Eight Personal Finance Regrets From the Past Year

Even though I research and write about personal finance every day, I still manage to make quite a few mistakes and poor choices in how I manage my own money and my own personal choices. Here are the eight biggest errors I made in the last year – and the actions I took (or am taking) in order to avoid these bad choices in the future.

1. Getting a thirty year mortgage.
When it came time to pick our mortgage, my wife and I debated long and hard between a fifteen year and a thirty year mortgage. The two mortgages we were offered would have resulted in a monthly payment difference of about $500, an amount that, in the end, we didn’t feel confident paying consistently, even though we were in good financial shape and were putting away plenty of money into the bank each month. However, looking at things from our current vantage point, it’s clear that we should have gone for the shorter, slightly lower interest mortgage.

Lesson learned: Rather than just merely spending that difference, we’re applying that difference to an even larger advance payment on our other debts. Right now, my one remaining student loan is the highest interest loan we have, so we’re busy eliminating that one as fast as we can.

2. I didn’t start my daughter’s 529 immediately.
This one was mostly just my brain not really clicking. Instead of starting my daughter’s 529 as early in the pregnancy as possible, I just simply didn’t think about it and wound up starting it shortly after her birth. Those months during the pregnancy were months that could have been used for some very nice savings – and some very nice growth in what I saved.

Lesson learned: When I started her plan, I started by contributing a little more to hers than I have contributed to my son’s plan all along, then I raised my son’s plan to match it. In the end, though, they’ll both be in great shape for college.

3. Not committing to cloth diapering as soon as we knew our second child was on the way.
Shortly after we found out that our daughter was coming, we visited one of our friends who strongly advocated giving cloth diapering a shot. We didn’t. Just recently, though, we found out how easy it actually can be and are actively cloth diapering our daughter. I did the math earlier today and discovered that if we had started with them when the suggestion was originally made, we would actually be money ahead with cloth diapering at this point compared to the disposables (starting off on our son, then using them on both when our daughter joined the fray).

Lesson learned: We’re gearing up for more cloth diapering as I type this, mostly as a result of pretty firmly deciding that we’re committed to a third child. The idea that such diapers have some degree of resale value put us clearly over the top.

4. Not listening to my wife and my own heart sooner with regards to committing to full-time writing.
I was missing out on so much because of my hesitancy with making that decision. I spent most of a year with my life so tightly booked that there was scarcely room to breathe – it was so bad that later on I’ll probably call it “the lost year.” I knew in my heart that writing was the way to go for me – I just spent too much time trying to talk myself out of it and listening to others who were trying to do the same.

Lesson learned: I need to trust my heart when it comes to the big decisions.

5. Not paying my estimated taxes for 2007.
When I first started The Simple Dollar in late 2006, I had no idea what kind of success it would grow into, so I filed my 2006 income taxes in early 2007 assuming very little income from the site. It turned out to be substantially more than that, especially near the end of the year, and I wound up being socked with a nice penalty for it. I did manage to save enough to cover everything, but that was mostly through blind guesswork.

Lesson learned: When doing my 2007 taxes, I was very careful to try to accurately estimate my income from writing in 2008 so I could pay my estimated taxes properly all the way along – and I got that first payment in on time, too.

6. Not planning adequately for retirement after my career change.
I still don’t have a retirement plan in place for my writing career. Right now, that retirement plan revolves around fully funding Roth IRAs for my wife and me. This is limited, and I really need to spend the time looking at other options, such as an SEP-IRA, that I am not fully educated on.

Lesson learned: Kick that Roth IRA funding in the tail and start researching that SEP-IRA! Get on it, son!

7. Clinging to bad buying habits.
At this point, it’s as though I’ve clipped away the big branches on my bonsai tree of bad spending and now there are just little ones to clip, but they’re still there and they still require focus. Right now, my worst tendency is to spend too much on food – I tend to go directly for the highest quality ingredients without really considering other options. Like I said, it’s a little branch – there are a lot worse things I could be spending my money on – but it’s something I need to watch. Just because my spending is under control and I can afford the expensive cheeses and meats doesn’t mean that I should always buy them when there are acceptable alternatives at a much lower price.

Lesson learned: The place I need to really watch myself is at the grocery store – I blink and suddenly a half-pound of gruyere and a big pile of fresh shiitake are in the cart.

8. Not getting more politically involved in my community.
Something that’s bothered me over the last year is my lack of community involvement – with so many other demands, it was easy to let this fall by the wayside, and that was a mistake. Now that my time is more open, I’m getting much more involved – and there are a lot of financial benefits to community involvement besides the fun of it.

Lesson learned: The way I’ve been getting more involved is that I’ve started noting when meetings are that I’m interested in on my personal schedule so that I’m continually reminded of them.

Personal finance is hard. It’s easy to know the right thing to do – it’s much harder to be persistent and always correct when implementing it in your life.

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52 thoughts on “Eight Personal Finance Regrets From the Past Year

  1. Rebecca says:

    Number 7 is a killer-and food is it for me, too! When I first got married I justified everything at the grocery store because we had to eat and we were/are both food snobs. I later realized how much I was throwing away and I have now cut our bill by 30-50% of what I was spending. I recently read an article that said the average American household throws away $590 in food do primarily to poor planning. Ouch!

  2. Frugal Dad says:

    Nice to hear that even “the experts” mess up every now and then. It just proves we are all human. I have momentary lapeses in my own frugality, and always regret it later. However, I figure if we are constantly moving in the right direction, even if we stop for a rest, or get a little off course, we will still win in the end.

  3. FMF says:

    I made #2 for YEARS. Now I’m catching up, but it’s much harder. You have a good jump on me — so don’t be too hard on yourself.

  4. Dave says:

    2. I understand regarding #2, but my planner told me that I couldn’t start mine without a SSN, thus no way to do it prior to birth!

  5. Vered says:

    It is great that you are so honest with us. I admire that.

    I am happy for you that you took the leap of faith needed to write full time, but I wouldn’t necessarily consider waiting before you did it a mistake. You were careful and didn’t jump into something prematurely, instead waiting until you knew for sure that this was the right path for you. I think you did the right thing!

  6. Stacey says:

    Very honest, thanks for sharing. We’ve all got regrets, but only the most disciplined can learn from them and move on. Our biggest problem is the mortgage as well – we’ve got a 30-year mortgage, but want to pay it off well before then.

  7. KC says:

    Can feel your pain on the estimated taxes. A friend of mine did like you and “underestimated” a few years ago, she had to pay a sizeable penalty. She scard the —- out of me, so I paid 40% each quarter. So I overpaid by about $2,000 on the entire year. Course I’m getting the money back, but I’d rather have had it all along. This year I made my first estimated payment and went with 30%.

    The problem is my accountant is too rigid and gives me estimates each quarter based on last year. But our quarters are not consitent at all. They won’t however give me a ballpark figure like 30% – so I just created my own.

  8. I don’t know that #1 is so bad. You’re chipping away at other debt, which is good, and you can always, always pay more toward principle as if it were a 15 year mortgage. The challenge is that most people with “extra” money will fritter it away on trivial stuff or the vacation in the Bahamas. You’re probably more disciplined than that.

    The tax thing is what would scare me the most. Those boys at the IRS don’t play around. It’s good you had the money to handle it and know what to look for in the future.

  9. Seb says:

    i have to say your website has got me, hooked on various topics you write about. and keep up the good work.

    i had a question for section 2: what is a 529 plan?

  10. Despite the ramblings of Dave Ramsey, who is right 75% of the time, the 30 year is the better way to go. If you can almost feel comfortable with a 15, better to do the 30 and make lots of payments. Interest is a tax deduction and it allows for breathing room if money gets tight.

    My parents had a 20, which they recently finished paying off (in 18). I don’t see those often anymore.

    If those are your only personal finance regrets, you’re in great shape Trent. The best thing is acknowledging (sp) a weakness and trying to work around or over it.

  11. Heidi says:

    As long as there is no prepayment penalty on your 30-year mortgage, that may not have been a mistake.

    Something I have learned is not to beat myself up over the mistakes I have made, but simply take stock, say “How fascinating! Look at all I learned by making that choice!” and move forward.

  12. Dave says:

    Don’t beat yourself up over the 30-year mortgage. Pay off your other debts first, then double your principal payments on the mortgage and you’ll turn that 30-year-mortgage into a 15-year mortgage. And if you hit some rough times, you can always scale back on the extra payments, something you couldn’t do with the 15-year note. How do I know? I did just that, paid off a 30-year mortgage in just over half the time making pre-payments, except for six months when my wife took off work when she was pregnant.

    The best thing is you learned all these lessons at a young age and now have a bright future ahead of you!

  13. Allie says:

    I didn’t know you could start a 529 plan before the child was born. I thought you needed a social security #. Or you do mean just saving it in the bank then starting a 529 after birth?

    Since I didn’t think we could start a plan during pregnancy, we slowly started saving a little here and there and have a plan for future contributions, so I guess that’s a start…

    Thanks for sharing your ‘mistakes’ Trent. It reminds us that you’re just human like the rest of us. :)

  14. @1: Aren’t you better off investing the extra money instead of having the shorter mortgage when you include investment returns, tax breaks on mortgage interest and a (I assume) low mortgage rate?

    @7: Like you said yourself, you had no idea TSD would blow up like it has…you can’t really blame yourself.

  15. L says:

    I went with the 30 for the same reason as you. Just an extra safety net. If you pay extra on the 30 year to match the payment of the 15 year, there is only a 1-2 year difference in the time you pay it off. And with other debt, that is a better place for your extra money.

    Have you bought more of the bumGenius diapers or are you experimenting with other kinds?

  16. PS @ the poster above me: you can start a 529 before they are born. You have it in your name and then when your child is born you can transfer it to their name.

  17. Debbie M says:

    For #4, I bet you can come up with a better term than the “lost year.” You weren’t ready at the beginning, and you were ready at the end. Maybe the transitional year. The two-job year. You did earn a lot more money that year than you would have if you had quit earlier, and I bet you put that money to good use.

    **

    I do have a problem with your statement that “It’s easy to know the right thing to do.” I don’t think that’s so easy at all. It’s hard to even know what all your options are. And it’s hard to know what you’d think of some of those options if you actually tried them (you didn’t know that using cloth diapers could be so easy, and you didn’t know you could be comfortable with a fifteen-year mortgage).

    And once you do know some right things to do, it’s hard to do them all right away–you still have some time-consuming research to do on things like SEP-IRAs and local opportunities for political participation.

    **

    I really like this post because it shows how even people who are doing quite well still have room for improvement. It gets harder and harder to find ways to improve, but if you can, maybe I can, too.

  18. Heidi says:

    I ment to comment on what Allie said as well – I know that most banks won’t let you set up a 529 without a SSN. According to our inside legal council, it’s illegal to set up a 529 for an unborn child (we had a client that tried to do just that about five years ago).

  19. Personal finance can be hard to implement, especially without mistakes. But learning from mistakes, as you clearly show in this article, will help you do better next time. And sharing what you learned might help someone else (though we all tend to like to make our own mistakes!)

  20. Andy says:

    The food one will be tough to break I think. Here are some thoughts on how to do it maybe (and I haven’t done these, but I thought I’d throw in some ideas). First, you could try individual comparisons of cheap and expensive foods and see how much or if the more expensive one is better (and this could lead to some good blog posts too). Second, you could try to make one meal a week that is delicious and costs less than X amount. Then you could start thinking creatively about making delicious, healthy food that is also cheap. Anyway, it is not that bad of a problem to have, buying nice food to cook for your family.

  21. Sandy E. says:

    A 15 yr. mortgage is always the way to go (provided you can meet the monthly payments comfortably) because you always get a lower interest rate w/them as compared to a 30 year. We all have a list of ‘live and learn’ things though, and so long as I’m on track now, as you are, I wouldn’t beat myself up over them.

  22. I also need to do some research into SEP IRA investment options. I look forward to having you share your findings in a future article : )

  23. Ryan says:

    The goal for me is to never own my house. And not because of the usualy reasons such as beating the rate of return by investing in the stock market. I live in a hurricane prone area and the last time a hurricane came through here and destroyed many houses, the insurance companies walked and breached thier contract by not replacing those homes. If I owned the home 100 % in this situation, I’d have to eat the loss. If I only owned 20%, I’d only eat 20%.

  24. TheCFONow says:

    I did #5 in 2006. OUCH! I feel your pain! We got hit with a nice little penalty too!

  25. Joe says:

    Regarding #1, maybe the mistake is not getting a mortgage without a pre-payment penalty?

    Otherwise, you’d be able to get the low payments of a 30-year, but pay down sooner than that provided you had the extra cash. Still, it’s never a bad idea to put extra money towards debt and student loans. I think the average term on a student loan ends up being 10 years!

    As for me, I’m guilty of #2… though I set up the 529s for each of my kids, I know we’re nowhere near putting in enough but our retirement is more important and we have to have our priorities. :)

  26. Bill says:

    I would recommend researching a Solo 401(k) as an alternative to the SEP-IRA. I found that I could save much more tax free in the Solo K versus the SEP-IRA.

  27. Trent says:

    “According to our inside legal council, it’s illegal to set up a 529 for an unborn child (we had a client that tried to do just that about five years ago).”

    You start a 529 for yourself and then change the beneficiary to the child upon the child’s birth. That’s completely legal – I did it online with my first child and would have done it with my second if I was more on the ball.

  28. Yi Hui@The Simple Wealth says:

    We all make mistakes. It’s all right to make mistakes as long as we learn our lessons, but it’s scary that it takes sometimes 5 or 10 years to learn from our mistakes. If it takes only one year, that’s not bad at all.

  29. Cheryl says:

    Ok, I love #4 because it could have been written by my husband, only substituted “writer” for musician. He has now become a full time musician and will be recording an album this summer, and may very well have a chance at fame in the music industry. Read about our journey on my blog!

  30. JW Thornhill says:

    Getting a thirty year mortgage is one that we are regretting also. But, with the rate that rates are going down you should be able to get a good 15yr. fixed soon.

  31. Steve G. says:

    Regarding #6:

    If you’re going to research the SEP-IRA, look into the Keogh account as well. I can’t spell out the differences, but a Keogh is similar to the SEP-IRA (retirement account for the self-employed) and may be more generous on things like max contribution amount.

    Good luck!

  32. Pinyo says:

    I am not sure why you regret the 30 years mortgage (I regret my 15 years). I think 30 years give you greater financial flexibility and security (yes security…and we can debate this until we turn blue). Also, 20 years from now, you’ll be really happy about the small amount you pay each month on your mortgage due to inflation.

    Cloth diapers…that’s an acquired taste. Baby poop is fatty and hard to clean. I tried it and I probably spent more in cleaning (time and money).

    Lastly, SEP-IRA is not that hard. Just visit a knowledgeable brokerage firm (I did mine at TD Ameritrade) and they should be able to walk you through the set up process.

  33. Trent,

    Have you looked into refinancing into a 15-year mortgage, or was your comment more along the lines of rates being universally higher now compared to when you got your 30-year mortgage?

    I would love to see a breakdown of the savings you might see for refinancing in today’s market. I’ve considered it but I don’t really know at what point a (lower rate at reputable bank + fees + effort) > (current rate).

  34. j says:

    Don’t call this year “the lost year” – your hard work and dedication to your family, writing, and finances set you up for the ability to jump full time into writing safely. It allowed you to take the habits you gained during the hard work and apply it to something you absolutely love doing with your life.

    While the rest of your points I can see as “regrets” – never regret hard work and making sure your ducks are in a row before moving forward.

    Congrats!

  35. George says:

    @Pinyo – “Also, 20 years from now, you’ll be really happy about the small amount you pay each month on your mortgage due to inflation.”

    Er, uhm… a 15-yr mortgage has been paid off for 5 years by that time, so you’ll be really happy that there is no mortgage :-)

  36. Mark B. says:

    To me #6 is by far the biggest issue on this list. Since you are now completely dependent on yourself for retirement savings this is something that cannot wait.

    Thanks for sharing, great list. If these are the worst mistakes that you make then you will just fine.

  37. CBus says:

    Hey Trent,

    Could you elaborate on your 30 year mortgage regret? Buying a house is one of the biggest financial decisions most of us face (and I would realy love to see your point of view).

    I lean towards longer term, but paying back early, even if that means a slightly higher interest rate. I feel it gives a level of financial security should I lose my job. I say this because I am in a job where I have to show up every day to get paid and have no passive income (yes, I should get on top of that). I strongly hesitate to use the words “passive income” when talking about your wonderful blog. You did well organizing your site to sustain some level of passive income (although your continued input continues to draw more people and retain the rest).

    Are you writing from the perspective that TSD has provided additional revenue and will continue to provide a steady, if not growing revenue? And with the knowledge that TSD will continue to produce revenue affords you an additional level of financial security?

    This is a nice list, but don’t all of these regrets pale in comparison to where you were just 2 shorts years ago. Well done, best wishes.

    -CBus

  38. Michael says:

    George, good return.

  39. getagrip says:

    Most of these “regrets” are based upon hindsight being 20/20.

    1. You found you could afford the difference, even with your quiting your 9-5 job.

    2. You had a healthy baby.

    3. You’re set for the next child, and did it really cost all that much?

    4.& 5. You didn’t know how successful the blog would grow.

    6.,7., & 8. Okay, here you had good room for improvement :-)

  40. Karen says:

    In addition to the SEP-IRA, you should also look into an individual 401K. It allows you to put away $15,500 + 20% of your profits per year. I’ve been self-employed for over 10 years and started out with a SEP-IRA, then set up my individual 401K several years ago.

  41. mike the timesaver says:

    You forgot, the mistake “not making a big enough commitment to save your time”, your greatest asset.
    I highly reccomend anything by Brian Tracy, but specifically his courses on How to Manage your time.
    How much would you pay for a surgery that would prevent you from dieing and extend your life another 10 years? what about towards a family member that would give you the ability to see them for an extra 10 years?
    Then Why not do everything you can to save your time and others?
    Plan for the future, you’ll be living the rest of your life in it.
    Brian Tracy points out that someone once said that time is the stuff your life is made of so the real question is not “how much do you value your time” but “how much do you value your life”.

    Why not take your earnings from this site, and invest in a couple of other writers to contribute with different ideas every couple days so if you need to take a break and spend time with your family, you can do so without feeling like you’re letting down your readers by not having great new content?
    Rather than take the time to write yourself, wouldn’t it be better for everyone if you found a few like minded people that would be willing to post high quality posts for you?
    How about using the time you saved to make this just be a starting point, so you can help out a lot more people and focus on a different audience. By automating this one by hiring writers, you can maybe have this site more specifically for saving, and then you can start a new site related to investing.

    If you wrote a page every day, you’d have a 365 paged novel by the end of the year…
    But, if every day you found someone new to write a page for you every day, at the end of the year, you would have enough posters where you’d have 365 pages every single day, or 365 365 paged books every year.
    Now that’s not a reccomendation to get that many people writing on this site, but I’m sure since you’re retired now, you could grow 50 sites each with a couple writers on it within a couple years.
    That’s more income for you, for all of your writers, and more money in all of your readers pocket, or at least they’ll have help with some need that you can address.

    Look, you already know that you can save people thousands of dollars, but by not increasing your ability to reach more people, you’re costing the people that you don’t reach thousands of dollars!
    If you can reach out to an extra 1,000 people with your time, You’re saving a combined amount of millions if they take your advice!
    Maybe create a professional information product, and put it on clickbank. You will have affiliates making money from selling it, while having your affiliates reach your materials out to MORE people, and your message of saving will be much more inspirational, to many more people.

  42. Hogan says:

    Can a collection agency charge interest on an account?

  43. Sarah says:

    Hey Trent – Thank you for this post. It made me take a deep breath and calm down from my daily worries of financial doom, seeing that even someone in as stellar financial shape as you are has these regrets. Reading your blog for over a year now, I’ve started (finally!) to absorb some of the messages you’ve been putting out, and I appreciate them. But I have to admit, it’s so wonderful sometimes to have a small acknowledgement that yeah, we’re all human, and yeah, sometimes that half pound of gruyere gets the better of us. (For me it’s brie and sometimes a bottle of wine that’s just a leeeetle too nice for my budget that week…) ;)

  44. We should all have such regrets!

    After reading about where you started, I feel as though you have accomplished so much in such a short time that the matters you describe here are just predictable spin-offs.

    BTW, on the taxes: Could you have sent money in to the IRS each quarter based on the unexpected revenue, even if you hadn’t made an estimate at the time you calculated your 2007?

    I don’t understand — have never understood — where the IRS imagines a freelance gets a crystal ball. From year to year I have no idea what my freelance work will earn. Some years it’s so little it’s barely taxable; others it’s fairly substantial. There’s no way to know until a client walks in the door. Wouldn’t it make sense that if you got a $20,000 commission you could simply send 28% of it to the IRS the minute the client’s check cleared the bank? You’d probably overpay, but better that than to get hit with a penalty.

  45. NP says:

    You have written about possibly moving sooner or later. Maybe sooner? If so you can get a 15 year mortgage on the new place and sell what you have. If you don’t plan to live there for 30 years or even 15 years, I don’t think you have made an error.

  46. Jessica says:

    I’m really enjoying your blog, but the cloth diapering stuff is especially bringing a smile to my face. We decided to go with cloth for environmental reasons, but have been amazed by how much cheaper they are than disposables. We’re also happy that we’re not beginning our son’s consumer indoctrination by swaddling him in pampers printed with corporate cartoon characters! Instead we have the pleasure of wrapping him in environmentally sustainable, non-sweatshop clothing made by self-employed moms who choose to run their businesses in a way that makes the world a better place for all of our children. Just another place where what’s good for your wallet is also good for the rest of the world too. And then of course there’s the secret that all our grandmothers knew but the disposable diaper companies would love us to forget: that most cloth-diapered babies are toilet trained and out of dipes entirely by around 18 months. So smile! Your savings are only beginning!

  47. Dave says:

    I find a food budget helpful. I love to cook, often making food to bring in for co-workers, as well as participating in a (very laid back) monthly cooking contest. I often have to buy several one-time-use ingredients for these, such as morels (my mom had to explain what they even were!)…I set a limit for myself of $240 a month; this lets me go out to lunch with the coworkers a few times, cook several nice meals, and also keeps me honest sticking to my ‘staple’ meal of rice, beans, spinach w/ balsamic vin, and occasionally chicken.

  48. gr8whyte says:

    @ Funny about Money (comment #41) : If your income stream is unpredictable, have you considered using the Annualized Income Installment Method which bases quarterly tax amounts on actual income received through the end of the current quarter? The upside is it eliminates the need to guess/forecast incomes for future quarters. The downside is you’d be required to file Form 2011 with your Fed return. It’s a fillable pdf form and the real work is in figuring out your cumulative AGI for each quarter; the rest is simple math. I’ve done it and it’s not bad. If you’re interested, look in Publication 505.

  49. Autumn says:

    Wow, my husband and I have made some of these as well this past year. That taxes thing can really bite you. Thankfully we are on a good tax plan these last few years.

    Dave Ramsey has great advice and is always right!

    Cloth diapers will save you a ton. It took me one child to realize this, but with my last 2 kids I’m on board. For cloth diaper saving tips, check my blog.

  50. reulte says:

    Hmmm – regarding #6 – Why prepare for retirement, when you’re not going to retire since you’re doing something you love doing?

    OK, OK – just being somewhat rhetorical; but also I’d suggest re-visiting your retirement plans. Your life has changed as has your work — perhaps that’s the reason that you’re procrastinating doing the retirement planning?

  51. Lucy MacEachern says:

    I had my children before disposable diapers were a big thing, so used cloth diapers. I had rags for cleaning and other chores until they were teenagers and still occasionally buy some at garage sales to have good cleaning cloths.

  52. Jenn says:

    I was just revisiting some posts. I am looking into buying a home this year. I used some on-line calculators that showed me that I could save almost $25,000 in interest over the life of my mortgage by cutting my monthly payment into bi-weekly payments that equal the monthly amount. And consequently also shortening the length of the term. Have you considered doing this?

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