Pretty much everyone has made some money mistakes that they later regret. So many people don’t plan their financial future and are not able to cover an emergency or unexpected expense. Making mistakes happens to everyone, but it’s how we react to these mistakes that really changes our lives. Today we’re going to talk about the 5 biggest financial mistakes I’ve made.
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1. Credit card debt
This is probably the financial mistake that I am dealing with the most. I have been dealing with trying to clean up my credit card debt for the past two years. Paying off debt is not easy, especially when credit cards are so easy to use.
I have had two different maxed out cards since I got my first credit card in 2015. You would think I would have learned from the mistake after I got my first maxed out card fully paid off, but I didn’t. I am currently working on paying off my Discover card and now will be dropping my credit limit as I pay down the balance.
2. Purchasing a brand new car
I’m not sure if I really should say this is a money mistake or not to be honest. I absolutely love my car. I have a Mazda CX-5 that I bought brand new in 2016. Although it has been a great vehicle and it works out perfectly for my career and traveling, looking back I definitely spent more money on a vehicle than I should have at the time.
I had a paid off 2006 Ford Focus that I probably should have kept until it needed too much maintenance to be practical. At the time I didn’t travel much and it would have lasted me a couple more years I think. What I should have done was look at a nice used vehicle instead of going all-in on a brand new, (almost) fully loaded new crossover.
3. Paying off a credit card with stock money
Around October of 2018, I cashed out some stocks that my parents had bought for me around the time I was born. I used the money to pay off about half of my Discover card at the time. Since I was focusing on paying off my credit card I thought this would be a good choice to knock it out faster.
This is probably one of the financial mistakes that really bothers me the most. I did pay off half the card balance with that money, but my Discover card ended up maxed out again by Christmas of that same year. Looking back, I probably should have used that money for something more useful like paying off my boyfriend’s truck or paying off my student loans. We even bought our house very soon after that and I was really annoyed with myself that I had already basically wasted that money.
4. Not having sinking funds
I never had any sinking funds until sometime during 2018. I did always have savings, but I generally just kept about $1,000 in the bank. Because I wasn’t saving for expenses I knew were coming, I would end up dipping into my savings all the time for things that I really should have been planning ahead for.
Sinking funds can be a lifesaver for your budget because you won’t have to use your emergency fund money unless something unexpected happens. It added a lot of financial stress to be constantly using and refilling my savings on a regular basis instead of just knowing that money was there if I needed it. Sinking funds have helped me be ready for things like car repairs, vet expenses, property taxes, and even Christmas. Having money set aside for these things gives me a lot of peace of mind.
5. Not having a budget
For the first few years out of college, I never did a budget. I knew how much I had to spend from each paycheck and for about a year actually did really well with putting money in savings. I didn’t have a credit card at the time and was able to save up for things and didn’t have near as many impulse purchases as I do now.
However, because I didn’t do a budget, once I did have a credit card I would end up putting groceries and gas on the card. I started having a bigger spending problem and started using my credit card very often. This is what snowballed into using my credit card to buy things all the time whenever I thought I wanted them instead of thinking things through and saving up. If I had done a budget, I wouldn’t have used my credit card to pay for things when I was short at the end of the month.
I really am fortunate that I realized I needed to get control of my finances before I made any really big financial messes. I have always had some form of savings and have never been a situation where I could not pay my bills. For the longest time, I thought I had pretty good control of my money because I never had any issues paying for the things I actually needed to pay for.
If you’ve made money mistakes in the past, don’t let them follow you around and make you feel guilty or ashamed. Everyone makes mistakes, it’s how you clean up your mistakes that matters.