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.
Recommended Reading: Simple Savings: 274 Money-Saving Tips That Will Help You Save $1,000 or More Every Month
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.
Recommended Reading: Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Ind ependence: Revised and Updated for the 21st Century
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?
For us all the above pertained to us. All the of these let me asking where did my money go? and in debt. All because of the 5 mistakes you mentioned.
I hear you, Joyce!!! We too wondered where all of our money went. When we went back and looked over our 2012 spending, we found out real quick that we were piddling it all away.
Love it when people are open about their money mistakes 🙂 We definitely made our fair share of them as well.
Yeah, but you’re making up for it big time now, LOL. 🙂
I connect with almost all of those mistakes. I tracked my spending with a running total in my head. It didn’t work as well as I thought it would, yet I kept doing it for years. for me, Budget was a four letter word. What am I, in kindergarten?! Haha
I was definitely driven by emotion and whims on most of my purchases. I felt like saying “I can’t afford it” when people asked about going out, was admitting failure. I mean they were younger than me, how can they afford it and I can’t? I’m guessing none of us really could afford it.
You live and learn though, and now I hope to pass on better financial models and principles to my kids, using my past as examples of what NOT to do. 🙂
LOL, budget was a four-letter word for us too. Now my budget is my new BFF. 🙂
Unfortunately, many of these sound very familiar. Tracking our spending was incredibly eye-opening, and we’ve been doing it for about a year now. However, we only committed to detailed, line-by-line budget for the first time this month! It’s been both frustrating and freeing. 🙂
I think they are all too common, these mistakes. Glad you are finding line-by-line freeing. Keep with it – the frustration will go away. 🙂
I have a lot of financial regrets in my life, but I think the biggest is that I didn’t make saving a priority. I did the bare minimum and thought that would be enough. I am an overachiever in every area of my life, but for some reason opted to not be an overachiever when it came to savings. I kick myself all the time about it, while also making it my life’s goal to not see this happen to other people.
Why is that? I think us type-A’s tend to think we need one area in which we need to be an F-. 🙂
Saving is hard especially when it’s not aligned to a specific goal. I’ve always struggled with a “rainy day” fund. Other more specific goals I can focus on and achieve.
The key for me was a shift in mindset of “saving” to “paying myself” which lead to the concept of TipYourself. Now I save for me, because I earned it. Trips to the gym, getting my todo list done, etc.
Saving to save is hard. Try a shift in mindset.
LOVE the “paying myself” mindset. People are always eager to get paychecks. 🙂
I had these money mistakes before. I am glad that we learned from it. And now, I have felt nothing’s like before since then.
It’s amazing, isn’t it? 🙂
Yea. It does feel great, Laurie, because I feel like I am heading to somewhere I know I can be successful. And, all those money mistakes, I can avoid it more easily.
We made some if not all of these along the way. So easy to look back now and see the issues, but its good to just more forward, learn from these mistakes but not get hung up on them.
Hindsight is definitely 20/20, isn’t it. And you’re right – don’t get hung up on your failures – learn from them and then move onto success! Great words of wisdom, Brian.
I went through many of those things myself. There are so many things I wish I could go back and change, but you can only learn from it and grow and try not to repeat anything ever again.
Exactly! I go through those periods of beating myself up over past money mistakes too. There is something to be said about learning from them, but dwelling on them only creates some seriously useless guilt.
I love the concept of value based spending…while we were pretty good with money, there were times that we spent on stupid things that weren’t important and were certainly a waste. We’re trying to track our spending more and have more money meetings to discuss financial goals and how we’re doing. It works best when you’re on the same page!
That’s SO smart, Andrew! So many couples avoid money talks, but they really do strengthen a relationship.
We all have past mistakes we regret, like the time I was convinced by a family member to take to a whole life insurance agent at 21 years of age. I wasted 3K on whole life insurance that I never saw a return from that product. I learned from it, and now I only buy term life insurance.
A good lesson to share, EL – thank you!!! We had a similar experience with life insurance when we were younger. Frustrating when I look back at our lack of knowledge in those days!
The only people that can say that haven’t made a mistake financially are just living in blissful ignorance. We can always do better, it just whether or not you want to keep having regrets or make a change today. If you don’t make a mistake you probably aren’t taking enough risk for investments as well to really make your money grow. Live and learn, but I sure like it when I can learn from others than my own mistakes, but I still run in to my own every so often.
Love that first line, Lance!! I hear you on learning from others. We work hard to teach the kids that it’s better that they learn from our financial mistakes so that they don’t have to make too many of their own.
All of the above – check. ” . . . it’s important to determine what whims or misunderstandings about money and life are causing you to spend . . . and to get them under control before your money starts controlling you.” So true! The prevailing misunderstanding out there is that frugality and discipline mean a lack of freedom. The truth is that when they’re absent, we end up being controlled by our money. Ugh! Never again!
Exactly!! It took me SO long to understand that. I thought that budgets and spend-tracking were forms of punishment. Now I understand just what a blessing they are!
Yeap, we made the same mistakes. Talking about money was really hard at first. Even now we sometimes have a problem communicating if one of us is afraid of upsetting the other. The fear of making the same mistakes we made in the past keeps us communicating.
That fear is a pesky taskmaster!!!! We too have to work to keep it underfoot on a semi-regular basis, even after all we’ve learned.
I can still remember the days when we used a legal pad and marked down when our bills were due on which days of the month. The truly sad part was that almost every day was a due date for a bill. Egads, the most important thing taught in elementary, middle, and high school should be finances. Period. Required courses. And that if you are a saver and you do not believe in debt, don’t hook up with someone who does! They will just drag you down with them.
My mistake in the beginning is that saving was not my priority. I didn’t save first before I spent. All that was left would be my saving. Sadly, most of the time, nothing was left that means I didn’t save anything in that month. But, now I have learned how to do it correctly. I just wish that I should have known it earlier.
I hear you there, Michelle. It’s hard to deal with those money regrets at times!
I am guilty of thinking that student loans were a good idea and that I’d be able to repay them easily! Unfortunately, that’s not the case, and I’ve had to learn it the hard way.
Ugh, that is the koolaid the colleges sell, isn’t it? On the other hand, you’re doing a terrific job of paying them back, Natalie. 🙂
Appreciate your openness about your financial mistakes. I have had many financial mistakes over the years, and I try my best not to dwell on them and do what I can to learn from them instead.
That’s the way to handle it, DC!
I totally relate to these. We ”talked” about money but we didn’t really discuss it. Sure we vocalized that we wanted to pay debt off but at no point did either one of us attempt to make a plan to do so…so it sat, and sat…and sat…thankfully we finally got real. I do think this is something that constantly needs to be done though- for instance I know my husband thinks we will be getting a new (to us) vehicle much sooner than I know it will actually happen..
I SO hear you there, Catherine!!! We did a lot of the same stuff for many years of our marriage.
Definite fear of money on my end and sticking my head in the sand too many times to count.
All too common, Janet, and I’ve been there myself!