Squawkback: What Were Your 3 Worst Financial Decisions?
- October 22, 2008 by Fox | Comments: 32
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.
Question: What were your worst financial decisions?
Fox’s Answers:
- Years ago, I did not take responsibility for my own finances and deferred investment choices to a “Financial Planner” (sales person).
- I did not understand the funds the “Financial Planner” sold me.
- 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!
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Comments:
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).
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.
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.
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.
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.
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?
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.
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.
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.
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 $400 in surgery for that matter) they would be put to sleep. They are pets after all, not people, and there are plenty of other pets out there to be adopted in their place.
Not sure on the others yet, I’ve been pretty responsible financially most of my life (I opened a IRA in high school).
Interesting to see how many people say that buying a new car was a bad financial decision, especially those who had to finance it.
At the moment, I’m resisting the urge to spend my savings on a new car, or keep saving for a down payment on a house. I don’t want to make a mistake here!
Heres my list:
1. Spending the left over money received from student loans.
@Brian Tabios Indeed, I bought a new car 12 years ago, on lease. Terrible financial decision on my part. I haven’t owned a car since.
Just one– relying on my credit card to pay for things I couldn’t afford back when I was in college, thinking I could pay it off when I got a real job. Eventually I did it, but took forever!
celebrating having a salary by blowing it all and accruing more debt instead of paying down already existing student loan debt. woopsie!
Wow…interesting question
1) buying my house (I sold it at a small profit, but would have saved more than that if I’d kept renting)
2) buying an SUV (it’s only a 2000$ 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.
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.
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.
1.)MARRYING A STRIPPER
2.)COMING OUT OF THE CLOSET
3.)BUYING A NEW CAR AT A LOCAL DEALERSHIP FOR 1,100 PER MONTH
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.
#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.
@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!
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.
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.
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.
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.
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.
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.