Mindy Jensen & Scott Trench of BiggerPockets Money Podcast (which is my favorite podcast) asks their guests each podcast what their biggest “money mistake” has been. We all make mistakes but we choose to hide them out of embarrassment, shame, etc. I often see people saying they learn from their mistakes without talking about what the mistake was; just something positive coming out of it and that they got through it. I want to talk to you about some of the mistakes I’ve made (or are still making) with money so far because it’s important we all know the full detail of the mistakes we make, how we learn from them and how we are doing now. Mistakes happen; that’s what makes us human. I haven’t made any catastrophic mistakes with money (knock on wood) so far, but I have made mistakes that has definitely cost me money.
- Leasing Cars (and still doing so)
My family has chosen to lease cars for as long as I can remember. Now don’t get me wrong, there’s not problem with leasing cars. My parents always liked the idea of getting a new car every three years after the lease ends and I did as well. Which is why when I began to start paying for my car after I got my first full-time job out of college. I completely loved the idea of getting a new car every three years. Going to the dealership to pick out which model and which color I wanted was a great feeling. Sitting in the dealership office for 5+ hours made me feel like I was doing something right by getting a lease on this car. I have had three different types of Honda Civic’s since 2012, with my latest lease ending in 2021. When I started paying my own car in 2017 (I’m thankful and privileged that my parents paid for my car throughout college), the lease payment was $245.00 per month. When I entered a new lease on my 2018 Honda Civic, the lease payment was bumped up to $285.00 per month since I went a model up (dual cooling/heating is worth it because my significant other gets cold easily and I get hot easily!!! Think about the type of arguments we have gotten into LOL). As I entered my new lease, a couple of months into it, it finally struck me: this is $285.00 per month I am losing on a car that I most likely will not own in three years. I really don’t remember how I came to this revelation. Maybe it’s my distaste for the traditional work day and I was googling how to cut expenses everyday. (Plot twist: leasing a car is on the list of cutting out). I love my Honda Civic, but what value has it added for me other than get me from point A to point B? I’m throwing away $285.00 per month until December 2021 when I return the car. Should I do a payoff? That will cost around $13,000, which will then turn into a car loan that I would have to pay off with interest! I enjoyed leasing cars. The perception of going brand new and going to the dealership to pick a new model used to excite me. It doesn’t anymore and my priorities have changed.
Since 2017, I have paid a total of $11,295.00 in lease payments on two different Honda Civic’s. By December 2021 when my current lease ends, I will have paid $16,140.00 for two cars I do not own any more. I could have just bought myself a car in 2016 and be done paying it by 2021! However this is the mistake I made. By 2022, I will buy a certified pre-owned vehicle, not lease a car ever again and will have to pay for the pre-owned car for the next couple of years. The lesson learned here is: the leasing ends next year!
- Using my Roth IRA money to trade Options
The purpose of a Roth IRA is for you to be able to contribute to a retirement account and invest your after tax dollars. I started that in 2017, but used it to trade options contracts. Yes I can do that, but it was a huge mistake. In 2018 and 2019, I lost over $5,000 trading options and that was after I’ve made around the same! So in reality, I lost almost $10,000 by using my Roth IRA as a trading account! 2020, I have learned from my mistakes and began using the account for its real purpose, building long term retirement savings! I have so far bought VTI and AAPL with my $1,500 of my 2019 Roth IRA contribution and the full $6,000 for 2020. I love AAPL and VTI is a great way to invest in the market actively! VTI is the ETF equivalent to VTSAX, which is a mutual fund. New rule of thumb for me, keep retirement accounts only for long term assets and long term gains and not for trying to get short term gains😅😅😅
- Wasting Groceries
I hate to say it, me and my significant other tend to waste groceries sometimes. Especially since the COVID-19 pandemic has kept us from limiting our contact from the outside world, we have tried to bulk up on food and we’ve ended up wasting food a couple of times. Especially vegetables, sometimes throughout the work day we’re just exhausted and we don’t have the patience to wait for vegetables to be cooked, we go on and eat our proteins and carbs without it. We’ve been starting to go out more with restrictions being lifted and we are starting to grocery often and less to not waste food. We are hoping to waste 0% of what we buy soon! We will get there…eventually.
- Not saving my earnings earlier
I have a lot of interests other than real estate and investing. Sneakers, sports (Let’s go Nets, Yankees & Giants!!!!), fitness, eating (lol). Things that really cost money. The good part now is I’ve become disciplined in spending on the things I love doing. I don’t buy tickets to every sporting event or have many jerseys (I need that Kevin Durant & Kyrie Irving Jersey though), I don’t eat out all the time anymore or I don’t buy every sneaker I want (still need Bred 1’s though). The point I am making in terms of money mistakes is, I used to do this all the time. I would spend a lot of the money I earned on sneakers, food, jerseys, etc. I used to love spending what I earned because I thought:
“Hey, I worked for this, I deserve to spend it!”
Have you ever thought that? I always used to think that way, until. I realized the more I earned, the more I spent. Which means, I didn’t save a lot. But hey, it’s a mistake that I identified early on and corrected right away. I still buy those pair of sneakers when I can (got AJ Fire Red 5’s in May). I still spend money on food. I still buy my favorite team’s apparel. It’s all just in moderation. I’ve learned from my mistakes (I could have an extra 10k-20k in the bank or in my retirement accounts I bet) and I am moving forward!
- Constantly Switching Investing Strategies
As mentioned before, I lost a lot of money trying to trade options and grow my Roth IRA quickly. That was an approach that was a big mistake because I wasn’t ready emotionally to invest appropriately. When trading options contracts, you are risking less but you can lose all your money if you let the option contract expire. I often got too attached to the option contract, hoping the price will increase and I will make a profit, but it didn’t and I lost out. Then, after realizing I wasn’t fully ready for options trading, I switched to dividend investing, but then I realized I needed to switch over to ETF investing, see the trend here? I didn’t stick to one thing, and I lost money and lost out on potential gains in the stock market from switching positions too much. I was being too active too quickly. I have learned now to be not as active and to stick to one strategy.
- Pursuing an Advanced Degree (Pending)
Now this is in pending status because it is still early, but I am slowly realizing my decision to go to graduate school to receive my MBA in Finance may so end up being a future money mistake for me. Now, I have no regrets on the path I took and the time and energy I spent to obtain this degree, however only time will tell if me getting my Masters was worth the extra $50,000 in student loan debt. I do realize that the path I’ve taken has gotten me to where I am today and we will never know where I’d be if I didn’t go to graduate school. All that is certain is I could have saved $50,000 by not going LOL.
Don’t be afraid to admit to your mistakes. It’s important you learn from those mistakes and grow. We are all prone to mistakes and that’s what makes us human. What mistakes have you made with money?