My 2 Biggest Money Mistakes and How You Can Avoid Them

October 10, 2012

One of my goals in life is to avoid making significant money mistakes that set me back financially. However, I’ve made my fair share of mistakes that have cost me dearly. Here are some of the biggest financial mistakes I’ve made, and how you can avoid them. Learn from my mistakes so you don’t have to experience these problems on your own.

Buying a House at the Wrong Time

By far my most significant money mistake was buying a house. I’m not saying owning a home is a bad idea – not at all since I’ve since purchased another one! – but that it is such a serious commitment that really have to be sure you’re making the right decision.

In my situation, my wife and I bought a house at a very young age: I was 23 and she was 22. We had received some money and saved up on our own to be able to put a 5% payment down. The house was in a new development where there were about 5 different floor plans. The standard cookie cutter neighborhood. We got a 2nd mortgage for the remaining 15% we couldn’t put down to get to the 20% down payment.

All of that would have been fine because we paid off the second mortgage within 3 years with a very aggressive pay down plan – you can find similar plans. If we had lived there for a long period of time, it would have been great. We thought we would live in that city, in that state, for many years to come. But less than 4 years after signing the papers, we were packing up the moving truck to move back closer to our families. We went from being 6 hours away to about 2 hours away.

It also helps to mention we bought the house at the peak of the housing market, but unlike others who planned to flip their homes, we seriously intended to live there for a long time. We just couldn’t see into the future well enough to know we weren’t going to live in that state for more than 5 years. As a result we lost almost all of the equity we built up in the house. But I’m not complaining – at least we avoided foreclosure and were able to sell about 3 months after we moved away.

Buying a “Cool” Car

My second dumb money move was to buy a car in high school that I could modify to be “cool”. While I’m still a car guy at heart, I still smack my forehead when I think about what I did. I had originally planned to buy an early 90s Mitsubishi Eclipse. They were cheap, easy to modify, and I liked the look. I saved up my cash and all was going as planned until my parents talked to their insurance agent about coverage. It turns out these cars were death traps because they were cheap and easy to modify. Teenagers would buy them, make them fast, and wreck them with catastrophic results, so the insurance rates were insane.

Disheartened, my parents then surprised me by saying they wanted me to have an incredibly safe car. They knew I was still a car guy, and ended up letting me buy (with their assistance to keep me alive) a 1995 BMW 318is with 128,000 miles on it. I was thrilled. Are you kidding me? I’m driving a bimmer (Note: It’s bimmer for the cars, and beamer for the motorcycles. Pet peeve!). Of course what I quickly discovered was BMW stands for “Break My Wallet,” especially as a high school student working at the movie theater (talk about breaking the budget).

The car was safe as can be, but parts were expensive. And of course I wanted to modify it, so I bought some sport shocks and springs and had the genius idea to install them myself with a buddy. Why pay a certified mechanic $300 to install them? We could do this! Of course we installed them wrong, they eventually went out, and oh yea, I forgot to get an alignment with the new suspension . . . so I shredded a pair of tires very quickly because of how off the alignment was. It was one bad money decision that led to another significant cost that led to another significant cost. Horrible money decision, even though I loved that car.

What are your biggest money mistakes? What money lessons can we learn from you?


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Kevin Mulligan is a debt reduction champion with a passion for teaching people how to budget and stay out of debt. He's building a personal finance freelance writing career and has written for, Discover Bank, ING Direct, and many others.

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