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Everyone makes mistakes.
That’s just life. But you have to learn from your mistakes.
Or if you want to be really efficient learn from someone else’s.
Today I’m going to tell you my 6 worst money mistakes so you don’t have to make the same ones!
Now I am very lucky because growing up my parents did teach me a fair amount about money management. Things like avoiding credit cards or getting into debt to buy something were big no, nos. They advised that if you didn’t have the cash then you couldn’t afford it.
A great mentality.
But it was a mentality that encouraged spending, not saving. Not dangerous spending as such, as in I have never accrued debt except my mortgage. But that if the cash was there why not buy that thing you want. And as you will see, it’s that mentality that is at the root of a lot of my money mistakes.
Money Mistake One: Not looking at price tags when shopping
This is something I’m notorious for and let me tell you it’s dangerous.
Basically I would go out clothes shopping with my friends (well any shopping really but I use to do a lot of clothes shopping). If my friends spotted something they liked they would immediately check the price tag to see if they could afford it and whether it was actually worth the money. Pretty standard behaviour right?
However if I spotted something I liked I would hold it up against myself, find my size, try it on in the fitting rooms, fall in love with the item, decide this was the item of clothing that would make my dreams come true and change my life and only then would I check the price tag. And of course by that point I had to have the item because I was already imagining how much more improved my life would be with this dress (or other item).
This procedure happened with everything out shopping. As you can imagine I brought A LOT.
Luckily due to the ‘if you can’t pay cash for it you can’t afford it’ mentality my parents instilled I never went into debt for this habit. I just spent all my money instead. Great.
Which leads me on to my next money mistake…
Money Mistake Two: Not saving for retirement from a young age
I worked quite a lot when I was younger which helped support my shopping habit. The problem was I never considered saving that money. I always thought I would start saving for retirement when I had finished school, college, and university and was settled into my full-time job.
That was a big mistake.
I think the reason it never occurred to me to seriously save money was because retirement seemed so far away and unchangeable. Had I been introduced to the concept of financial independence and early retirement then saving would have sounded like a much better idea. As it wouldn’t have been about an age that seemed so far away, but instead a goal to reach as quickly as I was able. Something my over-achieving personality would have and does love.
Had I seriously started saving at a young age my route to financial independence would have been much shorter because hello compound interest.
I love compound interest it’s magical! This article about how teens can become millionaires by Dave Ramsey really brings it home how important it is to save money from a young age. Now I think the interest rate he uses is a little overoptimistic but the compound interest concept he displays is on point.
Yep really wishing I had invested some of my earliest paychecks now…
So my next money mistake one really does lead on and I’m quite ashamed that I allowed this to happen…
Money Mistake Three: I didn’t always put my money in accounts that made interest
Now whilst I didn’t really ever save any of my own earnt money. My parents did have savings for me, such as a university fund. And so that I would learn how to handle relatively large sums of money they would have me care for this money.
A great idea really.
I knew I was not allowed to spend it and never would have spent it without their permission as I didn’t really view it as my own money. But by them giving it to me to care for it meant I was use to seeing thousands of pounds in my bank account that was designated for something in particular and thus unspendable.
Obviously when they first entrusted me with this money they taught me how to find the savings accounts with the best interest rates and all that sort of thing and once I got the hang of it they left me to it, occasionally checking in with me that it was all okay.
But then life got really exciting. I learnt to drive, I started college (I went to college before university) you know all those kinds of things that make you feel like a mini adult.
Money management really fell down the priority list for me and the savings ended up sitting in accounts that didn’t pay interest for a couple of years.
Argh, so much stupidity. I literally threw away free money!!!
Moral of the story is don’t get lazy with your money management just because life gets exciting, otherwise you will end up making money mistakes…
Money Mistake Four: I ‘did up’ a car
The car was actually more like a truck. It was a beautiful Landrover Defender. I love those cars and so my Dad and I did one up for me to drive around and love. In all honesty, I don’t regret doing this at all. My Dad and I really enjoyed working on the car together and had some great Father/Daughter bonding time.
But money wise it was not a good idea and that’s why it earns a place as one of my money mistakes.
So why was it a money mistake? I mean people do make money when they renovate old cars, particularly classic cars. It’s not a recommended investment but it can be quite lucrative if you know what you’re doing.
Well, my car wasn’t particularly old and the work we did was more like cosmetic improvements that we quite liked. For example, we wired in some fancy new lights. They looked awesome but the way I wired them in wasn’t allowed on the MOT so I had unwire and then rewire them each year. They didn’t exactly improve the value of the car and stuff like that soon adds up…
However, we didn’t actually lose money on the car, or hardly any, purely due to luck. Basically about a year after we got the car the company that makes them, Landrover, announced they would no longer be producing Defenders. As they were already quite a cult car people went a little crazy for them. Seeing as they were now a limited resource their price didn’t depreciate and a lot even increased in value. When we sold people were still desperate to get their hands on one and so we could name a decent price.
But like I said that was complete luck and under any other circumstances we would have made a fair loss!!! Something not to be repeated unless you are doing it purely for the enjoyment that my Dad and I got out of it. Still, that’s expensive enjoyment haha!
Money Mistake Five: Buying a basically new car
After I sold my beloved Defender I decided that I needed a more practical car that was better on fuel and had things like a working heater (the Defender had been quite basic…). I found the perfect car but brought one with only 5,000 miles on it. For all intents and purposes this car was brand new.
The depreciation sucked. I paid around £17,000 for it, I’ve had it three years, it’s now done 35,000 miles and I would probably be lucky to get £12,000. That’s £5,000 gone.
Had I brought one with 35,000 miles one it, it would still have been reliable and done everything I needed but I wouldn’t have had to spend so much money initially and then wouldn’t have lost as much in depreciation. You live and learn.
Money Mistake Six: Buying things to make me feel better
Emotional buying. I’ve left this one until last because this is a mistake I still make sometimes. Don’t worry I am working on it…
If I have a bad day I always have an urge to go buy myself something nice and to eat something sugary. Neither are good things to do!
Since becoming more aware of my spending and creating money goals to reach financial independence I actually now feel guilty if I spend unnecessarily. So those impulse emotional purchases are few and far between.
If you find yourself buying things for emotional reasons I really advise figuring out your money goals. So when you decide not to buy something you will get the endorphin rush instead because of the knowledge that you are closer to your amazing goals.
Also figuring out why I was becoming upset and fixing the route cause has really helped with my emotional spending. If you’ve read any other parts of my blog you may not be shocked to find out that working for someone else was often the reason I was upset and having a bad day. Since quitting work my emotional spending has gone down even more!
So there are my 6 worst money mistakes.
I was lucky in that my parents gave me a really good basic money management education which stopped me getting into lots of debt or really losing a large amount of money.
Don’t worry if your money mistakes look worse than mine! Just know that they are in the past now and it’s your future actions that count. Get your money sorted, figure out your net worth, sort out your money goals and create a budget that will work for you and help you reach those goals. Then before you know it those mistakes won’t even matter!
Comment below what are your biggest money mistakes? Have you made any of the mistakes I did?