Liann completely inspired me with her awesome article on financial mistakes. So here are 4 of the biggest financial failures I have made and what I have learned from them.
Trusting Someone Else to Handle My Finances
When I was in high school and college, I was very distant from managing my own finances. So distant, in fact, that I was signing forms without thought and blindly following anything I was told. I did this because I didn’t know much about personal finances and I trusted the person that was handling them for me. BIG mistake. When I took control of my finances, I found out how much debt I was in and discovered the bad credit trail that had accumulated.
What I Learned:
Never blindly trust anyone to manage your finances or family finances. Looking back on this, it seems like a no-brainer. Though, I find this as a common scenario in married couples, in which one spouse is in control of all of the household finances. It is fine for one spouse to handle the finances as long as the other is consistently informed.
For example, I calculate the amount owed by Liann and myself on our joint credit cards every month. We each pay the amount we owe on the account and I always send her a spreadsheet with an expense breakdown for her records.
Whether it’s your spouse, another trusted family member, or a financial professional, it’s best to do your due diligence to ensure transparency and complete understanding. Communication is key.
Going Into Debt
When I left college, I was inundated with college loans and credit card debt. Just as I was about to start life as a young adult, I found myself buried in debt. It wasn’t until I broke free from that debt did I start to truly enjoy life. In my case, I was never good at school. Attending an expensive out-of-state private university was a stupid and costly mistake. This mistake is what led to my debt.
What I Learned:
Debt has the power to enslave us, but yet most Americans have it. Even “good debt”, like everything in life, is only good in moderation. Debt is not always avoidable, but it can be mitigated. Everyone has a different situation and approach to debt and so people must do what is right for them…but I am here to tell you that the grass is greener on the other side.
Leasing a New Car
My first car was brand new and leased. I loved that car. I loved it so much that once the lease expired, the car was purchased from the dealership. This was a terrible learning experience. The dealership was able to have their cake and eat it too. Not only was the lease expensive, but the purchase price was way more than the car was worth.
What I Learned:
Auto Dealerships always make more money on a lease than on a purchase. It is usually not a good financial decision for someone to take on a lease over a purchase. There is only one situation where it is smarter to get a leased vehicle and that is if you need your vehicle short term. This is because the second you purchase the car, it starts to depreciate in value and you will lose money when selling it.
I believe the ideal solution is to purchase a slightly used car and keep it for the bulk of the car’s life. That will give you the most bang for your buck out of the car. Carvana is a company that fits this model and I will likely never buy from a dealership again after using them. Read about my experience with Carvana.
Not Investing Sooner
I invested around $100 in the stock market when I was a little kid. It wasn’t long before I was told that it was all gone. Other than that experience, I didn’t start investing until I was able to contribute to a 401K. Now, Liann and I are starting to diversify our investments. Many investments take time. Unfortunately, I lost a lot of time not investing sooner.
What I Learned:
Oh compounding interest, capital growth, and growth investing…if I knew what you were when I was younger and used you to your full potential, life would be pretty dandy right now. Liann and I both have delayed investing listed as a financial mistake, but that is because it is so important in building wealth. When investing, invest smart and invest early.
What are some of your financial failures and what did you learn from them?
