Have you ever made a mistake with your money? Wish you could take it back?
I know I have. We all have made mistakes with our money. That is part of the process of learning. We really don’t learn lessons very well until we apply our knowledge and fail. Only then, do we truly start to understand the lessons being taught to us.
With that here are my biggest money blunders so far in my life.
Financial Blunder #1: Going to College Out Of State
As many of you know, I went to school out of state. I grew up in North Carolina, not too far from NC State, an excellent engineering school, but decided still to go to Virginia Tech where I graduated Magna Cum Laude with a degree in Chemical Engineering. In the end, it has all worked out. However, my deal with my parents when going to school at Virginia Tech was that they would pay the equivalent of full price for NC State and I would pay the difference…
The difference worked out to be about $57,000, $HIT!!! Somehow, I decided that it was better to go to a school in the mountains and ride my bike than it was to save $57,000.
Granted, I left school with $32,000 in student loan debt, the rest of my portion of the tuition and university cost was funded through scholarships, of which I had $25,000 worth.
Was it all worth it? No.
Did I have a great time? Hell yeah!! I don’t regret going to VT for school. I met many great friends and had a blast living in the mountains and really came to know myself up there, however, it was short-sighted when you look back on it. Knowing what I know now and wanting to retire early, I could be some $50,000 * about 3x growth richer if I had invested that money instead of taken on loans for school.
Hopefully, this is a lesson that can be learned from by others and I will certainly pass on to my kids one day.
Financial Blunder #2: Making Investing Too Complicated
My parents did a pretty good job of teaching me the basics of personal finance, but investing was never really part of it. I did my research online and decided to go with the shotgun approach.
Let’s just shoot blindly with a wide spread and hope for the best.
It worked out alright in the beginning because I started my co-op job in 2009 in the recession with a 401k that I put some money into. I invested it in pretty much everything that the 401k offered taking the general advice that to be diversified, I must have money in many different mutual funds. It wasn’t until 2016 that I found JL Collins Stock Series and finally came to the realization that I should keep it simple.
I started with a 401k at Fidelity in my first co-op job. When I finished college, I opened up an Roth IRA with Scottrade and put $1500 in it. It wasn’t until about 2 months later that I realized that Scottrade was not actually what I wanted. I started by thinking that the $7 trades were great, not realizing that what I really wanted was free mutual funds. That led to the PITA transfer of funds from Scottrade to Vanguard.
Warning: If at all possible, avoid having to transfer funds between investment banks/brokerages. It is a PITA in terms of paperwork!
I then proceeded to buy up about 7 different mutual funds before I simplified it down to 2 in the end. I found the best investment allocation for me was nearly 100% total US market stock index with the remainder in total US bond market.
Lesson Learned: Keep it simple when it comes to investing.
Financial Blunder #3: Financed a Car
Blunder #3 happened because of an unfortunate car event. I was headed home late at night after a UCI cyclocross race out in Louisville, Kentucky when I hear “bang, bang, bang, POW!!!”
My not-so-trusty Saturn SC2 decided to throw a rod or some other internal to the engine. I had paid $1600 for it 2 years earlier when I had a similar mishap with my Toyota Pickup truck. The Toyota also cost $1600, so I was used to cheaper cars and doing my own maintenance. The days towards the end of college and shortly after college, I was traveling a ton for bike racing around the Southeast. To put it in perspective, I was putting 20,000 miles on my car each year and I didn’t have to commute to work. All commuting was done by bike or foot.
When my Saturn went POW, I called AAA and had them come tow me to the nearest rental car location. From there, I let the tow truck owner take the car back with him and scrap it. I had to come back the next week to give him the title for it, but I didn’t even sell the car. I just gave it away and said good riddance. I don’t want to see you again!
I got home and immediately set my sights on finding my dream car… a Honda Fit with manual transmission and cruise control. Several of my friends had these and they were great for traveling to bike races. The bikes fit upright in the back and you can travel with 2-4 adults comfortably, but not too comfortably inside. I found one about 90 miles away from where I lived. I had already checked the local Honda dealer and they didn’t have one.
The timeline is this:
My car blew up on Sunday night.
Monday I research where I can buy a new to me used Honda Fit
Tuesday after work, I drive 90 miles away to go check it out. I drop off the rental car in the town and then ride my bike to the dealer.
Mistake #1: Don’t show up to the dealer without a reasonable means of leaving without buying a car. I was prepared to ride my bike home 90 miles if I had to, but was not overly keen on it, being still tired from the weekend’s racing.
The car was exactly what I was looking for, which I knew from the ad, so it was really just bargaining the price. The dealer did the normal strategy of asking how much can I afford each month? I was prepared for this one when I said, “monthly payments don’t matter! I am only concerned about the total price.”
They wanted $12,000 for it. I told them I wouldn’t give them more than $10,000. I ended up getting a token $500 off which got more than made up for with fees on the new-to-me car.
I have since learned much better bargaining skills.
Mistake #2: I should have started to walk out and get on my bike to leave and see if they would chase me down. I probably could have gotten it for my desired $10,000. It is all in your mindset.
The kicker to this story, though, is that the next day, I rode my bike by the local Honda dealer and saw a Honda Fit there. I checked it out and lo-and-behold it was exactly what I had wanted for $9,000!
Lesson Learned: Patience. You must learn patience. Good things will happen if you do not rush them, but I felt I had to have a car. The lesson was learned!
Financial Blunder #4: Saving Too Little While Paying Off Student Loans
I left school with $32,000 in student loans. All of the federal student loans have a payoff period of 10 years after graduation, and these had an interest rate of 6.8%. If I set up a regular automatic payment, then I could get a token 0.25% off of the interest rate. I did this and scheduled monthly payments of $750, more than double the minimum payment of $330 for a projected payoff of ~5 years.
When I started this plan of aggressively paying off student loans, I was also heavily buying up all the things I had put off during college. I had to get several new bikes, a nice computer, TV, car, etc. At least I was saving money on my rent staying in a home that cost $325 per month. It was barely, if even worth that amount.
In my pursuit to pay off my student loans, I only contributed 10% to my 401k and then $5500 to my Roth IRA after working for a year. If I could go back and do it again, I would have maxed out the 401k and Traditional IRA from the beginning and then paid whatever was left to the student loans. It sure does feel good to have no debt whatsoever, though.
Lesson learned: Investing and saving is more important than aggressive pay down of “not-so-high” interest rate debt.
Financial Blunder #5: Not Starting Side Income Projects Sooner
My last financial blunder is not so much a blunder as it is a disappointment that I should have thought of this earlier. I was so focused on saving money to reach financial independence that I didn’t even think about starting side income streams to bring about early retirement sooner. I pursued the expat job that I currently hold because I wanted to travel the world. It truly was not about the money, despite the nearly 50% raise I have seen since moving over to China. This income allows you to lower the number of years to retirement by increasing your savings.
Side income, on the other hand, has 25 times more power on its side. For every dollar that you can make on the side that is $25, you do not have to save to become financially independent. That is assuming the 4% rule of withdrawal. So, If I can generate $1000 per month, not an unreasonable amount, then it saves me from needing savings of $300,000! Sign me up!!!
I wish I had started sooner. The 4-Hour Work Week should be required reading for every high school student. It is not as easy as it is made out to be, but it is so worth it in the end when I can free myself from the death grip of corporations and money.
Lesson Learned: I am now diligently working on side income. If you want to retire early, start working on passive and side income streams.
I have made some super lame financial blunders in my short 28 years, but they have been lessons well learned and those mistakes will not happen again. If they do, you will hear about them right here on Atypical Life.
As my dad once said:
If you are not making mistakes, you are not trying.
What financial mistakes have you made? Have you learned the lesson or are you continuing to fall into the same traps? Let me know in the comments.
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