Squawkback: What Were Your 3 Worst Financial Decisions?

It’s time to move from the light and face the dark. Let’s turn to the dark side. No, I’m not squawking about Pink Floyd’s Dark Side of the Moon or turning to Star Wars for The Force. (Although both would make exceptional Halloween costumes, snicker).

Since last week we boasted about our Best Financial Decisions, let’s go deep this week and squawk about the dark stuff many never mention. Let’s look at our money mistakes and consider the lessons learned from our financial folly. Your comment may just spare someone some grief.

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Question: What were your worst financial decisions?

Fox’s Answers:

  1. Years ago, I did not take responsibility for my own finances and deferred investment choices to a “Financial Planner” (sales person).
  2. I did not understand the funds the “Financial Planner” sold me.
  3. I did not understand the massive impact that mutual fund fees, called management expense ratios (MERs), would have on my returns.

Fox’s Lessons Learned:

  • Since no one cares more about my money than me, it is my responsibilitiy to learn about how to invest and understand the costs of investing. I have also found that learning about personal finance and investing is neither scary nor hard. It’s just takes some time and effort.

Your turn! Share your financial mistakes by Squawking Back!

Your two cents:

  1. Jules October 22nd, 2008

    1) Went to medical school–and then an MD/PhD program. This isn’t usually a mistake, but it is if your heart is elsewhere. Even if I hadn’t gone, it still would have cleaned out $700 from my pocket (applications are EXPENSIVE!).

    2) Moved to another country with around $500 in my pocket and no job prospects lined up with $40k in student loans looming over my shoulder (I now have a job, but it was really iffy for a while!)

    3) Strictly financially–taking in my cats. Personally, I think it’s the best thing I’ve done, but I can’t ignore that I spent $1500+ to vet them when I first got them (they’ve since required only mandatory rabies vaccines and one needs a renal panel every year to keep tabs on the progress of her CRF, but that’s not a hardship).

  2. guinness416 October 22nd, 2008

    Probably my worst financial decisions were my best personal decisions. Hooking up with a charming New Yawk bartender a decade ago, when he was about to go bankrupt (and I’m now married to him, of course) and spending most of my twenties moving around (I’ve lived in Dublin, Amsterdam, Kansas City, Connecticut, NYC and now Toronto). It also took me a while to figure out the MER thing.

  3. Marci October 22nd, 2008

    1. Marrying one of my ex’s who didn’t believe in the word savings and having to hide money under the baby clothes to be able to get the baby in to see the doctor when needed, and not divorcing him soon enough, leaving me with a pill of bills he wouldn’t pay.

    2. Not starting my IRA’s soon enough… but they weren’t around when I got out of college either :( LONG time ago.

    3. Opening up a certain kind of college savings for the grandkids without checking it out more thoroughly. The fees are eating up the money. I’m slowing moving stuff around to a daughter to be able to withdraw out of that.

  4. Lise October 22nd, 2008

    Can I list “buying my house” as all three of them? ;)

    Probably having four cats wasn’t the wisest decision, either. I love them dearly, but I just had to spend $2200 on dental surgery for one of them.

  5. Treva October 22nd, 2008

    1. Not learning to save until my late 20s.

    2. Getting into CC debt in my early 20s and then spending 2 years paying it off.

    3. Buying a new car 3 years ago when a used one would have sufficed.

    I’ve made plenty of other mistakes, but these are some that I’ve really taken a good lesson on and have NOT repeated! Now I save, drive a used car, and have no CC debt.

  6. Frank Costello October 22nd, 2008

    1. I flipped my mortgage to COFI note about 4 years ago….

    2. Financed the purchase of a used car.

    3. Dis not purchase gap insurance on a car a bought and then totaled it in an accident.

    I sound like a bozo, don’t I?

  7. Hayden Tompkins October 22nd, 2008

    1. Cosigning for my brother’s student loan.

    2. Signing up for a credit card in college. (They need to get those people OFF CAMPUS.)

    3. Getting liposuction. [sigh] Don’t ask.

  8. Rob in Madrid October 22nd, 2008

    Simple: budgeting for payments and not for savings. Secondly using credit rather than savings when things got tight.

    Needless to say I don’t do that anymore.

  9. Vered - MomGrind October 22nd, 2008

    I’ll share one.. I used to do recreational online shopping to the tune of several thousand bucks per year. I didn’t even realize just how expensive this habit was until I sat down and went over my credit card statements.

  10. Susy October 23rd, 2008

    Spent a few years buying a lot junk we didn’t need. Never got into debt and had enough money to buy it, but just because you can afford it doesn’t mean you should buy it.

    Like so many others, having pets isn’t a great financial decision, but I think the joy they bring really makes them worth it (2 cats, 3 dogs). We have found ways to make it cheaper (making my own dog food). However if my cat needed $2200 in surgery (or $400 in surgery for that matter) they would be put to sleep. They are pets after all, not people, and there are plenty of other pets out there to be adopted in their place.

    Not sure on the others yet, I’ve been pretty responsible financially most of my life (I opened a IRA in high school).

  11. Brian October 23rd, 2008

    Interesting to see how many people say that buying a new car was a bad financial decision, especially those who had to finance it.

    At the moment, I’m resisting the urge to spend my savings on a new car, or keep saving for a down payment on a house. I don’t want to make a mistake here!

    Heres my list:
    1. Spending the left over money received from student loans.

  12. Kerry October 23rd, 2008

    @Brian Indeed, I bought a new car 12 years ago, on lease. Terrible financial decision on my part. I haven’t owned a car since.

  13. YoungMoneyTalks October 23rd, 2008

    Just one– relying on my credit card to pay for things I couldn’t afford back when I was in college, thinking I could pay it off when I got a real job. Eventually I did it, but took forever!

  14. neimanmarxist October 23rd, 2008

    celebrating having a salary by blowing it all and accruing more debt instead of paying down already existing student loan debt. woopsie!

  15. Jill October 23rd, 2008

    Wow…interesting question

    1) buying my house (I sold it at a small profit, but would have saved more than that if I’d kept renting)

    2) buying an SUV (it’s only a 2000$ mistake but now it’s sitting there, dead in the driveway, oppressing me with evidence of my midlife crisis impulse purchase)

    3) STUDENT LOANS. Those are actually my biggest mistake. I should have starved even more.

  16. Susy October 24th, 2008

    I don’t think I would categorize buying a new car as a bad financial decision, at least not for us. We need to have a super reliable car, if we miss one event that’s half month’s salary. We weighed out the options and decided that buying new was our cheapest option. We did have credit card rewards (buy everything on it and pay it in full each month). So with sales & our $4200 rewards we ended up getting a new car for cheaper than a used one. For us the peace of mind is worth the extra $ paid over the life of the car.

    Plus if you buy a car that retains value well, it’s not as bad of a financial choice. One of our cars is a MINI Cooper and it has only lost $1000 of it’s value in the 2.5 years we’ve owned it. Not Bad.

  17. JanaB October 24th, 2008

    Getting involved with someone who was financially irresponsible and letting my credit card debt soar because we had to pay his back IRS bills and his child support. Also putting a car for him in my name. I took a huge financial hit from this total looser, but in the end, I will prosper because he is gone now and on his own. Next time, I’ll pull a credit report and do a background check before trusting ANYONE.

  18. Madisonville,KY October 24th, 2008

    1.)MARRYING A STRIPPER

    2.)COMING OUT OF THE CLOSET

    3.)BUYING A NEW CAR AT A LOCAL DEALERSHIP FOR 1,100 PER MONTH

  19. SoNn October 27th, 2008

    1. Getting a VUL insurance that eats up 85% of the premium for the 1st year, 50% on the 2nd year, 25% on the 3rd, and then 5% on the 4th to 10th year. It also eats something up monthly. I just finished the first and have 9 more years to go.
    2. Buying an Acer laptop when I really wanted a Mac. I ended up the Mac 20 months later and selling the Acer laptop at less than half the price.
    3. Back in college, I let 3 friends use my credit card for big purchases. 2 of them never got to pay it back.

  20. The Financial Blogger October 28th, 2008

    #1 I was day trading with my cash down 1 month before buying my house. I was trying to make the big trade. I ended up loosing 4K and I had to ask my parent to lend me the money in order to buy my house :-(

    #2 I didn’t apply for student loans while doing my bachelor degree. This was money without interest charged. I should have invested this money during those 3 years!

    #3 When i bought my first house, I didn’t assess my needs correctly. We had to sell 6 months after since we wanted a second child and we only had 2 bedrooms on the second floor.

    At least I have learn that:
    #1 never trade money to be due in a few months
    #2 when borrowing money is free, take it and invest it
    #3 assess your needs before buying anything.

  21. Lise October 28th, 2008

    @Susy: She was a less than two year old cat with an immune disorder (stomatitis: it’s where the body develops a violent allergic reaction to the plaque on teeth, causing vastly accelerated tooth decay and tremendous pain) that had a good chance of never recurring if we removed all her teeth.

    My philosophy towards pet ownership is that if life can be maintained with any sort of quality, it should be, and that when you adopt a pet, you are taking on that commitment. With a young cat with a chance of a full recovery, I didn’t hesitate to pay the money. I don’t begrudge people who feel differently than that, but I did want to make it clear that that’s where I’m coming from.

    Given that we had an emergency fund, the $2200 came out of that, with no discomfort.

    Our house, on the other hand… let’s not talk about how it’s going to cost me $700K over the life of the loan (I live in a very expensive RE market, which hasn’t softened much since the “bubble burst”)… and we were perfectly happy in an apartment before this.

    There was just a sense, when we bought, that “now we’re making more money; it’s time to buy a house!” a feeling which my parents totally fed into. I thought the markets had softened enough when I bought my house; they hadn’t, of course, and my house has dropped significantly in value since then.

    Good thing we’re not planning on moving!

  22. Victoria November 3rd, 2008

    Hmm…

    1. Taking out MORE than I needed in student loans. If I had been smart, I could have graduated with only $3000 of debt.
    2. Loaning that student loan money to my ex-fiancee…Where did that $15000 go???
    3. Crashing my lovely 2006 Civic…I would almost be done with the payments if that hadn’t happened.

  23. Kathryn November 6th, 2008

    I’ve made some humdingers. These all pertain to our house.

    1) Buying my first house in 1982 using an 80/20 loan when we had money in hand to use as a down payment. The agent convinced us the money would be better spent decorating or landscaping.

    2) The 80% loan rate was 15.5% for 15 years with an escallating 3% note on the principal. In other words, the payment went up 3%/year and the extra 3% was used to drive down the principal owed. The 20% loan was at an 18% APR. To say we knew nothing about how money worked would be an understatement. By the way, the high rates weren’t due to bad credit. We had a terrific credit score and always paid off our credit cards in full each month with no late payments. Interest rates were at their height and so were property values. The bubble burst about two months after closing and it took another 5+ years for the house to be worth what we’d paid for it.

    3) We refinanced to a fixed rate (11.5%) three years after the initial purchase and then again to a rate of 6.25%. After many years we had quite a bit of equity built up and used it to consolidate credit bills. Now we owe more on the house than when we first agreed to buy it in 1982. We’re learning but, obviously, very slowly.

  24. fredlet January 8th, 2009

    Actually I’m a little horrified by people who get pets and then consider them a financial liability… and completely horrified when people say that they would put their pets to sleep when they become inconvenient financially.
    Please don’t get pets if you even remotely consider the financial aspect more important than they are. There comes a point where you have to decide to save your money on other things instead of killing your animals out of miserliness.

  25. fredlet January 8th, 2009

    Just a follow up… I’m not advocating injudicious pet adoption either.. know when you can or can’t afford a pet.
    But seriously, don’t kill them just because they are inconvenient either.

  26. Brad Fults January 22nd, 2009

    1. Taking a post-graduation vacation to Amsterdam. The trip was fantastic and well-deserved, but it was financed entirely on a credit card.

    2. Running up credit card debt to the tune of $20K after college.

    3. Buying a fantastically fun but grotesquely expensive car after college. At least I got out from under it with little penalty and am now carless. Hooray for BART.

  27. Suly June 22nd, 2009

    My biggest mistake was making monthly payments on a brand new car in high school. All I did was drive this car to my job at McDonalds and I worked at McDonalds only to pay for my car. I was literally and figuratively spinning my wheels.

    Second biggest mistake was getting a revolving line of credit in university and lived beyond my means. Luckily, instead of counting sheep to get to sleep, i counted the days I would be done paying off my massive loans(yes Squawkhawk – more than twice what you owed) and did so in a little over two years.

    My current biggest problem is shopping at expensive grocery stores like Whole Foods. Their paper bags do make good greenbin (compost) bags.

  28. Shaniqua September 8th, 2009

    1. Deciding to sell makeup and skin care (think pink) as a home business full-time without earning sufficient monthly income from it to pay my bills and attend all the company functions that were expected. Therefore racked up HUGE credit card debt.
    2. At the same time, deciding to live alone.
    3. Then deciding to move to a MORE expensive apartment.
    Five years later have paid off $28G in debt, and have nearly that amount in savings/pensions etc.

  29. Bethany September 11th, 2009

    1. bought a house without learning about markets – bought high – had to sell when markets were low – dumb, dumb, dumb
    2. bought a house when I already had lots of other debt to pay off – hadn’t saved for down payment – borrowed that too
    3. didn’t set a fixed amount into a savings account as untouchable every payday right from when I started to work

  30. Bethany September 11th, 2009

    Lessons learned
    1. Pay cash. Don’t use the credit cards no matter what reward system they tempt you with. If a big thing happens, like you lose a job or a spouse or there’s major recession, like now, you are debt free. Also, if you don’t carry heaps of credit card debt, your credit rating is SO much better if you have to get a loan for a big item such as a car or a house.
    2. Keep reviewing your finances regularly. Learn all about your own bills & finances. Pay all bills in full when they come & don’t get behind. Be sure to allot an amount into a savings account as part of your monthly payments. If you are married, both of you should know all about all the finances in case something happens to one of you.
    3. No matter how good a deal sounds, take your time & do your own research & get lots of estimates & information before making a decision & handing over money. There are lots of smooth talkers & scammers out there who are only too happy to help you part with your money. “If it sounds too good to be true, it probably is” Stand up for your own financial life. If you don’t, no one else will. Don’t be embarrassed to say “I don’t have the money” & walk away.

  31. Warren September 14th, 2009

    I had lived on my own from the time I was 17, never having money for a car, or time to think about getting one (or even my driver’s license).
    Shortly after I turned 25 (early 2008), I got my driver’s lic. and decided I needed a car. Without looking at price i decided which car I wanted (based on reviews, style, etc)… found the car at a price much lower than the going rate… FANTASTIC! I was approved for a loand and I bought myself a fully loaded upgraded engine – year and a half old car.
    THE PROBLEM: I had never financed anything before and never ran a major credit card and really wanted this car so everyone from the insurance agent to the salesman to the financier saw me coming…
    1st mistake: Buying from a used car lot and allowing the them to bully me into the extended warranty (If I didn’t buy the warranty for $2000, they would have to make the money by increasing the price as if the interest rate of the loan was 2% higher)… I should have bought from a reputable dealer and been willing to walk)
    -2nd mistake: Agreeing to take a loan on a car at 23% interest… Can you imagine $539/mo for 7 years for a North American mid-sized sedan
    -3rd mistake: not reading the fine print… My $15,750 car plus $1250 in admin fees and whatever plus $2000 in extended warranty was going to end up costing me $38,000 by year 7 and was actually 24.5% rather than 23

    I loved this car and drove it proudly… paying nearly $1000/mo in payments, insurance, and fuel alone, then the economy went to heck and I lost my job… Thank God I was living in Alberta at the time and they have a seize or sue legislation, so I walked from the car and will suffer the perils of a poor credit rating for the next several years.

    This was a huge series of huge mistakes, but wow have I learned a series of invaluable lessons; which are everything from making purchase decisions for the right reasons to do i really need a next near brand new car if i’m going to have one?
    I have recently moved to Victoria, BC and am actually glad I don’t have the car anymore.
    Since getting rid of the car (and moving primarily to walking and cycling) I have lost over 20 lbs and have never felt better.
    If I do get another vehicle again soon, it will definitely be for cash and be alot more economical (Who needs to upgrade from a 4 to a 6 cylinder anyway? lol)

  32. Laura October 10th, 2009

    This could take a bit of time. Biggest financial mistakes are my student loans. I decided at 22 I should go to university without really knowing what I wanted from it. I went away for 1 year and had about 9000 in student loans. Then 2 years later going to private career college that was way over priced. That was another 16000. Needless to say it has taken me 10 years to pay it off. With being self-employed the whole time, I was only paying mostly interest. I feel like I’m a decade behind in financial situation. All I can do now is try to be smart as possible with money in the future. I never want that feeling again.

  33. Terra April 9th, 2010

    Biggest mistakes:

    1. signing up for a credit card when I was 19 without a job (I stated I had one lined up, which was a lie) They gave me one with a 6, 000 dollar limit.
    b) being completely clueless as to what borrowing credit was all about. I actually thought that once you reached your limit that was it. I am sure I have made enough payments to pay off that damn card, but still, five years of school later and six or seven so years of life, is still there!
    2. Supplementing rent/living necessities with my credit card
    3. treating money as if it had no importance. lending it out when I didn’t have it, making a gourmet meal on my last 20, clothes shopping… (those expensive purchases seem to always be the ones I lose, the ones I don’t wear…)

  34. Anita July 5th, 2010

    I didn’t sell my house at the peak of the real estate boom, when it was worth $100,000 more…thinking it was going to increase some more. Instead I concentrated on other investments, hoping they would pay off but didn’t as the economy went downhill and so did the value of those.

  35. Anita July 6th, 2010

    To add to my last comment, making the decision to use credit cards again when I swore I never would was also a big financial mistake. Sometimes though circumcstances can change where you have no choice, that’s why it’s a good idea to plan and prepare ahead for any setbacks.

  36. Suzanne Tremblay July 7th, 2010

    1. listening to my financial advisor who recommended that I invested in more aggressive stocks so that I could retire at 55…then there was the crash in 2008. Having lost over $100,000, and not having yet recovered $80,000. Needless to say, I am now over 55 and not retired. Previously, I had been a conservative investor.
    2.financing my son’s first year of CMA for $2,500 and he dropped out not liking the online approach…
    3.trusting that my husband was buying RRSP when he was the one who told me about it.

  37. Kerry July 7th, 2010

    @Suzanne Ah Suzanne I want to give you a huge hug. For Canadian investing help I’d suggest reading financial journalist Dan Bortolotti’s blog: “The Canadian Couch Potato” (http://canadiancouchpotato.com). I use this method in my own portfolio. :)

  38. manchas no rosto December 12th, 2010

    Getting a credit card at 18 when I got my first job and using it to buy a lot of stuff, spending all my salary even before I receive it! Not only mine, but a lot of people may commit the same mistake!

  39. Chris February 19th, 2011

    1. Spending more time picking out a good olive oil (insert any food item here) than I do pondering a good amount of cash sitting in my savings account earning .25% because I’m not trusting myself to make my own financial decisions. This has been going on for years.

    2. Not taking the time to consider my current expenses i.e. do I need cable? Is there a way to cut down on phone expenses?

    3. Fearing numbers, percentages, commissions, feeling frozen (and kicking myself in the tush as I know better). And now that I’m that much closer to the big 50 versus the minor 40, 30, 20 wondering if it is too late.

    Lessons to apply:
    1. Taking steps to ponder and move forward ie. don’t just read about the high interest savings account – open it. Check out sites like the one you suggested above. Commit.

    2. Read and follow some of the suggestions on Squawkback. Enjoying browsing your website – thank you.

    3. Realize that it doesn’t matter how old (or young) you are. Your starting point can be right now (and I could still be around for another 4 ot 5 decades)!

  40. Darrell Smith July 29th, 2011

    Buying my Condo in 2007 for 180000, now its worth less than 150000.

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