Financial Mistakes I’ve Made in the Past Year

I make financial mistakes. I make a lot of them, actually.

What I usually try to do when I screw up is not dwell on them. Instead, I try to identify why I made the mistake and then try to figure out how I can fix that issue. I don’t beat myself up over them – there’s no benefit in doing that. I’m human. I made a mistake. I’m going to make more in the future. The best thing I can do is just make sure that mistakes don’t turn into a culture of repeating them.

Ten Financial Mistakes I’ve Made in the Past Year

1. I’ve splurged too much on books

Most of the time, when I find out about a book I want to read, I either reserve it at the library and/or I check for it on PaperBackSwap. Most of the time. Far too often in the last year, I’ve allowed my impatience to get the better of me and I’ve just ordered the book off of Amazon.

Solution: The real problem is the convenience of book ordering from Amazon. My solution was simply to remove my card information from the site so that when I go on there to order, the “hassle factor” goes way up. It’s a lot easier to tell myself I can just patiently wait on Wolf Hall if it’s a hassle to order it.

2. I miscalculated my estimated taxes for 2009

Mostly, I’m just not very good yet at really estimating (at the start of the year) what I’ll make all year long. Trust me, if you’re self-employed and make an income that varies a lot from month to month and isn’t really predictable, the federal tax laws do not work in your favor. My mistake was estimating far too high at the start of the year this past year and then really struggling through the middle of the year as my income was really low.

Solution: I just need to be very, very careful when calculating my taxes and, because of the penalties involved if I miscalculate, I should calculate very much on the high end. It’s a lot better to pay extra now and forego the small amount of interest than it is to pay less now, realize you didn’t calculate quite right, and have to pay a stiff penalty.

3. I waffled too long on replacing my truck and passed on two great offers

As I shopped for a vehicle to replace my truck, I knew I had plenty of time. This led me directly to favor the “two birds in the bush” over the one in the hand and constantly skip over good deals I’d discovered.

Solution: We finally found a great vehicle and are moving forward with the purchase of it. I hope to write about it soon.

4. I left more cash than I should have in my checking account

Doing this foregoes nice interest returns elsewhere. Because our income is variable, our automatic savings transfers are on the low end of what they should be. Thus, during good months, money builds up in our checking account. I left it there instead of putting it into savings.

Solution: Be more vigilant with my balances and my automatic transfers. Check in on things at least twice a week and don’t be afraid to transfer money back and forth as needed.

5. I didn’t spend time re-evaluating long term goals

The big question, “where do I want to be in five years?” It’s something that I’ve learned is well worth reviewing on a very regular basis, particularly with the people most important to you. I didn’t do this and instead stuck with some visions from the past. Meanwhile, life goes on – we decide to have a third child and make some other personal decisions. Suddenly, the five year vision is quite a bit different – and our saving and planning tactics are a bit out of whack.

Solution: Look at the future more often. Talk to my wife at least every month about our future. Save our money for these goals in a way that’s pretty flexible so that if plans change, we’re not subject to financial penalties.

6. I gave less to charities in 2009 than I intended

Mostly, this was borne out of uncertainty about the uneven income I was making. I strongly padded my emergency fund during 2009 and charitable giving was one of the things that suffered in the process. We still gave, don’t get me wrong, but we didn’t give nearly as much as we could have.

Solution: Since most of the money we would have given is socked away right now, we can simply do more charitable giving in 2010 to make up for it. In addition, I’ve been steadily increasing my time given to volunteering over the past year, and time is money, after all.

7. I let my personal inbox overflow

The problem here wasn’t that I missed out on anything truly important (though I did come close to being late on a bill or two). The problem really was that I missed out on several opportunities for local political involvement and career advancement and, in one instance, in getting my child registered for youth sports.

Solution: I need to process my inbox to zero at least once a week. This was once a routine, but it got thrown off when I was in “crunch time” with my book. I need to get back to it.

8. I allowed myself to get talked into an expensive trip

Several of my friends and my wife persuaded me to take a trip to GenCon in Indianapolis this summer with a large circle of friends. I was resistant to this for months until I realized that at least one close friend had decided to go on the trip mostly because I was going. I let the guilt of that get to me.

Solution: I’m going to go on the trip and enjoy myself, but I’m going to save very carefully for the expenses. This is another reason to control the book spending, as mentioned in my first mistake.

9. I didn’t pay enough attention to my wife’s retirement planning

My wife’s investment advisor through her work had been managing her retirement savings. I made the mistake of assuming that the money was being managed well.

Solution: Even if there is an advisor involved with money management, I need to be involved myself and know exactly what’s going on. Even more important, if I see something I don’t like, I need to step up and make a change.

10. I backed away from some of my big career visions

During the crunch time of my upcoming book (and some cooldown afterwards), I let a lot of other ongoing projects slide for a while. This likely means some missed opportunities and some missed income.

Solution: I’ve recommitted myself to long-term projects with regards to my work. There are several projects that were allowed to run cold and I intend to pick them up and run with them in the coming weeks.

Yes, I mess up. A lot. Time to learn from them.

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  1. Nicole says:

    Nice post.

    We haven’t gotten estimated taxes right once. They’re really obnoxious. The best we’ve done is gotten a refund that goes straight back as an estimated payment for the next quarter. When we estimated low one year the penalty wasn’t too bad– definitely under $50 maybe even under $20, but it is still annoying. Sunk cost, learn and move on.

  2. Johanna says:

    I think at least a couple of these only become “mistakes” with the benefit of hindsight. Don’t be too hard on yourself.

    Does your wife pay attention to her own retirement planning? Or has she delegated that responsibility to you?

  3. marta says:

    Many people would love to have those financial “mistakes”. They aren’t too bad. Enjoy your trip, live it up a little.

    I am a bit confused about the taxes issue: am I reading it wrong or your solution (“I should calculate very much on the high end”) seems to be the same action that prompted the problem in the first place (“My mistake was estimating far too high at the start of the year”).

    It’s insane to be asked to estimate our earnings at the beginning of the year — here you do that when you first register as self-employed, and you have got two ways of paying taxes: quarterly estimated taxes payments, based on the income from *two* years ago (yeah, I know), or having a fixed (non-negotiable) percentage withdrawn from each paycheck. I am always a bit frustrated when I read posts about how we shouldn’t aim for a tax refund — I always get one, because I have no choice re: tax payments.

  4. Oh, I so hear you on the estimated taxes. I’ve been self-employed for all of our marriage, and I always overpay and end up getting a refund simply because the cost risks of underpaying are so high. One underpayment penalty can easily wipe out several year’s worth of interest.

    I’d rather be on the safe side.

  5. prodgod says:

    I never pay my estimated taxes, as I need to pay other debt first. Someday, I’ll get to that point, but the penalty is anything but “stiff.” I’d rather use that money all year and then pay the 4% the IRS tacks on – it’s chump change compared to CC interest.

  6. Shevy says:

    I can almost accept that all the others qualify as “financial mistakes” *for you* (although as a bibliophile myself and knowing that you read 3 books per week I find it a bit difficult to fault you for buying “too many” books) but GenCon is different.

    You enjoy games. Your wife really wants to go to GenCon. You’ll be going with a large circle of friends. You’re not going to go into debt to go there. Being with family and friends is a priority for you. Now tell me how going to GenCon is a mistake. You have to be responsive to what others in your family want to do too, you know. And at least Sarah didn’t want to go to Europe! I really don’t think Indianapolis is a big deal and you shouldn’t consider it a mistake.

  7. Evita says:

    Oh Trent, aren’t you a little hard on yourself? None of your so-called mistakes will set you back or put you in financial danger… in my book, you did not “mess up.. a lot”, you just acted 95% of the time like the financially responsible person that you are.

    Please don’t let your perfectionnism and controlling tendencies keep you from enjoying your books, your upcoming trip or your current achievements that seem considerable to us, your readers!

    and tell us WHO can clean up an inbox that produces 300 to 500 non-spam messages DAILY ? Mission impossible!!

  8. Leah says:

    I agree — you’re being quite hard on yourself! Obviously, only you know your priorities . . . but are you really that upset about GenCon? I suspect you’ll have a fun time.

    Do you guys budget for splurges? If not, maybe it’s time to do so, both to allow you to cut yourself some slack and also do some of that charitable giving as the mood strikes. I’m working on a budget right now (just for myself), and I’m definitely planning some splurge money. I tend to beat myself up over spending, just like you’re doing in this post, and I’m starting to think that’s overly punitive.

    In terms of my inbox, I’m going for “inbox 25 or less.” It’s easier to maintain than inbox zero, and it definitely gives me some wiggle room. I can see all of my inbox items on one page, and I regularly deal with the stuff in there.

    Finally, with more money sitting in checking account, I bet you could run numbers and figure out how often you need to check. I’m not sure if checking twice a week is worth it unless you want to maximize every little penny. I’ve always found that it’s more worth it to me to leave a cushion in checking (so I don’t overdraft and have some flexibility) rather than get the little bit of interest, especially with rates where they are now.

  9. greg says:

    My solution to the book buying is the Amazon wishlists: whenever I find an interesting book on Amazon, which I can’t read immediately, I put it on a wishlist – knowing that I can have it shipped within 48 hours whenever I am ready to read it. Meanwhile, the list has grown to 400 books worth 9000 dollars – and that’s money in the bank. Another great resource is the “Authors@Google” series on YouTube, where well-known authors give a one-hour summary of their latest works – great for listening while doing the dishes or cleaning potatoes.

  10. I think the key is that you don’t beat yourself up over them, that you do learn from them, and then simply move on.

    Which it seems that you do.

  11. Harm says:

    Do tell, where are the ‘nice returns’ you are
    foregoing by keeping too much in your checking? LoL

  12. Russ says:

    @Harm

    It’s not exactly hard to find decent returns these days. My index funds have all recovered (money invested in 2006/7 is back to where it was, and money invested after 2007 is up *massively*). I’m receiving 3.5% in a normal savings account, around 9.5% at zopa, and my bullionvault account is up around 10% too. Why are you having so much difficulty?

  13. Kevin says:

    @Russ

    Trent needs his excess cash savings to be liquid and safe, which rules out Index funds.

    Where are you finding 3.5% interest in a “normal savings account?” The best I can find is 1.5%. Please be specific.

    Zopa is a peer-to-peer lending site, which again sacrifices safety and liquidity. Those sites have notoriously high default rates, and I’m highly skeptical of your claimed 9.5% return.

    Bullionvault may have risen 10% recently, but given that gold is already at record highs, is it likely to continue climbing? Again, this is much too risky for cash that needs to remain liquid and safe.

  14. Russ says:

    @Kevin

    I am getting 3.5% from ING Direct. This is a promotional rate in the UK, so may not be available in the US. I can trivially achieve 3.5% from a number of other places, though.

    In 4 years of using Zopa I haven’t had a single defaulter; a couple of late payments is all. Please don’t confuse Zopa, which has better-than-industry-standard credit checks, with cowboys like prosper.com. And, now that I check, you’re right – I’m not getting 9.5%. I’m getting 10.2%, *average*, over the last year.

    Gold may or may not go higher. I don’t have much money in gold, a couple of thousand at most. I don’t much care whether it goes up or down, since it’s simply part of a diverse portfolio. I merely mentioned it as an option, I didn’t and wouldn’t suggest anyone should put all their money there.

  15. Kat says:

    Kevin, a lot of credit unions (which nowadays the only requirement is that you live somewhat local to them) have regular CHECKING accounts at 3-5%. You have to jump through a few easy hoops (like having direct deposit or using your debit card X times a month) but if you already do those things, you should check if there are any high yield checking account options available for you.

  16. et says:

    Re your wife’s retirement – this solution should say, at a minimum, that you and she need to pay more attention to it. Ideally, she should be paying attention & keeping you posted/seeking your input if she wants it. Regardless of whether you are the financial expert in the family, it’s her retirement fund & she needs to “own” that emotionally & mentally and commit to managing it the way she wants it managed.

  17. Kevin says:

    @Kat/Russ:

    I’m in Canada, and cannot find any bank offering anything even remotely close to 3.5% for regular checking accounts. ING up here only offers 1.20%. The credit union I used to use for my “high interest” savings is currently paying only 1.85% for their “Daily Interest Savings” account.

    My point is that rates vary widely by geographic location. Trent is in the US, where rates are currently very low. Thus, Trent’s assertion that it is hard to find a higher rate while keeping his savings liquid and free of risk is accurate, given his location.

    I reiterate that index funds, Internet lending communities, and gold bullion do not provide the low risk and high liquidity necessitated by Trent’s short term savings funds.

  18. Kenney says:

    Buy all the books you want from Amazon. Just sell them back on Amazon when you’re finished. You’ll probably only be out a couple of bucks.

    Also, I agree with the poster who doesn’t understand how GenCon is a mistake.

  19. colleen c says:

    My husband and son went to GenCon last summer and had a ball! We live south of Indy so they just went for the day. My son is 12 now and he was in geek heaven, and it was special time they spent together. That said, it was VERY expensive. Keep an eye on the “pre-registration” dates as the tickets were a full half-off if you registered early. Also be aware that the food available in the convention center is VERY expensive but the Circle Center Mall is adjacent and they have a food court with more reasonable choices or you could easily bring a cooler in your car and eat outside. WIll you have extra time with your kids? Indianapolis has a world-class children’s museum and a beautiful zoo.

  20. I have to agree that GenCon sounds like it’s not a mistake given your likes and priorities – just something you aren’t used to spending on!
    Now, I will have to say that IF your hesitation comes from thinking attending the convention will severely test your willpower and make you want to spend $$ you don’t have, then I can understand your reluctance. The best thing I can say is in addition to making sure you budget for your travel/tickets, etc. also budget for some $$ to spend wherever it calls to you. As a regular attendee of sci-fi/comic conventions I have to do this! Practicing restraint and knowing in advance the types of things you might want to spend $$ on is helpful.

  21. elderly librarian says:

    GenCon will be on the agenda for one member of my family! (They won a free admission ticket too) I am beating myself up over the tv. cable bill from Comcast. I really screwed up on this one by paying double for the digital service I didn’t use or need by not installing the digital box they provided me since last July! I finally cut the price in half this weekend and installed all the boxes. It seems like the new (to me)”digital economy” service is the exact same thing that I was paying double for since July. Financial mistake= extra outlay of approx. $160.00 by neglecting to examine this. I AM quite upset over this.

  22. SLCCOM says:

    Trent, if you start blogging on games the entire GenCon trip will also be tax-deductible! In any case, just go already and have fun!

  23. chacha1 says:

    Re: estimated taxes, DH generally estimates based on his previous year’s income and that has served us pretty well.

    EXCEPT.

    In order to make those payments, you really have to set the money aside as you go. If he’d put 30% of each week’s deposits into his tax account like I suggested, he would always have plenty available.

    Because there *is* a penalty for underpayment, but if you’re paying as much as you owe, even if that’s less than you estimated, there’s no underpayment, thus no penalty. 30% will cover most situations.

  24. Deborah says:

    I find myself genuinely offended by your need to supervise your wife’s retirement planning. Not that it doesn’t need to be done but I would hope this is something you would discuss and she would take primary ownership of.

  25. Ellen says:

    @24 Deborah (& my earlier post) – One advantage of each of you supervising your individual retirement accounts is that most likely you’ll have a wider diversity in your investments. My DH and I make our own decisions (with some discussion as appropriate) & sometimes select different funds for our investments – and are finding that sometimes his are doing better, sometimes mine. If he (or I) were managing both accounts, all the eggs would be in fewer baskets.

  26. Harm says:

    I’m not critical of Trent or any of the responders
    for not finding well paying alternatives to an
    infinitesmal return checking account….but he
    would probably be better off just not worrying
    about it, and certainly not consider it a
    ‘financial mistake’ :)

    p.s. here in the U.S., even promotional rates
    are miniscule :(

  27. AnnJo says:

    Re: The estimated tax problem,

    It’s worth looking into creating a business entity that pays you a W-2 salary. I pay myself a salary sporadically during the year and then as the year-end approaches, I use my last (and usually largest) check of the year to “withhold” extra as needed to make up for any tax withholding shortfall during the earlier part of the year. So my last paycheck may, and sometimes has, gone almost entirely to taxes, but I don’t have to mess with the quarterly calculations of estimated tax or penalties for underestimating.

    Obviously, this is not a strategy for someone who can’t save adequately during the year. It just means a once-a-year hassle instead of a quarterly one, and no penalties for underestimated taxes.

    There are other benefits and disadvantages to various structures, so it needs to be looked at from a lot of angles, but this ability to tack extra withholding onto a paycheck and skip the estimating stuff has been nice.

  28. Carrie says:

    Regarding self-employment and estimated taxes: We also have income that varies throughout the year. We found out (after going to a CPA after doing taxes ourselves for years) that there is a form 2210 regarding underpayment of taxes. This substantially reduced our penalty (and made it worth paying our accountant!)

    If you haven’t already done this form, it might be worth investigating.

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