I’ve made more money mistakes than I can count. There were $700 wedding shoes and a $26,000 new car. Then, there was the actual wedding that I still haven’t blogged about because I don’t even know what it cost. A lot. It cost a lot. But these mistakes actually don’t bother me. In fact, unlike many people in the personal finance world, I don’t actually consider them to the biggest money mistakes I could make.
When it comes to ruining myself financially, Jimmy Choo isn’t going to do it. Toyota isn’t going to do it. I am. I continue to allow a powerful combination to exist in my life: fear and a lack of information. While I’d like to blame all of the things in my life–and if you’ve read my blog at all you know there is a lot of stuff–I am my worst money mistake.
Money Mistake #1 – Benefits
It’s open enrollment season. Since we switched to open enrollment maybe two years ago, I’ve dedicated all of five minutes to weighing my choices. And by weighing my choices, I mean clicking “Accept” twenty times to or so in order to keep things the same. Homeostasis. No change. Nothing to see here. That’s a mistake.
I now realize that I might be able to leverage the HDHP/HSA option to my advantage over the PPO plan that has always been the best. There’s platinum in the PPO name. Clearly, it’s the best. I know. I’m embarrassing myself. The same goes for all the other optional benefits. I’ve always declined them because I’m young, invincible, and too busy grading 97,000 essays to take the time to educate myself on myself. In an attempt to do things differently this year, I’m spending time with each option. The problem is, I’m not sure I can educate myself in a way where I feel confident before open enrollment ends. As much as I can tell myself to make the jump, I need to be good and ready. And please don’t rush me. I’m learning.
MONEY MISTAKE #2 – Investing
If you follow me on Twitter, you know that I have a love-hate relationship with investing. Because it’s really scary. I don’t care what anybody says. Those overinflated hypothetical situations aren’t for me. The truth is investing is a risk, and that’s easier to stomach for some people that others. And sometimes it’s really exciting, like when my Roth IRA magically turned green after weeks and weeks and weeks of red. Oh, the red! I still don’t like it, but I’m starting to get it. Thanks in part to my husband and also people like Des, Maggie, Our Next Life, Emily, and Mr. and Mrs. Groovy.
The next hurdle, though, is figuring out my 403(b). Now that I realize I have the option of investing with Fidelity, money gurus like Ed and Leigh have been really helpful with shedding light on options that will feel similar to Vanguard. For a long time, I felt too stupid to ask questions, especially when there is so much information already written. Just read it, yeah? But people have been beyond helpful now that I’m finding the courage to ask.
MONEY MISTAKE #3 – Goals
When I first started blogging, I set goals for myself. That lasted for exactly one month. I’ve tried to revisit them several times along the way, but they’re just too complicated. It’s not that I don’t understand SMART goals. Trust me, I’ve read all the posts on them. And there are a lot.
It’s that up until now I haven’t realized understood the true obstacles. On some level, the hurdles are optimizing my benefits and reducing my pre-tax income. But my real goal is to feel more confident, to ask more questions, and to be less scared of money. The problem is there really isn’t a metric for that. The days when I open my Vanguard account and see an 11.5% year-to-date return make me feel like Warren Buffett. But that’s the market, not me, not really. I want to get to the point where I’m confident regardless of what the market, the blogging world, or anyone else says. And how do you write a SMART goal for that?
Money is power. Admitting I don’t know something–lots of somethings–makes me feel weak. I joke a lot about people taking away my PF card. It’s really not a joke. But maybe if I ask enough questions, if I own up to the fear and the ignorance, maybe we can figure out this money thing together.
So Tell Me…Is there anything you wish you understood better? What do you consider your biggest financial mistake?
My biggest financial mistake was buying a car in my early 20’s. It was a $20,000+ ride and I think I made something like $8.50 an hour. It was a huge mistake, and I still cannot believe the car dealership approved me for financing! When I finally paid that baby off, I said I would never do that to myself again!
It’s funny that you post this. I just wrote about why I loved my new car purchase. I wasn’t making $8.50 an hour, that’s for sure! I suppose we all live and learn, huh? 🙂
Emily @ JohnJaneDoe
Making mistakes is how I learn, unfortunately some of those mistakes have been really expensive. Credit card debt, unnecessary student loan debt from a graduate school experience that went on long after I should have realized a PhD program didn’t suit me, staying in a toxic work environment too long (it kills your self confidence.)
And now, I may be doing the biggest one of all…am I semi-retired or am I just underemployed? I’m trying to go with the first, but it’s quite possible that I’m really just the second, and I haven’t figured it out yet.
Oh, I am right there with you when it comes to making mistakes. Now my problem is that I let myself get so overwhelmed that I don’t act. Which only makes things worse. So I’m going to really work on my benefits. Even if I can’t sort them all out, I’m going to really at least understand one part of them at least. Then, I’ll tackle my 403(b). And I’m going to keep on keeping on from there!
Oh jeez, while I probably seem pretty “with it” when it comes to money, I’ve made so many investing mistakes over the years. Hopping in and out of investment strategies, and thus paying more taxes on short term gains.
I’ve built a solid stash for myself despite all of that. Save early and often is the best advice. 🙂
I’m trying to work time to my advantage. Lates 20s until 30 seems so late compared to most PF people. I have to remind myself I’m still way ahead of the game for most!
Thanks for the shout out. Investing takes some getting used to before the fear subsides.
The biggest mistake we made recently was with our 2014 taxes. We paid estimated quarterly federal taxes for capital gains but state tax wasn’t on our radar. We got hit with a penalty, albeit very small. Paying the fee was not a big deal but we felt like idiots for being ignorant.
Ignorance is very humbling in my experience 😉 I’m going to have to learn about quarterly taxes if this side hustle stuff works out on the scale I want it to!
Gwen @ Fiery Millennials
My biggest mistake was including my employer match in my calculations. At the end of the year, there it was: $18k in my 401k. But I’d only contributed $13k. DOPE! I fixed that really fast for the next year.
That’s a really important catch! Good call, Gwen.
You’re being unnecessarily hard on yourself! Learning has to start somewhere and usually starts with asking questions. There’s a win! You’re already head and shoulders ahead of those who bury their heads rather than think about financial stuff. There’s a win! You’re part of an awesome PF blogging community full of smart smart people who love to answer questions. There’s a win!
Oh, and I spent $2000 on my wedding dress 15 years ago. It’s hanging in the closet doing nothing. Fail!
Oh, I know! I just think that it’s so easy to point at an expense as a mistake. Mine isn’t that simple. It’s that I still have so much learning to do! And I have to be less afraid to do it. Thank you for the support, Mrs. PIE. I have grown a lot and learned a lot. But miles to go, miles and miles to go.
My biggest money mistake is letting emotions (mainly fear) stop me from making big decisions that could impact my net worth in big ways.
Yes, yes, and more yes. It’s so scary. I get so frustrated when people tell me it’s not. Money is my safety net. Of course it’s scary to possibly jeopardize it. But of course, sometimes we have to act in spite of that fear. I’m starting to learn how.
I have been working on a post about the honest learning curve. Reading and learning from others can help, but at the end of the day it takes time in the game. This year we are letting my 9 year old start to buy stocks. And we have promised once he turns 10 he can start investing in a Roth IRA. Because it’s better to learn with small amounts. Every one will make mistakes. I would rather he make those while the stakes are low, and he has plenty of time before it is crucial he gets it right.
My dad opened an IRA for me when I was a little bit older than your son! Exposure matters so much 🙂 Granted, I kept my IRA in a CD for a long, long time (way too long). But at least I understood the importance of one. My dad asked me to put my tax money in it, and I still do to this day (if there’s anything on the return!).
Why is it so much easier to see the mistakes of others as valuable learning experiences and my own mistakes as foolish and embarrassing errors?
Cars that turned out to be lemons, investing with huge commissions, houses that lost value, spending on shiny stuff I didn’t want or need…
If only we could be as kind to ourselves as we are to others.
Any mistake is worth its weight in gold if it keeps you from making a bigger one later, so I’m trying to be grateful for the lessons.
That’s a beautiful perspective. One false step now can be a huge savior later. The key is to find the awareness early to avoid repeating the missteps I think.
Colin @ rebelwithaplan
I just really wish I understood more about investing. I’ve read countless posts on it, soaking in information but I’ve yet to be able to sort through the information and really pick out what I need to know.
Right now I’m using a robo-advisor, Wealthfront, for my Roth IRA. I like using it since they created a diversified portfolio for me based on a questionnaire, but now I’m craving something more. I may be moving to a Vanguard target date fund or something. I’m still wondering and figuring it out!
I was debating between Betterment and Wealthfront for our Roth. But there really wasn’t a reason for it. The Vanguard Target Funds do the exact same thing — there’s just less bells and whistles with the sign-up (and no blogger kickbacks). The only reason I might have used a robo advisor is because the minimums were lower. I think you’d be quite pleased with Vanguard! As someone who is still learning, I felt supported enough by them to open a taxable savings account with them, too!
Now to figure out this same mojo with Fidelity for my 403(b)!
Maggie @ Northern Expenditure
We’re all fools a little bit. Remember how we’re early retirement frauds? http://northernexpenditure.com/early-retirement-frauds/ – PF is hard… even if we do know the ropes. 🙂
Thanks, Maggie! That post was one of my favorites of yours. And I love them all!
My biggest financial mistake was paying extra on my mortgage instead of investing in a taxable investment account. Why? Liquidity gives flexibility to better handle life’s changes. I can’t extract equity from my condo nearly as easily as I can sell stock index funds. I was okay with investing in the stock market in my retirement accounts but so scared of doing so outside of them.
Yay for discovering fidelity index funds in your 403(b)! They’re pretty good really. Does your husband have interesting ones too?
Ahahaha 🙂 As I celebrate another triple mortgage payment. I definitely understand your logic, but being more aggressive with our mortgage makes sense for me for now. Maybe when I get a better handle on my 403(b), I’ll switch gears!
I have no idea what my husband has. Because my husband has no idea what he has. AXA. But we both know we’re not doing that. I’m going to pull the trigger with Fidelity in the next few weeks. Then we can figure out his options.
Thank you for all of your support!
Being aggressive with mortgage payment makes more sense when you have zero plans to career shift before it is paid off plus you have more buffer built up after that. It sounds like you and your husband don’t want to do that, just like I didn’t expect to when I started paying mine aggressively…
Brittney @ Britt & the Benjamins
I’m right there with you on investing. I can’t seem to get over the fact that it feels a little like gambling and let me be honest, I like to play the penny slots. Really diving into the investing world going to be my main financial goal for this next year, though – keep your fingers crossed for me.
I LIVE FOR PENNY SLOTS! 🙂 Don’t blog about them, though. Online casinos will pester you to no end for sponsored posts. Ha.
I will keep your fingers crossed. Now that I feel good about our Roths and our taxable savings, the 403(b) is next. Gulp.
Harmony @ CreatingMyKaleidoscope
It feels like the only way to have a real understanding of investing is by actually doing it. I can read posts and articles all day, but it doesn’t really stick. As we’re still paying off debt, while making some minimal contributions to my 401K, I also feel way behind the pack. I can’t wait until we have some money to actually experiment with (by making informed decisions, of course).
I know it’s an unpopular opinion, but we’re definitely happier to be paying down our mortgage than investing all our extra money. Roth, mortgage, taxable. I’d like that to read Roth, 403(b), mortgage, taxable by year end!
Our Next Life
I want to give you a big hug because it’s a smidge crazy to see you referring to yourself as a financial mistake. Look at all the progress you’ve made! Look at how much you’ve learned! None of us are ever perfect at this stuff (and, let’s be honest, the ones who are perfect are also insufferable), and we can’t optimize everything. I haven’t looked at our health insurance in years either, and I still get antsy when the markets go sideways. I got an expensive parking ticket on a work trip recently that I’m on the hook for, and worse, I didn’t pay the ticket on time and so it has now doubled PLUS I got hit with a rental car company surcharge for it. So yeah, total financial pro over here! Focus on SMART goals that you control, like how much you invest, not ones you can’t, like what your portfolio balance says. And celebrate the tiny victories! That’s what a big nest egg is ultimately made of. 🙂
I am going to dry my tears with your parking ticket! I have come so far, and I am so grateful for the support of all the PF peeps, especially you.
Gary @ Super Saving Tips
I’m with you on a lack of understanding all the healthcare insurance coverage options. People think once you’re on Medicare, you’re set, but generally you need either supplemental coverage or an advantage plan to get the kind of coverage you need. And those are confusing as can be. I am getting better at using the Medicare tool to find a plan, mostly thanks to my in-house healthcare/technology expert (my wife).
As for my biggest financial mistake, that would be investing a huge chunk of money in my ex-brother-in-law’s fraudulent investment opportunity. All the warning signs were there, but I still learned the hard way to do more research before putting my money on the line.
I don’t think I will be able to sort out my entire health plan fast enough, but I have all the numbers I need now to keep crunching. I might actually stay with my current plan but then compare as I visit doctors throughout the year (what would it run with PPO vs HDHP).
And I’m so sorry for that mistake. How terrible 🙁 People’s selfishness frustrates me to no end. That’s THE WORST. I can’t imagine.
Amanda @ centsiblyrich
I learn best from diving in head first and learning from my mistakes as I go. As I’ve aged, I realize if I don’t jump right in, perfectionism will lead to eternal procrastination and inaction. I’ve had this epiphany after turning 40, so I think my biggest mistake is not learning this about myself earlier in life.
I think the benefits and investing will just take a little time and experience before you start to feel more comfortable with them. I was totally against investing in the 401k in our mid 20s – until I looked at the account several years later and witnessed the growth. I admit, it can be scary at first.
I get that, Amanda. I can’t sit on the sidelines for too long. But I also don’t know that I want to cannonball (belly flop?) in. Starting with my Roth seems to have worked. Now I’ll tackle my 403(b). Then my husband’s. And we’ll go from there.
I applaud you for your courage to write this post! And this is a great counter-post to your ‘best money spent’ series.
I think my biggest money mistake was investing in individual stocks, rather than index funds. Like a lot of new investors, I thought that the stock picking ‘gurus’ out there actually knew what they were talking about. I made a lot of dumb moves and grossly under-performed the market. But, I did learn a lot, so I guess I don’t regret the mistake too much!
It sounds like it was a valuable learning experience, Daniel. It always interests me how bloggers seem to go from newbie to expert in a matter of days, weeks, or months. I’d love to figure things out that quickly. But I’m just not that fast I guess.
Graham @ Reverse The Crush
I’ve certainly made a few financial mistakes in the past.
I didn’t start saving and investing soon enough. There was a point in college where I racked up a lot of credit debt. Well, it seemed like a lot but it was only $1500 at the time. That was paid off quickly after school though. I’ve sold stocks too soon that I should’ve held. I’ve mad a lot of mistakes but I guess it’s important to learn from them and keep moving forward. Thanks for sharing:)
Thank you for sharing, Graham. It makes me feel less alone. Though if you know how to buy stocks, you definitely have a leg up on me! My Target Retirement Fund is about all I can handle right now. I’m working on it.
My biggest money mistake is by far my student loans – but I see where you are coming from on this post.
Even after I read something, I still sanity check it with other sources and ask questions. If something isn’t phrased in the exact way I wanted it answered – I ask (FAQ writers nightmare)
I used to day trade, lost some money – but you get over the fear of losing money quickly 🙂 (if you want the crazy approach)
I’m OK with investing. I’m doing that now. It’s the 403(b) business and reducing my tax bracket that is confusing and scary for me. I recently actually started to wrap my mind around Roth conversion ladders thanks to Ed Mills (Millionaire Educator), but I’m soooo far away from that I feel like I will miss the boat. Right now, I’m sticking with my Roth and trying to set up a 403(b) before the end of the year. 🙂
My biggest money mistake was not setting good financial boundaries. That was a painful lesson I’m still healing from. As for more normal financial mistakes, I’ve got 5 words for you. Limited Purpose Flexible Spending Account. LPFSA! The worst! I put in $1000 2 years ago and I’m still suffering the consequences. I didn’t know I could stress so much about $1000. Thankfully, none of it will go to waste, but it certainly made me more diligent about my open enrollment choices. Never again.
Ooooh yes. Poor financial boundaries has been my downfall – definitely my biggest mistake!
That’s a fantastic phrase that captures so many mistakes!
Oh, dear. Am I supposed to know what those words mean? That sounds like the deep end of the pool. I’ve only heard of FSAs. And they don’t seem like a good fit for me. It seems like that was your experience as well. Ekk.
My biggest financial mistake was not learning that saying “I can’t afford it didn’t mean I was a failure.” That led to LOADS of overspending and subsidizing a lifestyle above my means with school loans and credit card debt.
Beyond that I also cashed out a $12k 401k I’d built up, and besides paying the penalties, taxes, and what not Mrs. SSC pointed out that by now it would be enough to cover a full year of FIRE costs… D’oh!!
Wow. Thanks so much for sharing, Mr. SSC. I’m shocked by people’s honesty and support in the comments here. I hope you’re not beating yourself up (too much anymore). I’m trying not to (too much anymore). 🙂
Amber from Red Two Green
Ahh I’m so guilty of #1. Because I HATE dealing with any aspect of any insurance. Its confusing and it takes forever. I don’t blame you for your homeostasis. The savings are totally worth it but gosh. It is painful.
That’s a relief to hear, Amber. I go to the meetings that our district offers, but the PF community has actually problem been more helpful. Now I just need to fire up some spreadsheets!
UM YES: “I want to get to the point where I’m confident regardless of what the market, the blogging world, or anyone else says.” I can totally relate to this.
I think my biggest money mistake is simply not taking control sooner! It would be far too easy to pull out a list of everything I spent way too much money on. The fact of the matter is that I wouldn’t have made half of those “boo-boos” if I just learned a little bit about a budget and how to control my spend a few years earlier.
My mistake is forgetting to pay the credit card bills in time. Now, I found a solution with my google calendar. Every month, it send me a reminder to pay the bill and I just go and pay it.
Often you can have your credit card automatically paid on full each month. Well worth not having to worry about it imho.
Some months my checking account will not have enough money to do all the automatic payments. Sometimes, i have to move money between my accounts so that I don’t have to pay interest and fines on the OD payments.
Ah fair enough. Sounds like your Google calendar solution is perfect then!
My biggest money mistake in the most literal sense was spending $3k on a brand new big screen tv about 1 1/2 years after my first job sometime back in 2005. I had saved over $30k though, and mostly ate at home and did frugal things, still was a stupid move.
My biggest opportunity cost mistake was just not getting started sooner, and not diversifying my portfolio properly. Didn’t learn about that until years after I started.
I’m currently stuck on the diverse portfolio piece. My Target Retirement Fund should only be a piece of how I’m investing. Unfortunately, it’s pretty much it right now. Working on it!
And one of the first Black Fridays that I knew my husband, he may or may not have been in line buying a TV similar to that one. Sigh. We’ve all made mistakes, I guess!
Chris @ Keep Thrifty
Our biggest money mistake was probably a lack of communication in finances early in our marriage. I took care of the build and my wife was in charge of furnishing our newly purchased house.
The problem? I was constantly stressed because my pay was barely enough to cover the bills plus aalltge eating out, etc.
It took us a while but thankfully we’re in a much better state now!
My biggest money mistake was loaning money to a girlfriend in crisis knowing that we would break up as soon as the crisis was over. I thought the money would help her stay alive. She would have lived without it. I could not be responsible for her life choices and will to live.