Mistakes, I’ve made a few…. and I do regret a lot of them! I started on my financial education very late in life. But there is no point in dwelling on them and feeling annoyed with myself. The only way to resolve money mistakes is to become aware of them, learn how to do things better and just get on with it.
However, you probably could avoid some of my money mistakes. Here is my list of monumental errors and what I would do differently.
My most embarrassing money mistakes
1# Mortgages and second mortgages
When I was married to my first husband, I was unbelievably naive and uninterested when it came finance. We both were actually! We took out a mortgage when house prices were hugely inflated in the late 80s, just before the crash.
Fortunately for us, we had a tiny and very modest house. Although house prices plummeted, by the time we sold it 7 years later our price band had recovered and we made a tiny profit.
I also thought we should keep moving to buy bigger houses. This works for some I know, but I wish now that we had stayed in our second house, which was a modest semi on a quiet street, and over paid the mortgage rather than constantly stretching ourselves with bigger properties that we couldn’t really afford.
We also thought absolutely nothing of taking out a second mortgage for home improvements and did it a few times. Each time, when we moved house, we paid off the second mortgage with some of the equity. Although the home improvements did improve the value of the house a bit, it wasn’t by much. This meant that when we got divorced, we had hardly any equity left in our home and came away with much less than we should have.
If we had stayed in the first or even the second house rather than moving several times and spending each time on home improvements we would have been quids in.
What I would do now: I would have bought a modest house that didn’t need big renovations and focused on paying off the mortgage as soon as humanly possible. I certainly wouldn’t have taken a second mortgage out.
2# Not saving
I only started saving money in my fifties. Previously I never had more than a couple of hundred pounds in savings, which in theory were for Christmas but in practice often got spent on something else.
I can’t help but look back in frustration at how much money I wasted on takeaways, nights out, clothes, furniture and evenings in the pub, especially before I had kids. At that point I actually had spare income after all the bills had been paid, which I just frittered away without a thought.
What I would do now: If I had started a savings plan – perhaps 10% of my income – in my twenties I would be laughing all the way to the bank at this point. I keep urging my children to do this!
3# Not having an emergency fund
This is another biggie and the reason my Christmas fund often got looted. If you have no emergency fund – a pot of money to help when the boiler needs replacing, or the car dies or you lose your job suddenly – then you are in for a lot of stress and risk getting into serious debt.
What I do now: I read Dave Ramsay and realised the error of my ways. We started saving for a crisis fund and haven never looked back. This post explains in more details why everyone needs an emergency fund.
4# Not over paying the mortgage
It would no doubt have been a struggle on occasion, especially once my daughters came along, but there is no doubt in my mind that at certain points in my life I could have over paid the mortgage.
For many people, their mortgage is one of their biggest monthly expenses. Getting rid of this burden as soon as possible gives you more options about how to live your life. There is a whole financial independence movement among young people now, aiming for FIRE (Financial Independence Retire Early), where paying off the mortgage is the foundation stone to achieving this.
What I would do now: If I had my time over, I would have focused my energy on over paying the mortgage whenever possible, after saving my emergency fund and putting money into a savings plan.
5# Not investing
Once you have an emergency fund in place and have started building some savings, you can start to grow your money by investing.
I thought investing was just for crusty old men in suits. It never occurred to me that it would be something I could consider. I wish I had started saving and investing years ago. Another of my huge money mistakes.
What I do now: Better late than never. After reading several posts from other money bloggers, including this interesting one from Faith at Much More With Less, I have started investing a small amount each month. I will give you more information in a future post when I can say how well my investment is doing!
6# Paying for Christmas on my credit cards
Many people do this…. Paying for Christmas on your credit card means a miserable start to the new year, in my experience. I did it once, then spent a lot of the following year paying it off. Never again.
It is much better to save in advance for Christmas and other occasions like birthdays and holidays. It takes the stress out of the occasion when you have set a budget in advance and saved the money rather than getting into debt.
What I do now: A regular amount goes into an account each month for Christmas, birthdays and holidays.
7# Taking out loans for purchases rather than saving for them
When I was younger, I suffered badly from ‘I want it now syndrome’. I would frequently buy items on credit, because I wanted them that minute rather than saving for 6 months or so.
When you wait and save you won’t have to pay interest on your purchases. Cash always makes everything cheaper, in my experience (and if you buy second hand you won’t have to wait so long).
Because I was oblivous to the ridiculous rates of interest charged, I also once had a store card that charged me 45% interest! Criminal!
What I do now: I don’t have any store cards and never would again. It has also been a long time since we had any kind of loan for things like cars and household appliances. We save up if we need to and buy second hand because it’s so much cheaper. If an urgent purchase is required we always have our emergency fund to fall back on.
I also know that I would rather have an ancient car worth a few hundred quid that a brand new model with a big debt attached.
8# Not setting a budget
I always had an ostrich approach to budgeting. In other words, I never had a budget at all and kept my head firmly in the sand.
I just hoped that we would get to the end of each month without going into the overdraft and began to drastically curb my spending as we approached pay day. Sometimes we did, but mostly we didn’t. This meant starting each month in the red. Not great for your peace of mind.
What I do now: I know exactly how much money we need in the account each month to cover our bills. On top of that, I budget for petrol, food, clothing, outings, etc. It has become even more important to make a budget and stick to it since I took redundancy and moved into self-employment.
9# Not meal planning
I think that meal planning is a big part of keeping track of your finances and sticking to your budget. It is far too easy to find yourself too exhausted after a busy day to cook and, as a consequence, to spend half of your week’s grocery budget on a takeaway. Or to chuck food away because you haven’t planned for it and forgotten it was hiding at the back of the fridge. I have been guilty of both and it wastes so much money.
What I do now: I plan all of our dinners, and have a rough idea of what we need for breakfasts, lunches and snacks too. We are flexible on this and chop and change as necessary. I also have easy stuff in the cupboard such as stir in sauces for pasta for those occasions when we are unexpectedly rushed. This post explains the benefits to your wealth and your health too of planning all of your meals each week.
10# Allowing insurance policies to auto renew
You know how it is…you know your car, house, pet, life insurance is coming up for renewal. You know you should do some comparisons to see if you can get it cheaper but you really can’t be bothered. You will do it tomorrow. Before you know it, it has auto renewed.
Even worse, you take out an extended policy on an appliance and forget to cancel it when whatever you bought has died and gone to appliance heaven. I think taking the policies out in the first place is a money mistake most of the time, but forgetting to cancel is bad.
I have done both of these things in the past. The shame!
What I do now:
Fortunately, nowadays insurance companies are obliged to send out reminders when your policies are close to their renewal dates. I have a look on comparison sites and Money Saving Expert to find the best deal, and don’t mind swapping. I also look on TopCashBack and QuidCo to see if I can get some cash back (these are my referral links).
On the plus side…
In case you are thinking that I am a total disaster financially, I did manage some sensible things in my youth.
I always paid my National Insurance stamp.
I also paid into an employer pension scheme before you had to. In fact, in every job I ever had where a pension was offered.
I have borrowed small sums of money in the past, but never had huge, unmanageable debt.
I have always tried to buy second hand when I could. For example, I have never bought a new car. I generally prefer second hand furniture as the older stuff is so much better quality. In addition, I have always loved a charity shop and a boot sale – bargain hunting is in my genes.
So this is the list of my worst embarrassing money mistakes. As I said in the intro, there is no point in wasting time and energy on regrets and guilt. The thing to do is learn from them and move on.
What are your worst money mistakes?