We all make mistakes and having financial ones are no exception. From receiving my first ever paycheck to my recent one, it has been quite a roller coaster ride. I would say I started high from the beginning but went down for long time from being in debt with credit cards, student loans and medical bills but since I got married to Mother with Cents my financial roller coaster has been going higher and higher.
This is a list of mistakes I’ve made when I was in the financial dumpster.
Not Handling my Credit Card Payments
As a college kid and carrying my first credit card, all I thought was, “Wow, I have money right here and can spend it on anything I want.” The first three months or so with that credit card I paid off my credit card in full until I wanted a futon. For those that never had or heard of a futon, it’s a type of furniture that can convert between a couch and bed. It’s popular in dorms and college kids.
So I went to a futon shop and I picked one that I like and used my credit card to pay over $300 for that futon. This started my history with credit card debt. For about the next 7 years credit card debt was chasing me and unfortunately I put it on back burner. Every time the bill came in the mail I would pay the minimum or a bit above it. There were a couple of occasions that I completely forgot about it and thus missed the payment due date. The credit card company charged me a penalty fee of $35.
Paying the minimum for credit cards is a big no-no. Always pay the full amount
Not Putting A Lot in My Retirement Contributions
When I got my first 401K account from my company, I should have been planning right away to contribute a high amount and look forward to building on that account. But instead I just shrugged it off and was like, “Ehhh, retirement is a long way I’ll just put in 6% for my 401K. I did not have the awareness that the more you put in the better because even putting 10% in start off would have been okay. But for over five years I had only put in 6% and even for about a year 4% so I use that 2% for our wedding. Turns out it would have been okay if I stayed at the 6%.
I also had a Traditional IRA at balance of $2K from an old employer and I let it sit there for almost ten years without contributing a penny. I also had to pay fees at around $50 every year from the funds in that account. It was pretty much a wash because my capital gains and dividend payout was around $50 as well so it was almost like this account was frozen.
For the last three years I have contribute the max for my traditional IRA and close to the max for my 401K. I should have done this when I first had these two accounts but now I was able to figure out that this is best strategy for all retirement accounts.
Unaware How Much was in my Bank Account
If you do not know much is in your account, you could almost say you are bad with money. Throughout my 20s, my financial outlook was to have a positive amount on my checking account and as long as that happens I felt that I would be okay. Oh man, what a terrible outlook that was. You need to keep building on that account and not try to survive every paycheck I received.
Since I have been out of debt five years ago, I keep checking all of my accounts a few times a week and have it all complied on Personal Capital where I can check it all at once. It’s great to keep on building instead of surviving.
No Emergency Fund
This correlates from my bank account mistake. Since I was always having money coming in and out, I didn’t have any thought in my mind of having an emergency fund.
Now I have close to a year’s worth of pay in my emergency fund. And that was from saving more and spending less.
Getting Back Into Debt
For a period of time in my late 20s, I decided after my routine paying the minimum on my credit card payments I took the time to plan out to cut down my debt. This plan was to make payments every single time my paycheck would come in. I had just under $4K in credit card debt when I started to plan this out. For every other week I would pay close to $300 -$400 and I finally see the debt going down to 1K within a matter of three months. I was just ecstatic when the balance was under a thousand and a month later I paid off my credit card.
I should have been happy at this goal after this long in being in debt. I should have made a plan after that I will never go back into credit card debt again. Instead I didn’t really have any plan and watched as my checking account kept building for the next two months. I was going to start paying for student loans and should have planned out how to pay for it. Instead this next category held me back again and started getting into credit card debt once again.
No Clue on What I Was Investing In
About a month after I got out of credit card debt the first time, I received a letter from my bank at the time, Citibank, promoting the other services they wanted me to get into including opening a brokerage account. I was like, “Hey investing in the stock market, let’s try that.” So without any type of research of how to invest or to any meaning to it, I wanted to let other people know I have invested in the stock market but I did not know how to invest. my 401K account is an investment account but I let advisors from Fidelity tell me to put that money into a target date fund and left it alone.
So I went to my Citibank branch and talked to one of their advisors about opening a brokerage account. She was looking at all of my bank accounts and determined since I don’t have a lot of funds that I should open an account exclusively for mutual funds. So I blindly agreed to it without knowing what a mutual fund is. I contributed most of my paycheck to this account because I wanted to pay my student loans with this investment account so why not use almost all of my paycheck money to put it in here. Problem was I barely had enough for the ‘now.’ I don’t why I did this because I built up my credit card debt again because most of my funds were going to this account of mutual funds. I guess I was looking too much into the paying off my student loans because now I have credit card debt again.
Now looking back on it, I should put all of that money I contributed to my investment account into a good old savings account so this way it was more liquid and use it to pay my student loans instead to having it in a less liquid account and had to pay taxes and fees whenever I wanted to sell the mutual funds I had on there. I probably would have paid off my student loans sooner and I wouldn’t have gotten back in credit card debt. Ahhhh!!!!
Was not watching what I was Spending
No budget, not using an excel spreadsheet, not using a web based money management service, or not even writing on what I spend on in a notebook. No awareness on what I spend got me into my lack of awareness of how I spend my money. When you don’t have your finances as one of your top priorities to handle, it can spiral out of control. You build up credit card debt, you barely make payment on loans, and you take out money from the ATM every week without jotting it down. It adds up to a being in bad financial situation. Watching on how you spend is a contributor on managing your money efficiently
Today I track all my expenses on an excel spreadsheet. If you are a frequent reader of my blog, you know that I post my monthly expense report and keep track of all of my expenses.
With the help of reading personal finance stories and Mother with Cents I was able to pay off all of my debt and student loans and now pay off my credit cards in full every month, create a monthly income statement, have greater knowledge of all of my investments and do weekly check-ups on my bank accounts. I have greatly learned from all of these financial mistakes with the next financial goal to keep building on my net worth.