Money regret is something we all deal with. We’ve all made money mistakes that look pretty foolish in hindsight but it’s all part of the personal finance experience. I’ve made my fair share of bad decisions and I wanted to talk about a few of them today. I think talking about our mistakes brings more openness (and less awkwardness) to the money conversation, and can be a learning experience for those starting out.
The thing with money mistakes is they are personal. Everyone has different opinions on what’s important and worthy of their hard earned dollars. Some people might think spending hundreds of dollars on a pair of shoes is frivolous, while someone else might wear those shoes to death and get more than their money’s worth. Narrowing down those things that are important to you is a learning process though. And often you’ll only realize it was a bad call after you’ve already made the purchase and start to feel regret creeping in. That’s ok. Chalk it up to experience and move on. You’ll know for next time that maybe yoga isn’t your thing and those $100 yoga pants weren’t exactly an investment in your health.
My Money Mistakes
1. Starting Late
My biggest regret about money is that I didn’t start paying attention to it until I was in my mid to late twenties. I would earn, and I would spend, but I didn’t keep a budget and did very little in the way of saving. That was dumb. As an elder millennial (if you haven’t watched that Iliza Schlesinger special, you should), I’m here to emphasize the importance of starting early.
The longer your money is invested the better, and building good habits early is key. Need proof? If you start saving $100 when you’re 20 and keep that up until you’re 60, you’ll have over $150,000. Instead, if you hold off until you’re 30, that same $100 per month contribution will only be worth $80,000 when you’re 60. To get to that $150,000 you’d need to save $185 each month. That’s an additional $1,020 every year or an additional $30,600 total. The wonder of compound interest.
Even as a clueless twenty-year-old those numbers would have hit home and I would been inspired to save more and spend less.
2. Not Investing
I started saving late, but I started investing even later. When I was younger, I thought investing was something only people with money did. A university student with $100 a month to save couldn’t invest. I didn’t have a clue where to start. So I didn’t. It wasn’t until I started working in the industry that I realized you didn’t need to be rich to invest. Heck, you didn’t even need to know what you were doing.
Recent technology has made it so much easier to start investing, but how many people actually know that? In a recent study, the Ontario Securities Commission discovered that while four out of five millennials are saving, only one out of two are investing. That means that only 40% of millennials are investing. That’s not nearly enough.
Us millennials have time on our side, and time reduces the risk of investing. Most of us aren’t planning to retire for decades, and we need to let the markets help us hit our goals.
3. Quantity over Quality
Not only is this one bad for my wallet; it’s bad for the planet. I like spending money, and until fairly recently I had the mentality that more is better. Why would I buy a $50 shirt when I could buy five $10 shirts. More clothes mean more options and more options means it’s easier to choose outfits. Variety is the spice of life, or something like that. Wrong.
How many of you have flipped through your entire wardrobe only to come out frustrated complaining you have nothing to wear? That was me, all the time. I had too many choices, and none of them were all that great. That’s what happens when you buy the cheap stuff. It kinda sucks.
Changing to a mindset of quantity over quality is a work in progress. I still get tempted by the clearance rack of Joe Fresh stuff when I’m grocery shopping. But I’m way better than I used to be. And you know what? I might have less stuff, but my wardrobe is so much better. I have pieces I love and wear over and over again because they’re made to last. Your gut may assume a $50 shirt isn’t a good investment, but if you break it down to cost per wear, you’ll likely find out that’s not true.
4. Buying a New Car
Personal finance logic asserts that buying a brand new vehicle is a terrible financial decision. Cars lose an estimated 60% of their value in the first five years. Depreciation isn’t just an issue for new vehicles. Old cars lose value year after year, but the percentages are exceptionally high in the first few years.
My first car was a used Pontiac Sunfire my parents bought for me when I started university. It did me well but eventually died and needed to be replaced. Did I have the cash available to buy a car at that point? Heck no. But that was no problem at all. I had good credit, and the car dealerships were more than happy to lend me the money for a brand spanking new car for only $155 every two weeks. How could I say no?!
Do I regret buying brand new? Honestly, not really. I got 0% financing, so even though I had a car payment, I didn’t pay extra interest on it. And the payment was an amount I could afford. Sure, I could have put that money towards savings instead of a car payment, but at least I didn’t buy it on a credit card 😉
Would I buy new again? I’m not sure. We’re a one-car family so having a reliable vehicle is important as there’s no back-up. We also don’t drive a lot, so our mileage is low which helps with depreciation rates. I’m hoping this car will last and we won’t have to make that decision anytime soon. I wouldn’t write it off completely but I’ve gained so much more knowledge since I made that decision that I’ll go in with my eyes wide open and be better able to comparison shop.
5. Not Taking Advantage of Credit Card Points
Have you guys heard of travel hacking? It’s pretty freaking awesome. Basically, you collect as many travel reward points as possible and use them to go on super cheap vacations. The pro travel hackers will consistently open new credit cards as promotions come up so they can get the most bang for your buck. It’s a bit harder to do in Canada as we don’t have nearly as many credit card options, but people still have a lot of success doing it.
I’m not one of those people. For the longest time, my primary credit card was a Mastercard that earned Airmiles. That might not sound so bad, but when I compare the rate I was earning to what was offered by other cards, it wasn’t even close. Earlier this year I signed up for my first credit card that was specifically for travel hacking. It was the Scotiabank Gold AMEX. They had a good sign-up bonus, and I was tempted by the front of the line concert tickets AMEX offers. With the sign-up bonus and careful use of the bonus spending categories, I now have enough points for a free flight. It works, it really works!
I’m still far from a travel hacking pro, but I’m hoping to do more it and get some cheap vacations! I’ve been holding off on adding a new card because we just redid our mortgage for the upcoming move but I’ll be seeking out a few new offers next year.
Everyone makes mistakes when it comes to money, and there’s no reason to feel guilty about past mishaps. The more we talk about our poor decisions, the less awkward it will be to talk about money, and the more others will learn. In that spirit, I want to point you towards another couple of blogger who inspired me to share my mistakes by sharing their own. Check out these posts from His and Her FI, Financial Peacock, and Making Momentum.
Next week I’ll be back with the second edition of money mistakes, but this time it’ll be money ‘mistakes’ I refuse to give up.
This post was proofread by Grammarly.