I have made some of the worst money mistakes any person can make. It took me at least 10 years to recover from these money mistakes in my 20s and I have been paying for these mistakes to this day.
What are your worst financial mistakes and how have you or are you recovering?
Here are my 5 worst financial mistakes
Student loans and credit cards
- I funded my entire out of state college education with student loans. I did not work a side job and I used my excess student loans carelessly. I also had no idea how to use credit cards responsibly. It is funny how this all turned out. I now have a background and experience working in the financial services industry and know exactly how banks make money off consumers. If I were to do this all over again, I would reconsider attending an out of state school. Credit cards are now always paid in full so banks do not make money off me through late fees and interest fees. This is something I quickly learned after experiencing credit line decreases and credit cards being shut down because of my credit score dropping well below 500.
Leasing a car
- Ever since I graduated from college, I have leased a new car. That is 10+ years! As recently as a couple years ago, I told colleagues that I was perfectly fine leasing a new car and having a car payment for the rest of my life. I actually said that and believed that. Clearly if you are trying to build wealth and financial independence, leasing a car is not smart financially. I leased a new car and will guarantee this will be my last. I do not drive much, so I intend to finance the car once the lease matures. I have learned that you are much better off buying a used car (2-3 years old at a minimum) and get rid of that car payment as soon as possible. Car payments are a major drag to accumulating wealth.
Not contributing to my company 401k
- During my 20’s I did not contribute a dime to my company 401k despite some of the companies I worked for matching up to 8%. I wasted the opportunity to earn literal free money. Looking back the reason I did not bother with any retirement accounts is because I did not understand how this all worked and how it could benefit me. I did not bother researching or asking my company HR to educate me and it cost me in the long run. I now know better. Currently I am only taking advantage of the company 401k match and not contributing more because that extra money is also helping me reach my student loan debt payoff goal by the end of February 2018.
Defaulting on my loans
- Just like the other money mistakes I mostly made in my 20s, I defaulted on my student loans. This absolutely killed my credit score and resulted in credit line decreases, additional and unnecessary fees, and eventually my credit cards being cancelled. I am still paying for this mistake to this day in my mid-30s and thankfully I see the light at the end of the tunnel in paying off my student loan debt.
- I not only experienced this throughout my 20s, but also in my early 30s. I felt entitled to the money I was making and how much I should be spending. I started making 6 figures in my 20s and not only was I living paycheck to paycheck, but I was barely making my minimum monthly payment towards my late 20s. A sign of maturity is delaying gratification and I certainly did not practice that. I am much better now, but I do have bouts of lifestyle inflation.