest of his life.
7. Use Credit cards for impulse purchases. – If you do not have the cash for it, then you can’t buy it. Let me say it again, this time with a kick ass graphic to go with it.
It really is as simple as that and I NEVER got it. I never cared enough about myself to say “no” to myself. I didn’t care enough about my future to stop and think. Impulse shopping is so very dangerous to our current budgets but also to our future financial stability.
8. Fully Finance a Vehicle I bought a car in 1994 for $6,500. It was a great little car. But my sole purpose in buying it was that the monthly payment be less than $150. That was my only requirement. I bought the car with out a deposit or a trade in. When I paid it off in 1999, it was because my mom paid the last $1,000 for me. I couldn’t pay for it because I had charged up my credit cards so badly (this was just before I filed bankruptcy) and I was in jeopardy of losing the car. I don’t even like to think about how much money was paid in interest on that little car. If I had done without a car, (and I really could have by finding a different job that was close to campus) and saved my money, I wouldn’t have wasted so much money and almost risked my mom’s credit because she was my co-signer.
9. Fund Trips on Credit Card This is where the bulk of my current debt is from. When I was in the beginning of my newly single life, my favorite band reunited and I spent THOUSANDS of dollars traveling to cities across the US to see them. I put 100% of those trips on credit cards. What do I have now? A bunch of great memories that are tainted by the guilt of the debt.
10. Ignore the future. There is a quote that I once read “I know not what the future holds, but I know who holds the future.” (Author Unknown). In the past I lived my life thinking that since I can’t predict the future, why worry about it. But if I hope to be an active participant in it, I need to prepare. The future is coming and I plan to be a part of it. Living in denial is no longer an option.
The future is coming and I plan to be a part of it. Living in denial is no longer an option.
— Jessica (@Debt_Princess)
I know you are smart people and have done none of these things and never EVER will! I also know that if you have kids, you are going to tell them all about this crazy girl who did this really dumb things and ended up being living with her mom, unemployed, broke up to her eyeballs and without even a penny in the bank. You are going to then tell your kids the RIGHT things to do, aren’t you?
Sharing my stories about debt and (a lack of) financial education is cathartic for me. It helps me work through why I did what I did. More importantly, I hope it gives you places to start conversations with the people you love the most. Sharing this information is caring!
I also blog at A Five Star Life. I write about anything that comes to mind but try to focus on finding the good in daily life.
#1, #2 and #7 were my biggest mistakes and the reason I ended up in so much debt. I also never considered paying off my balance right away and before I knew it, it got out of control. I really did look at it as ‘free money’ although I wouldn’t have admitted it then.
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Jen @ SheBloggs(Quote)
It’s amazing how easy it is to lie to ourselves. The simple act of denial is very effective! I’m so glad to have overcome “most” of those impulses!
Jessica The DebtPrincess(Quote)
on April 19, 2012 at 12:47 pm
I am guilty of many of your points as well! I 100% financed my trip to Hawaii with my student loans when I was in undergrad and didn’t even think twice about it. Now I think about it every month – when I make that student loan payment!
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Sarah BB @ East9thStreet(Quote)
on April 19, 2012 at 1:43 pm
I was totally guilty of the student loan thing. Currently not very good about the emergency fund, but we are debt free except for the house, so that takes a huge weight off!
Dakotapam recently posted..Happy 8th Birthday Ethan!
I wholeheartedly believei n all of these. Especially number two. However, we are not in that position just yet. We need a better plan…
I agree with all of them – and haven’t committed any of them – except for #4. Why is it so bad to go to college on student loans? I financed part of my undergrad and graduate degrees with loans; granted, that was when you could still consolidate loans to interest rates under 2%, which is impossible these days. Education is about access just as much as it is about learning; the two schools I attended have helped me so much simply because of their name brand recognition, making the cost totally worth it in my point of view.
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Elizabeth @ Broke Professionals(Quote)
I can relate to this post a lot =) I regret my credit card debt, severely!!!
I don’t regret the student loans though because that was the only way to get me through school, and I will cherish that degree forever. 2 more years and they’ll be paid off and it will be the best feeling in the world! =)
on April 20, 2012 at 7:24 am
The first time that I used my first credit card was on a trip to Toronto for my cousin’s wedding. I shopped like there was no tomorrow. When I got back home and I saw that bill, my eyes popped and that was enough of a learning experience. I never shopped like that ever again…And everytime I travel and use my credit card, I keep a record of what I spent.
Dannielle @ Odd Cents(Quote)
on April 20, 2012 at 10:47 am
Credit cards aren’t popular in Europe, so I’ve never used one. I do second the part about the emergency fund — I only have a small one since a few months!
Eternal*Voyageur recently posted..
Our culture is so debt-centric it really is amazing. Even teenagers have credit cards! When I was in my early 20′s I got into a lot of trouble with credit cards. I paid them all off and closed them all and didn’t have a credit card for over a decade. I only recently opened a couple because while my credit score is excellent, it could be better if I had a history of paying credit card debt. This is our culture. I’m hoping to teach my kids not to go into debt. If you can’t afford it, you don’t need it. And if it’s a big ticket item, then save your money until you can pay cash for it.
I definitely made some of the mistakes you mention with credit cards. However, I am so glad that we have never touched our retirement savings. That example you give of a 44 year old with no retirement savings is scary!
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