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The Dirty Dozen: My 12 Biggest Financial Mistakes of the Last 10 Years and How I Wish I Had Done Things Differently
When I write about my own personal finance experiences, it’s easy to report on the things I did well. Writing about the good moves makes a lot of sense, after all. Those are the moves that resulted in a clear-cut personal finance gain without a lot of sacrifice, and those are the moves that really are well worth sharing.
The problem with sticking to that approach is it creates the utterly false impression that my life is one long series of financial success stories, that everything I’ve touched (especially since my financial turnaround) has been golden.
I’ve made many financial mistakes in my life. Many of them have happened even after I “turned my financial ship around.”
A few years ago, I wrote an article about my 15 biggest financial mistakes, listing errors I made mostly before my financial turnaround. Today, I want to focus on the errors I’ve made since my financial turnaround.
Some of these won’t seem as big as my pre-turnaround mistakes – and they’re honestly not. I’m not doing things like maxing out credit cards any more. We have basically no reason to be in debt any more. However, these mistakes are still real and still quite costly.
They’re mistakes I’ve either worked hard to correct in very recent years or am still working to correct right now.
Let’s take a look.
Mistake #1: I didn’t have a firm grip on my hobby spending.
This is easily the single biggest mistake I’ve made in the last decade. I’ve simply spent too much money on personal hobbies.
This really boils down to a series of small mistakes that merge together into one big problem. One issue is that I often convinced myself that hobby spending was actually another kind of spending and would shoehorn it into our budget. I identified things like Netflix essentially as utilities, for example. Another issue is that, while I had a budgetary limit on how much I should spend on hobbies each month, I went over that limit quite often. A third issue is that I just didn’t make wise choices when it came to hobby spending and I often spent money when I already had things that fulfilled that need.
What have I been doing to squelch these bad routines?
I’ve gone on some “no hobby spending” diets and 30-day challenges, where I didn’t spend a dime on anything that was largely for me (I left things like Netflix in place because the whole family uses it), which works well.
I adopted some rules in which I capped the size of some collections. For example, I adopted a “one in, one out” rule for my board game collection, in which I have to get rid of a game before I can add a new one. I have done the same thing for other collections, such as notebooks, where I have to use one up before I can get a new one.
I’ve also moved to collecting experiences with as many of my hobbies as possible. I’m working on “collecting” every single hiking trail at all of the state parks in Iowa. I’m “collecting” geocaches. I’m “collecting” books I’ve read and board games I’ve played. This shifts the focus to experiences rather than stuff.
Mistake #2: I didn’t think about a long-term vision regarding where to invest and save our money.
When we first paid off all of our debts, I basically just switched the amount we were using for our debt payments toward an investment system that made sense at the time and I basically just let it sit. I’m a big believer in a “set it and forget it” investment philosophy and I took that fully to heart.
The problem was that the idea I had in that moment, while it was made up of good investments, didn’t really reflect any sort of long-term vision. I was basically maxing out retirement plans and then putting the rest into 529s and taxable accounts because it seemed like the straightforward thing to do, but it was not the best thing to do for my future.
What I should have done – and what I finally got around to doing – is to spend some serious time thinking about my goals and how those goals translated into specific saving and investing tactics. That’s the real way to do things.
Notice that I didn’t say that I needed to specify a goal. Specifying a goal wasn’t the problem (at least, not here… we’ll revisit this shortly). The problem was translating that goal into something meaningful that I could take financial action on. Instead, I just went with a “one size fits all” investment plan.
Mistake #3: I spent several years focused on a financial goal that I knew was fading away.
For many years, I operated under the belief that Sarah and I were saving up to buy a nice country house. We both grew up in a rural area and in various ways longed to return to that kind of setting. Our current house is on the edge of a small but rapidly growing town, one that may be subsumed by a larger city eventually but, for now, is a bedroom community populated by a lot of people who commute to their jobs, and we both felt like we eventually wanted to be more rural.
Of course, things change. We began to appreciate the advantages of where we live right now. We built strong relationships with our neighbors. I have a good friendship with a couple of our neighbors and a growing friendship with a couple more, and I’d describe myself as a good positive acquaintance with our other neighbors. Our children have tons of friends in the area. It’s quiet and there’s very little crime because the local police department is on the ball.
Over time, we began to realize that we’re pretty happy where we are, at least for the foreseeable future. Sarah and I might someday move elsewhere, but if we do, it will likely be to a smaller home, not a larger one, which means that our focus on that big goal of buying a big country house was misplaced at best.
Mistake #4: I didn’t plan ahead well enough for a career switch.
Several years ago, I pretty abruptly switched from a full time career in a research field to a full time career as a writer. I was growing frustrated with some aspects of my job, but the big frustration was simple absence from my family. I had this growing sense that I was missing out on my children growing up, which was really amplified by the fact that I missed my son’s first steps while on a work trip and I heard his first attempt at saying “dada” over the phone.
That feeling of guilt drove me to make a very rash career decision. I was not ready to make the switch to being a full time writer, but I was flush with the sense of our recent financial successes when I made that decision.
I was incredibly lucky that the whole thing didn’t just backfire in my face. Looking back, I see how easily things could have gone south in the first few months. By some miracle, they did not and things worked out. I should not have relied on “some miracle” for the success of my career and my family’s financial stability going forward.
The thing is, had I just been a little more patient with my primary job, I could have made the transition much easier and less painful. What I lacked was patience. Simply sticking around my previous job for another six to 12 months would have made it possible for me to make that transition much more smoothly, with the groundwork laid for more income streams.
Speaking of which…
Mistake #5: I didn’t establish more income streams very quickly.
One of the most important elements of financial stability, in my book, is having multiple streams of income so that everything doesn’t fall apart if you lose your job or if a side gig fails. For a long while, I had all of my eggs in one basket – this website.
The problem was that I convinced myself that I actually had several streams of income. I had several different agreements centered around The Simple Dollar that brought me revenue, but they all relied on the same thing: continuous additional content for The Simple Dollar and a continued readership. I convinced myself that those different agreements were really different income streams, when the truth was that they were effectively the same income stream. They all lived and died by the existence of this site.
In the last few years, I’ve worked to build other streams of revenue for myself and my family. I’ve built some standalone websites and some other things that provide at least some revenue for my family and I’m hoping to soon reach the point where any income stream can go away and it won’t really adversely affect my family.
I just should have done this sooner. It was a big risk for my family for me to not do so.
Mistake #6: I often assumed bills were auto-paying correctly without verifying it.
This bit me more than once. I would set up an online bill pay or auto payment for a particular bill and then assume that every payment was going through without really thinking about it. A few of the companies I dealt with seemed to switch computer systems or banks at some point and then would fail to make a withdrawal and then ding me for a late payment.
In each case, I was able to figure out what was going on and spend some time on the phone to get all of the late fees waived, but it’s far easier just to check and make sure that bills on auto-pay are actually getting paid each month. It takes just a minute or two, compared to the hours I’ve spent on the phone dealing with these issues.
Even worse, this could have cost me a lot of money in late fees and other expenses had I not caught them, had I not spent that time on the phone, and had I not had customer service people who were willing and able to remove the charges.
Mistake #7: I used weak passwords for online accounts.
Over the course of a few years, I had several key online accounts hacked, not because I got phished or gave away the password, but simply because my password was either guessed due to it being leaked or because it was a weak password to begin with. In a couple of cases, these accounts were financial in nature, which cost me some money in one case and caused me a ton of time in another.
Since then, I’ve adopted a much stronger password policy. I’ve enabled two factor authentication on as many of my accounts as I can. I have a monthly password change policy on every account of any importance (I keep a list of them) – I do this on the first of each month. I use a simple algorithm for my passwords so that each account has a unique password based on the current month, year, and domain name, so by simply knowing the simple algorithm, the current month, the year, and the site, I have a unique complex password.
(I know people are going to ask about the algorithm, but it goes something like this: I add the number of the month to the year and put that number in a long string that includes the name of the site, along with a symbol or two. So, you might use a password that starts with “$”, is followed by the year plus month number, followed by a “%”, followed by the name of the site with the first letter capitalized, followed by a “X”. This gives you a password for, say, Netflix, that goes like “$2021%NetflixX”. That’s not anywhere close to my exact password algorithm, but that gives you the idea.)
I haven’t had a key account compromised in the four or so years I’ve been using this password system. That’s saved me a lot of headaches, and it’s a system I wish I had in place since the start.
Mistake #8: I experimented with individual stock investing.
For several years, I tinkered with investing in individual stocks. I mostly invested in large US companies like Coca-Cola, Verizon, DuPont, Apple, and Google, so the investments were pretty stable, and I did it following the advice of a bunch of books I was reading at the time.
While I didn’t lose a ton of money – by simply sticking to huge, safe companies with a giant market share, I largely avoided that – I did see a ton of volatility in each of the stocks while I owned them. Individual companies would rise or fall 40-50% in a year, which was an incredible roller coaster, and it often seemed that those rises and falls were unrelated to anything I could really track.
The thing is, not only were the investments really volatile, I spent a lot of time studying them. I would try to figure out why the stocks were rising or falling and sometimes it was clear, but at many times, it wasn’t clear at all. It felt like something “insider” was happening with the stock that I wasn’t privy to.
Eventually, I got out of it. It quickly became clear to me that without the research tools available to large scale investors, it was pretty hard to gain any sort of advantage in investing. I lost some money in the process, but it wasn’t a major loss. What I really regret is the time I essentially wasted on it when there was a much better investing strategy right in front of me – simply investing in index funds would have meant a lot less headache, a lot less time, and likely more money in my pocket.
Mistake #9: I overspent on the fledgling interests of my children.
Sarah and I are both strongly committed to maximizing our children’s educational opportunities, but we also try really hard to give them large blocks of unstructured free time so they can figure out how to manage their own time smartly and creatively. For us, this means really encouraging independent interests that they can follow on their own.
The problem has been that, in some cases, we’ve invested money in helping them pursue fledgling interests, only to watch those interests die off pretty quickly.
We’ve purchased particular art supplies, musical instruments, and model-making supplies that our children have dove into with gusto, only to find themselves burnt out on the interest after a relatively short while. The interest then turns into a conflict, where our children’s hearts are going in a different direction.
What we’ve done recently is have our children sign agreements when they want to pursue a particular interest where, if we invest in those interests, they agree to follow through with a passion to some extent with some consequences if they don’t. For example, we are considering buying one of our children guitar lessons, but doing so will involve a commitment of a certain number of months of lessons and home practice.
Mistake #10: I bought too many Kindle books out of convenience.
I’m an avid reader. I devour at least a book a week and often more than that. I get a lot of books from my local library, but that doesn’t always sate me, especially when I’m traveling or when I hear about a great book, especially at night.
What makes this worse is that I really like using my Kindle. I received one as a gift for my birthday a couple of years ago and I find it to be so convenient and easy on my eyes. I can read and read and read and read on it, and I love having lots of books with me on the go.
The problem, of course, is that it is so easy to order books on the Kindle. If I’m reading a series and I finish one, I can get the next one with just two button pushes. If I’m interested in a topic, I can get a highly recommended book on that topic so quickly.
This is actually one area I’m still struggling with. The most successful tactic I’ve tried is to simply remove my credit card from my Amazon account. This makes ordering everything from there more difficult, but it makes it much harder for me to impulsively buy a Kindle book.
The goal, of course, is to train myself to not order books impulsively. I allowed myself to become used to ordering books on impulse and that became a very expensive routine.
Mistake #11: I didn’t sign our youngest child up for college savings right away.
With our first two children, I signed each of them up for a 529 college savings plan as soon as humanly possible. In fact, I actually started their plans before they were born, naming myself as a beneficiary and then changing that beneficiary upon their birth.
With my third child… well, I let that detail slip through my fingers.
For the first few years of his life, he didn’t have a 529 plan like his siblings did. Even though it’s easy to sign up for one, I kept putting the task on the back burner. I kept finding other things that needed to be done and prioritized them instead.
When I finally got around to signing him up for an account, in order to balance things out, we set up double contributions for him, which we intend to stick to for several years until his savings are in line with his siblings.
In the long run, this will cost us money, because we’ll have to contribute more than we would have had we signed him up as soon as he was born. That’s because we missed out on the investment gains from his earliest years and will have to make them up out of pocket.
Mistake #12: I haven’t done enough to teach my children the basics of personal finance.
Don’t get me wrong – personal finance is definitely a subject that I’ve addressed with my children. I think they have a stronger understanding of basic money issues and money management than most children their age.
However, I just don’t feel as though I have done enough to really ingrain good money practices into their head so that they don’t make the same mistakes I did. In fact, I have this gut feeling that they’re going to repeat my mistakes during their college and post-college years.
It really is challenging to teach financial lessons to children and pre-teens and I know that many lessons become easier as they become teenagers. What I really need to do is ramp up their financial education in the coming years, especially for my oldest child as he approaches the teen years. I plan on opening up some of our own finances to him and having some real heart-to-heart discussions so he can see what the real world is like and outline some of my own decisions I’m making right now to him.
Will it work? It’s hard to tell. It’s a step that my own parents never really took with me, so I’m hoping it makes a difference. I will say that, other than a good tendency to save up when there’s a goal in mind, my own children don’t seem to have strong financial sense yet, and it’s on me to build that in them.
My financial mis-steps these days aren’t as severe as they were when I was in my early professional life. I’m not drowning in debt (thankfully). I’m not spending more than I bring home.
However, my financial life is still full of mistakes and things I need to correct.
For me, the underlying principle of my financial life – and every other aspect of my life – is simple. I want to be better today than I was yesterday. If I can achieve that over and over in my life, my life will gradually become better and better.
That means being honest with myself about my own mistakes and mis-steps and looking for ways to improve them. There’s still a lot to improve, just from this list.
Don’t be afraid of your own mistakes. Look at them honestly. Don’t run away from them. Ask yourself what you can do to fix them.
Make today better than yesterday. Make tomorrow better than today. You’ll never regret it.