I think it is good to discuss money mistakes as it shows that our past mistakes do not define us…so here are some of my money mistakes:
First off, I was a much less frugal guy in my single days. So a few of these are mistakes surrounding erroneous travel.
We cashed out my wife’s 401K when we moved to Argentina in 2010.
Direct cost $15,000 but if you had potential earnings over the last 6 years, likely much more.
Bought a home in 2008 for $200K.
Sold it in 2011 for $200K. Lost maybe 20K on the entire process through commissions and maintenance. I consider this a loss because if I had held on to it I could now sell it for $391,000 based on Zillow Estimates. The area was booming but I did not want to be a landlord. Hindsight is 20/20 but this decision will haunt me (and my wife). Cost of potential losses ($191,000 in earnings and $20,000 in commissions, etc= $211,000.
Bought a house in 2013 thinking we would be living in New Orleans for many years for $559,000.
Sold it in 2016 for only a few thousand more. Commission, etc. cost me about $20,000. So total loss, $20,000.
I did not start investing in IRAs until 2014.
I have been earning an income since 2005 and arguably even before that with part time work. Cost of mistake is 9 years x $5,500 = $49,500 plus potential earnings and losses.
I did not start investing in my wife’s IRAs until 2014.
I met her in 2007. So let’s say I should have been doing this from 2007 to 2014. That is 7 years at $5,500 = $38,500.
Changing my 401K contributions from 5% to 3% in 2011 and 2012.
This occurred once again when I moved to Argentina. I was cash strapped and made the decision to decrease my contributions. I still received the full employer match, but missed out on potential savings. This likely cost me $6,000 total.
Spent way too much on a wedding.
Let’s just say this is my second embarrassing financial move (after selling my house). We easily spent a year’s salary on a wedding. So as I am too embarrassed to put the number spent, lets just put the cost at $50K. For the record, it was more my decision then my wifes…and still quite the mistake. Was it fun? Hell yes! Was it worth a down payment on a house? No!
There are a bunch of other little things.
Like flying out to hang with girls I met at weddings (never works out well). Spending way too much money on booze and nights out (this was particularly dangerous when my friends and I would go to Vegas), and spending lots of money at restaurants that were over priced and did not add to my happiness. These expenses are a “Death by a thousand cuts” (an ancient Chinese Torture method you can read about on Wilkipedia here) and probably cost me in the tens of thousands of dollars. So lets calculate this at $30,000 though it may be much more.
So total costs of stupid mistakes = $420,000 since 2005 or approximately $38,181 dollars a year. Considering I made between $50,000 to 60,000 for 7 of those years as a trainee this is pretty bad. Conservatively we remove the potential earnings from the home if I had not sold it ($421,000 – $211,000 = $209,000 which equates to $19,000 a year). Still pretty bad.
I did not make all of the high money decisions my colleagues made. For instance, I did not buy expensive cars or lease them every 2-3 years. I do not buy expensive clothes that do not add to my happiness. Flashy items used to keep up with the Joneses (albeit my current house was expensive) don’t interest me. I made that purchase for the view more than the home and it provides me a great deal of happiness. We always look for good deals before buying furniture, toys, etc.
Luckily now as a high earner I can make up for prior stupid mistakes. The key is not to make any going forward. So what stupid financial mistakes have you made? How do you correct it?