As we continue to educate ourselves on how to pay off our debt and start growing wealth, the money mistakes that caused us to get into debt in the first place are becoming more and more clear. This “clarity” has been tough to deal with as we’ve worked to battle guilt and wanting to smack ourselves for our mistakes 🙂 , but we are working to focus on the fact that we’re changing our situation now, and now is what matters, both for your financial situation and for ours.
In hopes that you can discover your money mistakes now and take a short-cut to getting out of debt via learning from our past mistakes, I’m sharing with ya’ll our 5 worst money mistakes: the ones that got us into the boatload of debt we are currently working ourselves out of.
Our 5 Worst Money Mistakes
1. We Never Discussed Money
Money was a topic both my husband and I avoided for many years. There were several reasons for this:
- Money was tight growing up in both of our families
- The tight money situations we grew up in invoked in us a fear of dealing with money
- We hadn’t yet developed a habit of thinking long-term about life
Simply put, we just didn’t think it was important to talk about money, so we didn’t. And on the rare occasions when we realized the mistake we were making by not talking about money, fear led us to push the subject aside. This led to little savings and LOTS of debt as we spent without any kind of a plan in place.
Recommended Reading: One Bed, One Bank Account: Better Conversations on Money and Marriage
2. We Had a Wrong View of Budgeting
For a long time, we viewed budgeting as a form of prison. To us, budgeting meant restriction and punishment. We had tried several times throughout the years to implement a budget but it always left us feeling restricted and denied.
Through the education of personal finance blogs, however, we learned that having a budget actually meant more freedom with our finances instead of less freedom. A budget gives you freedom with your money because a smart budget means developing a plan to spend your money on what is most important to you. This is called value-based spending. Wasting your money on stupid stuff because you don’t have a budget and haven’t sat down to figure out your financial priorities is true prison. Knowing what you truly value in life and budgeting so that you can spend on those things is complete and total freedom. We encourage you to work to find the joy and freedom in budgeting today, and to stop believing the lie that budgeting is a form of punishment. Believing this lie is what helped get us into tens of thousands of dollars of debt.
3. We Didn’t Track Our Spending
Because we both had such fear and guilt about money in general, we never bothered to track our spending. I think subconsciously we knew that if we tracked our spending, we might have to come face-to-face with the fact that we were spending too much. And truth be told, we didn’t want to be confronted with that fact. Tracking spending involves discipline because it forces you to review your monthly monetary actions. Although facing the man or woman in the mirror may be tough at first, it will eventually open up a wonderful new world of financial peace if you stick with the spend tracking and learn to control your finances in a way that best serves your money goals.
4. We Didn’t Make Saving a Priority
Before our financial wake-up call at the end of 2012, we had no idea why a savings account was even important. In our minds, our credit cards were our savings account and our emergency fund. The problem with this mindset is that it keeps you at the mercy of lenders. On the other hand, having your own savings account helps give you more control over your financial situation, current and future.
5. We Let Our Whims and Emotions Guide Our Spending Decisions
We used to live our lives under the “You only live once” money philosophy. Our goal was to enjoy our money now because you never know what tomorrow may bring. Although there is some truth to that rationale, the likelihood is that tomorrow indeed will come, and you will need money to live on for tomorrow. For that reason, it’s important to determine what whims or misunderstandings about money and life are causing you to spend in such a que, sera sera matter and to get them under control before your money starts controlling you much more than you’d like it to.
As a bonus, I’m adding in a sixth money mistake as a gift to all of our wonderful readers. 🙂
6. We Thought That Being Financially Successful Was Tied to How Much Buying Power We Had and How Much Stuff We Owned
And it didn’t matter if that buying power was via cash or via credit. Somehow we’d gotten the incorrect message that wealth equaled stuff. If we had nice stuff and could make our payments fine and banks were happy to borrow to us, then we considered ourselves wealthy. But this book taught us differently:
Recommended Reading: The Millionaire Next Door: The Surprising Secrets of America’s Wealthy
Once we understood the path to true financial wealth we were able to start building it for ourselves.
You might wonder why we recommend so many books on this site. Dave Ramsey shares in this article twenty things that the rich do every day. One of those twenty things is that they read educational books for at least thirty minutes every day. Knowledge equals power, and it has been our choice to start reading personal finance books and personal finance blogs that has led to our discovery of why our money was such a mess. We are now successfully paying of debt and building wealth.
Most everyone makes money mistakes, but the good news is that those mistakes can almost always be corrected and you can get on solid financial ground again with some hard work and dedication. Choose to work so that you create a good financial picture for yourself and your family and so you can avoid letting money mistakes hamper your days.
What are your worst money mistakes? How have you overcome them?