It’s embarrassing to talk about your biggest money mistakes, but I’m writing this anyway. Hopefully it will help others avoid the blunders I made.
My husband and I realized that we’ve spent the last several years undoing the damage we did from poor decisions in early adulthood. For example, we spent 5 years paying off debts.
My biggest money mistakes
Of course it’s not all bad news. I’m very proud that we’re debt-free except for our mortgage. (I’m also proud that I got out of debt as a single divorced mom.) We budget monthly. We continue to look for ways to lower our expenses. Recently, we bought a house after saving up a large down payment. As self-employed people with low overhead we pay a buttload of income taxes each year – but we pay them on time!
Still, I’m teaching my children to do things differently in their young adulthood. And so I present my biggest money mistakes.
Mistake #1: Giving up my income when my oldest was born
Why I fell for it: Hormones. Seriously. I clearly remember holding my 6-week-old son, sobbing my eyes out at the idea of going back to work full-time.
While I don’t regret being a stay at home mom, and loved spending that time with my babies, I wish I had worked harder to keep a substantial income stream going earlier on. It would have helped avoid many other problems that were to come.
What I learned: Economic dependence is dangerous, both for mom and for her kids. It leads to bad decisions and feelings of helplessness. It makes mom (and often, her husband) feel that her voice is not as important. Also, not having income leads to other issues. Such as not investing early (more on this below).
What I do differently: I earn money through my ebooks and blog, and I now invest a considerable amount of my income. Thankfully, it’s far easier to invest small amounts of money than it was 20 years ago, using apps like Stash (with as little as $5 to get started).
Money mistake #2: Following the advice of one guru
Why I fell for it: When stress levels are high, it’s natural to want to follow a formula. To be told what to do instead of choosing from among the many options (hell-O, decision fatigue!).
When hubby and I got married, it was important to us that we start off on the right footing financially. We wanted to clean up the mess from prior years. So we went to Financial Peace University classes and started on Dave Ramsey’s baby steps.
I think Dave gives excellent advice for the majority. Most would be far better off following his baby steps rather than floundering around in financial ignorance. But I’ve begun to part ways with Dave after reading and listening to many other sages in the personal finance arena. (This year I’m reading 17 books on personal finance, follow my progress here.)
What I learned: Everyone’s situation is unique. Dave has to give advice in sound bites and can’t analyze each person’s situation individually in order to advise them on his radio program or books. But my husband and I would have been better off if we had ignored some of Dave Ramsey’s advice. For one, we would have been in our house several months sooner had we concerned ourselves more with credit scores.
What I’m doing differently: We get necessary items, totally free every month with our rewards credit card, which we pay in full each month, incurring no interest fees. And we don’t overspend, because we keep a rein on our finances by tracking every penny.
We didn’t have the best experience with Churchill Mortgage. And, we didn’t get a 15 year loan as Dave recommends, as a mortgage is an excellent hedge against inflation. Instead, because of our particular situation (large family/high expenses, high income, starting later with investing), hubby and I need to spend every extra penny towards investments. Paying down the house (4% interest) when we could earn 11% in index funds long-term is unwise.
Click for proof in the image, anyone who thinks the stock market is “dangerous” is sadly misinformed.It’s only dangerous if one attempts to time the market. Buying/diversifying with index funds, ignoring, and holding has always been and likely will always be wise.
Money mistake #3: Being cheap instead of frugal
Why I fell for it: Short-term thinking. Poverty mentality. Feelings of “I’m not good enough” to have anything nice.
What I learned: Things that cost more in the short term are often the best deal. They’re also better for the environment. If I had just bought the Vitamix years ago, I would still be using it. Instead I’ve burned through several inferior blenders through the years!
What I’m doing differently: While I do love a good thrift store haul, I’m now more likely to pay more to own less. I have a minimalist wardrobe, but pay more for each piece. I try not to settle.
More articles you may enjoy if you want to avoid my biggest money mistakes:
- How to publish an ebook for Amazon Kindle – an excellent way for a mom to earn money from home
- Work at home moms aren’t making the feminine mistake – a long article, but important
- How to save and invest small amounts of money – if you think you can’t save and invest because money is tight, you’re wrong!
- Personal finance books: my goal is to read 17 this year and review them here
What would you consider to be your biggest money mistakes? What did you learn, and how do you do things differently now? Please share!