When I had my own financial armageddon, I was in a terrible spot. I had made mountains of money mistakes in the previous several years and I found myself floundering because of all of those mistakes. I made a real commitment to turning my financial life around – and this site was (partially) the result of that commitment. Today, I find myself in a much better financial place.
However, that doesn’t mean I haven’t made some really hare-brained financial moves since that meltdown. Believe me, I have. Here are the ten stupidest financial moves I’ve made since turning my financial life around.
1. Splurging. At first, I just killed my spending off cold turkey, but at least twice after the meltdown, I went on buying sprees, buying a bunch of useless, stupid stuff. After the second one, I felt so guilty that I simply guilted myself out of doing it several times when the temptation struck me – and eventually the temptation to splurge basically vanished. In a way, this mistake led to a good conclusion, I suppose.
2. Not having any emergency fund for a while. I threw myself immediately into debt repayment and made some impressive progress very quickly, but I did it while walking the tightrope – I had no emergency fund at all at first. It only took one near-crisis for me to realize that having at least a small emergency fund is very worthwhile – if you don’t have it, where’s the next big bill for a car fix going to go? Right on that credit card, undoing all of your good work.
3. Not understanding frugality. For my “essentials,” I kept on buying many of the same expensive things. I never really bothered to think about whether I could save a lot of money by using a better shaving setup, for example, or that maybe I wasn’t actually buying the best bang for my buck at, well, anything. Soon, I began to realize how useful Consumer Reports could be and my grocery bills went down.
4. Not learning how to leverage my personal skills sooner. Instead of working hard at side activities that I did enjoy that earned a profit (like blogging, for instance), I mostly focused on hobbies that were a big, big financial drain. A simple and careful evaluation of how I spent my time revealed pretty quickly that I could have a lot of fun and improve my own bottom line.
5. Cutting my 401(k) contributions to zero for a short time. I thought this was the best way to secure my financial future, but in doing so, I was just throwing away the matching money from my employer. I should have merely cut it back to the amount that received the match – it might have meant that debt repayment took another couple months, but I would have been in much better financial shape.
6. Not understanding the value of time. I sold a ton of stuff on eBay, but I did it in an incredibly inefficient fashion. Selling 150 DVDs individually did maximize my financial return, but it was a ridiculously large time investment and thus my rate of return on that time investment was very low. I should have sold them all as a lot or two, then focused my energy on other projects that have a better rate of return for my time.
7. Not asking for credit card rate reductions right off the bat. Instead of simply flipping over my credit cards and calling up the companies to request a rate reduction, I merely smashed my head against the sand for a while. My credit was fine (thankfully), I just didn’t really get that this would be a reasonable move right off the bat. I did eventually call them up, but I wasted a substantial amount of money on finance charges before I made a simple 1-800 phone call.
8. Not learning to appreciate inexpensive cooking. I was a bit of a gourmand – spending $20 on a pound of cheese was completely reasonable to me. Now, I appreciate doing things like that on occasion, but I’ve learned there is a lot of space to explore with less expensive foods.
9. Having another child. In terms of a personal decision, this was incredibly wise – my son is the greatest thing that’s ever happened to me and I’m thrilled to have another. As a financial decision, especially given that I was backing away from a precipice, it might not have been the best move. I would feel a lot better if we were trying to conceive now, not in the middle of the third trimester.
10. Not thinking about the future. At first, I really just focused on getting rid of debts to help myself now and I didn’t really think about the long term future. While the debt repayment was a good idea, my single minded obsession left me unprepared to face investing when I got ready. I should have spent the time when I was repaying debts understanding and researching what was to come next.