15 Of My Biggest Money Mistakes [So You Can Avoid Them]

Making money mistakes is part of the learning process. Unfortunately, most of us don’t learn about money until adulthood. Some of us (myself included) don’t realize the horrible money mistakes until we’re close to retirement. If you’ve landed on this article, you’re about to learn about my worst financial decisions, so you won’t make them either.

But first, I want you to understand that it doesn’t matter what your money story is right now. You can re-write the ending anytime. However, it will require you to change your money mindset and do some uncomfortable things, especially if you’re closer to retirement.

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15 Of My Biggest Money Mistakes

I’m sure I can come up with a lot more than 15 financial mistakes, but here are the biggest ones I’ve made. Read my money story here, if you’re looking for the short version.

#1 Spending More Than I Make

The first JOB that made me a decent income was when I worked at the post office. After that, I was one of those people who spent whatever I got. 

Whenever I worked overtime, I’d find ways to spend more money. No matter how much I made, I lived paycheck to paycheck.

I bought my first house when I was 27 years old, and since I was making $65k per year at the post office, I bought a new inground swimming pool, a new vehicle, etc. 

Today, my mindset is different. Last year I earned over $64k working my online business and invested $54k in my brokerage and retirement accounts. Of course, this was only possible because my partner paid most of the bills, and we were careful about how we spent our money.

#2 Failing To Make A Budget And Track My Spending

I’ve realized the importance of having a budget, regardless of how much you earn. If you don’t know what you’re spending your money on, spending more than you make will be easier. Don’t get me wrong, I don’t use a budget app, and I don’t consider myself as strict as I could be.

After all, tomorrow isn’t guaranteed, and you should enjoy life. Sometimes that means spending money on experiences or things you love. 

But tracking my expenses helps me understand where I’m at financially, and it’s an excellent way to keep myself in check.

We’ve stopped spending unnecessarily, like buying things we don’t need or always eating out. Instead, I use money-back apps that help me earn points for shopping. Two of my favorite apps are Rakuten and Fetch.

Making a budget allows you to allocate your money for essential things (such as retirement savings) so you don’t have to worry about it later.

#3 Not Paying Myself First

I’ve always been that person that paid my bills before they were due. I never considered paying myself first until I started listening to Jim Rohn. He recommended the book “The Richest Man in Babylon,” which made me think differently about the order of my finances.

I put at least 10% of my and my partner’s income into investments and emergency funds. Then, I pay my bills with the remaining funds. But I try to do more than 10% because I’m older and trying to catch up.

If I only invest 10% of my income, it would take me over 30 years to save enough to retire. Because of my age, I have to make some sacrifices now, so I can ensure we have enough money for when the time comes when we don’t want to work or can’t work anymore.

You must pay yourself first!

I’m NOT saying to be irresponsible and NOT pay your bills. However, you must first take care of number one, even if that means cutting your monthly expenses.

#4 Not Investing Early

We’ve heard it thousands of times. Start saving as early as you can. I wish I had received that advice sooner, but hindsight is always 20/20.

The sooner you start investing, the longer the money will compound and grow. 

Investing early in life gives you access to compounding returns, which will make a huge difference when it comes time to retire.

For example, a 20-year-old that invests $100 monthly will compound to more than $160,000 when they reach 67. A 50-year-old that invests $100 will accrue an average of about $40,500.27 when they reach 67.

To retire a millionaire, you must start investing early and consistently. To find out how much you’ll need to save for retirement, you can use any compound calculator. This is the one that I use.

You should save at least 10% of your income, or more if you can afford it. Also, don’t forget to use tax-advantaged accounts such as an IRA or 401(k)

It’s never too late to start investing, but it is harder the longer you wait. 

If you’re like me, starting from scratch, you’ll have to invest more than 10% of your monthly income.

If you can’t invest 10% of your income, start with what you can. The key is to start now and build up your savings over time. 

Take advantage of compounding interest; it’s one of the most powerful tools in building wealth!

#5 Not Building My Own Business

I come from a family of blue-collar, hard, working people. However, I was never taught to create my own business or find ways to generate multiple income streams. 

It wasn’t until I had an accident at the post office and had shoulder surgery that I realized I wanted to become an entrepreneur.

I didn’t know anyone who had ever started a business, let alone been successful. So I had to do it the hard way.

It’s a lot easier today, and so many resources are available. You don’t have to build the next Amazon or Facebook, but you should start something that will generate extra income in addition to your paycheck job.

You can start a freelance writing business, launch an online store with Shopify, start a blog, YouTube channel, or any other type of business.

The possibilities are endless, and getting started doesn’t cost much. All you need is some time, patience, and creativity.

The important thing is that you’re taking charge of your future, building something that can open up more opportunities and provide a safety net if times get tough.

#6 Making Minimum Payments on My Credit Cards

I’ve always used credit cards and still do. I know some people like David Ramsey says to pay off your credit cards and stop using them. However, there’s nothing wrong with using them if you use them responsibly.

Plus, I love the cashback offers that I get every month. Over the past year, I’ve received over $165 cashback from my Verizon credit card. In addition, my chase business card allowed me to get some free Apple Airpods by using points.

I know what you’re thinking. You’re right that I had to spend money to get those points or the cashback. However, I was going to spend that money, so I may as well get the cashback.

I’ve learned how to use credit cards responsibly. I never spend more than I can pay off each month.

In the past, I would charge something and then make the minimum payment.

Paying the minimum on a credit card balance means it will take longer to pay off your debt, cost you more interest, and damage your credit score.

The longer it takes to repay your debt, the higher your credit utilization ratio will lower your credit score. You also end up paying more than you bought the item for because of accruing interest.

So, if you use a credit card, pay off the balance in full every month or at least more than the minimum payment! That way, you won’t end up with an unmanageable debt load.

#7 Not Starting An Emergency Fund

I NEVER had an emergency fund until last year. But, with all of the unexpected expenses in life, having an emergency fund is a must. Even if you don’t think you need one, it’s still wise to start one just in case something happens, and you have to cover an unexpected expense.

An emergency fund should be enough money saved up to cover at least 3-6 months of your living expenses. It should be kept in a separate (non-checking) account so you can easily access the funds when needed.

I currently have mine with Goldman Sachs and am happy with it. While I try not to withdraw money, I’ve never had any issues, and they never charge fees.

An emergency fund is crucial because if something unexpected happens, like a job loss or medical emergency, you won’t have to dip into your other investments or take on more debt to cover the costs.

#8 Walking Away From The Post Office Before I Made A Penny

My biggest mistake was walking away from my day job before I made a penny. I wish I would’ve sucked it up and stayed there until I had built up my business.

I’m not an advocate for staying at a job you hate, but sometimes it’s necessary to reach your goals. Focusing on your goals is much easier when you have a steady paycheck. 

I was constantly stressed and worried about my finances because I wasn’t making any.

In hindsight, if I had stayed at the post office until I had saved enough money, I could’ve focused on growing my business instead of stressing about the lack of money.

Now, I’m getting a job part-time job at 50 years old, to help me catch up for retirement.

#9 Keeping My Head In The Sand About My Finances

Self-education about your finances is essential. I used to not take the time to understand my finances and how they affected me. My belief was to go to work, pay the bills and spend the rest.

I was wrong. Not having a good grip on your financial situation can cost you in the long run.

You don’t have to become a financial expert, but you should understand how finances work.

Take the time to read articles and books, listen to podcasts, etc. There are plenty of resources out there that can help you learn about money management and budgeting. That said, always do your due diligence before blindly following any advice.

#10 Buying a New Car And Trading In Vehicles Every 4-5 Years

I was one of those people who liked looking rich by driving a new car every few years. I was happy to trade in my old car and get a new one with updated features, but it wasn’t the smartest move financially.

If you can afford it, there’s nothing wrong with driving a new vehicle. However, I couldn’t, and I cringe when I think how much money I could have saved if I hadn’t paid car payments for so long.

I should have kept my old car running and saved up to purchase another vehicle outright when I was ready for an upgrade. I’m doing that now, and it feels so much better!

As a matter of fact, I just bought a “new to me” vehicle this week. I can’t tell you how great it feels to pay it off in cash and not worry about making car payments.

#11 Not Setting Financial Goals

You need financial goals if you want to be successful with your money. Knowing where you’re going and how to get there is hard without goals.

I thought that financial goals were only for people trying to get out of debt or make a lot of money. I didn’t see the relevance for my life since I was trying to make it from month to month. 

I now realize I was living paycheck to paycheck because I had no goals. 

It’s never too early (or too late!) to set financial goals. They don’t have to be huge, lofty goals either – they can be small and achievable.

For example, my goal is to save $1000 this year, put it in a high-yield savings account, and allocate it for my upcoming vehicle expenses. This will include all expenses such as oil changes, insurance, new tires, etc.

Sit down with your partner or spouse and talk about your finances. Then, set some goals and be accountable to each other. You’ll feel much better knowing you’re on the same page and moving in the right direction!

#12 Withdrawing My 401k From The Post Office

Withdrawing my 401k has to be one of the biggest mistakes. When I left the post office, I had over 35k in my 401k, had I left it in alone, it would’ve had over $129k without adding any new contributions.

By withdrawing my 401k, I not only lost out on compound interest, but I also had to pay taxes and penalties.

Unfortunately, I didn’t really have a choice at the time, but if I could do it all over again, I would find a way to keep the funds in my 401k so it could compound.

My advice is to never withdraw from your 401k unless it’s absolutely necessary – such as in extreme cases of financial hardship. 

#13 Not Learning About The Importance of Investing Order

Your goal should be to keep as much as you earn. The easiest way to do this is to take full advantage of your tax advantage accounts. This means contributing as much as possible to your 401k, IRA, and HSA before contributing to a brokerage account.

Last year, I invested too much into my brokerage account before maxing out my solo 401k. My CPA told me I could’ve put $38k in my 401k. However, because I had invested too much into my brokerage accounts, I could only put $29k into it.

There’s nothing wrong with investing in a brokerage account. I still do it. However, this year, I will make sure I can max my solo 401k. Maxing out my 401k and HSA allows me to get the maximum benefit and helps lower my taxable income.

This will help me keep as much as I earn and retire with a larger nest egg. Learning about different types of investments is vital, so you know the best order to invest your money. Investing wisely will help you reach your financial goals sooner.

#14 Investing In Too Many Individual Stocks

M1 Finance is where I invest in individual dividend stocks. Although I had no clue what I was doing when I started, I had read the story of Ronald Read, the janitor who had amassed $8 million in the stock market.

Instead of doing my due diligence, I bought over 25 individual stocks. Looking back, I should’ve started with 2-3 stocks. Unfortunately, I don’t have much money to invest in these stocks, so some pay me $.03 in dividends.

My portfolio is too diversified, and I’m not making as much money as I could be making if I had invested in fewer stocks.

Don’t make the same mistake I did, instead of spreading yourself too thin, build up your stocks slowly. Start with 2-3 stocks; once you have 50-100 shares, you can purchase more.

That’s what I’m doing now. I’m manually contributing to M1 to allocate which stocks to invest in. Once I have 50-100 shares, I move to the next one. 

#15 Filing Bankruptcy

I’ve always avoided telling anyone I had to file bankruptcy because I was embarrassed and it made me feel like I failed. However, filing for bankruptcy was the best decision I ever made because it made me understand what was important in life.

After my debt was discharged, my credit was destroyed. It took forever to build back my credit, but it also made me realize that “buying things” was unimportant. I no longer care about buying the newest trends and gadgets. 

Instead, I focus on saving money and investing.

If I could do it again, I’d do everything possible to avoid filing. However, if you’re in a situation where bankruptcy is the only option, don’t be ashamed. It’s a way to start over and make smarter decisions with your finances.

#16 Spending Money To Look Rich

I used to be one of those people who looked rich. I’d drive a nice car, wear expensive clothes, have the newest gadgets, etc. The only problem is that I wasn’t rich; I went further into debt every month.

Unfortunately, many people do this to try and fit in or make themselves feel better. The truth is that it’s a complete waste of money and you’ll never be happy if you continue spending like this.

If I could do it again, I would focus on saving more money, investing more in my retirement accounts, and using the extra money to travel and experience life.

Living a rich lifestyle means living without debt, having real experiences and relationships with people, and financially caring for yourself and your family. This is the true definition of wealth.

Final Word

I’m not proud of how I’ve handled money in the past, but I’m grateful for the lessons I’ve learned. Of course, the abovementioned mistakes are only a fraction of my money mishaps. Still, if you can learn from them and avoid making any of these mistakes, my financial blunders have been worth it!

Writing this has actually allowed me to look at my finances through a different lens. 

I’m now making better decisions with my money and investing more wisely, which is something I should have done years ago.

We can’t change our past, but we can take the lessons we’ve learned and use them to create a better financial future!

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