Do you have a knack for making money mistakes?
So do I!
We’ve come a long way in our journey to frugal living, so as I look back at my biggest money mistakes, I want to kick myself. I would give almost anything to turn back the clock, to go back in time as my older, wiser self and make better financial decisions. I would cook at home more, put more money in savings, start investing much sooner, and embrace some of the amazing saving and making money ideas by some truly spectacular bloggers to set us up for a MUCH easier financial future.
Maybe you’ve made some of the mistakes I’ve made, or possibly you haven’t, but whatever your completion status on my 10 biggest money wasters, please learn from them! Take to heart the suggestions I’ve given to stop wasting money on each of them, or head off disaster before it starts so you don’t have to learn the hard way like we did!
Here are my 10 biggest money mistakes + my hopes for you that you can avoid them:
Biggest Money Mistake #1: Car Payments
Unfortunately, our biggest money-water, is many other people’s top money waster as well. And while I’m all for accepting personal responsibility, I do have to acknowledge that so many people fall into the car payment trap because not only is it completely normal to have a car payment, a new car is sort of a status symbol.
And to break up with your car payment, you (we) have to break up with our addiction to caring what others think.
It’s scary and it’s hard, and it requires quite a bit of discipline, but it can be done. Once you get rid of others’ expectations for what type of vehicle you’ll drive, it is remarkably freeing. We’re not yet completely free of our car payment (even though we did pay down $24,000 of debt last year) but we have reduced the interest we’re paying by about 70% by refinancing, and our strategy to pay down debt during 2016 is not only strong, it’s already going well.
When we first got married, we quickly got to the point where we had $950 of car payments every month. The interest rates were almost 8%, and you better believe that our insurance was astronomical. Because of the refinance, our monthly payment is about $450, our interest rate is 1.9%, and unfortunately our insurance is still hella expensive. We’re working on it, and are committed to seeing our last payment gone!
If you have car payments, I highly recommend that you check out these resources to help you deal with them:
- Our refinance story (how we saved $35,000 in interest)
- How We Dumped $11,276.69 of Debt in One Day
- 11 Things To Remember When Paying Off Debt Gets Hard
- Pay Off Debt Resources Page
Biggest Money Mistake #2: Vacations
Don’t get me wrong, vacations are absolutely ESSENTIAL to your mental health, emotional health, productivity at work and at home, and there is NOTHING wrong is seeing the world.
But incurring debt to take those vacations is a mistake that we, unfortunately, made in the past. In some ways we were smart about it, opting not to take our honeymoon right after our elopement, and instead waiting until our first anniversary. We did this knowing that we wanted to go somewhere spectacular (we eventually went to Hawaii) and the plan was to save up for the vacation during our first year of marriage.
As you can guess, that didn’t happen. Part of it was our immaturity (we got married at 19), part of the problem was our complete lack of financial knowledge, and yet even more of it was our work situation. I was in college full time, and my husband started out during our marriage working full time to support me as I went to college. But then, 6 months into marriage he blew out his knee and couldn’t work for 8 months.
Yes, 8 months is a long time, but working with the VA to get his knee fixed to an extraordinary amount of time, and it placed a really heavy burden our new marriage. I started working 60 hours a week at a local restaurant while still going to school to try and make ends meet, but it just wasn’t enough. We should have cancelled our Hawaiian honeymoon, but to be honest we were so worn down that we just wanted to get away.
So we took the vacation, put at $2,000 on the credit card to cover it, and came back in an even worse financial situation than we were before. We were relaxed, sure, but the moment we stepped off the plane the stress came back.
There are so many resources on the internet that can help you save money and still have amazing travel experiences, that there is no excuse for breaking the bank with travel:
- How We Vacation For Pennies
- Tricks To Save Money at Disney
- Travel Hack: Buy Timeshares Off Of Craigslist
- 6 Budget-Friendly Vacations
- Would You Listen To A Timeshare Presentation for A Free Vacation?
Biggest Money Mistake #3: Expensive Coffee
There was a time when the Starbucks drive-thru was my best friend. Ok, it was McDonalds, because that was the only coffee place in the town I went to college in, but still, it added up. Rather than taking the time to brew my own coffee to fuel days filled with college courses, I took the lazy way out and hit the drive thru.
It was good, sure, but our credit cards were starting to show the abuse.
Buying expensive coffees was my mistake, one that I will never repeat again (at least not on a regular basis). For myself, I don’t have expensive taste in coffee, I’m just slow in the morning, so making coffee at home isn’t the worst for me. A big can of coffee costs $7 from Aldi, and lasts me nearly two months. But for those with more discerning tastes, brewing better coffee at home, or using K-Cups to achieve a more “coffee shop” taste and feel will still save you money. Or, you could get even more creative and finance your coffee habit with Swagbucks or surveys.
Or maybe, breaking the expensive coffee habit just isn’t for you. If that’s the case, recognize the expense for what it is, and look for other ways to cut back your spending. Maybe you don’t place a lot of value of running the air conditioner constantly while it’s hot, or beef isn’t a necessity in your meal rotation. Everyone’s frugality looks different, just don’t turn a blind eye to expensive habits.
Biggest Money Mistakes #4: Cheap Clothes
There was a time when we were cutting back that I bought only cheap clothes. Granted, I was in college and working at a restaurant, so my wardrobe choices were pretty much up to me, and quality wasn’t a huge factor.
Then, when I graduated and started working as an accountant, I still kept up the cheap clothes trend. Sure, it saved me money in the short run, but what I quickly noticed was that I was having to buy more clothes and shop more frequently. Not only was buying more clothes costing me more money than it would have cost to buy decent clothes in the first place, each shopping excursion was another chance for impulse buys, purchases that weren’t thought through, and falling prey to the myriad of marketing schemes in the store.
Today, I’ve learned that a few quality pieces trump many cheap clothes. Having clothes in my closet that I absolutely adore gives me a lot more incentive to take care of them, and the fact that I spent a fair amount of money on them helps motivate me to was them less, use homemade laundry detergent, and take other measures to make them last longer.
Biggest Money Misatke #5: Baby/Kid Toys
We were very, very blessed when our daughter was born. Because of friends and family who had previously had children, we were give (0r loaned) basically all of the baby furniture we needed. Then, thanks to tons of hand me downs + 3 baby showers, our daughter has more clothes than she cold ever wear.
But on the toy front we weren’t so lucky.
Kids – especially babies – don’t need a whole lot of toys, but we went a little crazy buying them for her anyway, at least for the first year of her life. Maybe it was the fact that I didn’t buy her ANYTHING else because I didn’t have to, or maybe it was just the excitement of a new baby, but I went overboard.
Adding in the fact that when you slap the word “baby” in front of anything – toys, clothes, furniture, food – the price gets at least doubled, well we spend way more than we should have.
Once she hit about a year old, I started getting up the gumption to hit up garage sales for gently used and cheaply priced toys, as well as embraced just buying less in general. I’ve started taking pride in finding the best pieces at the best prices, and then reselling them when she’s outgrown them for the same or greater price that I bought the for.
Biggest Money Mistake #6: Excessive Interest
Credit Cards, Car Payments, Mortgage Interest Rates, and even Student Loan Rates all can vary greatly from person to person. In my case, I wasted money on all of the above. 3 years ago, when I started this blog, the hubs and I had credit card debt. We only had one credit card, but it was almost maxed out, and was costing us 8.24% interest each year. We also had car payments with excessive interest rates.
Thankfully, when we bought our house our interest rate was low, but we could’t say the same for my student loan interest rates. And while all of those are horrible ways to waste money, the credit card interest was by far the worst. Our income was fairly low, our expense were high, and so even the small extra payments we could put towards the credit card debt were usually swallowed up by interest.
Now that we’re free of credit card debt, it is so freeing! And, while we utilize credit cards for the rewards still, we NEVER keep our credit cards in our wallets, and we don’t allow online stores to keep our credit card information (only our debit card) to keep up from impulse buying things that we cannot pay for in cash right now. This may seem extreme, but we both love to shop, so this solution works for us.
We also keep track of our credit scores monthly, using some of these strategies, because any new forms of debt (0r refinancing, since we may purchase an investment property) depend on our credit to determine the interest rate:
- 5 Ways To Check Your Credit Score for Free
- Should You Build Your Child’s Credit Score?
- Credit Sesame: A Truly Free Credit Score
- Holiday Credit Card Debt? 6 Tips To Get Back On Track
Biggest Money Mistake #7: Private Mortgage Insurance
One of the biggest mistake many families make is paying PMI (Private Mortgage Insurance). PMI is the premium you pay when you put down less than 20% on a home. As a result, the bank views you as more of a risk that you will default on the loan, so you are required to pay the premiums on insurance against that risk.
Our PMI was pretty low – $40 a month because our mortgage was only $40,000 – but even that small amount added up to $480 a year! Our PMI was very low, but the PMI on a $150,000 house runs many families $150 – $200. That adds up to $1,800 – $2,400 a year, or even more for families with more expensive houses!
There are a couple of ways to get rid of the PMI on your mortgage: Increasing the value of the home, or refinancing.
If you increase the value of the home enough that your loan-to-value ratio is less than 80% (see your mortgage paperwork for the specific ratio) in most cases you can have an appraisal done and then request that the PMI be dropped off. Some mortgages do not allow for this, requiring instead that you pay PMI for 5 years, regardless of the home’s value, which was the situation we were in.
So we went with option #2, refinancing. We bought our home for $46,000, did some paint work, and then had it appraised for $87,000 2 years later. This allowed us to refinance, thereby getting rid of our PMI, decreasing our interest rate just a bit, and knocking 15 years off the length of the loan – while still keeping our payment the same. If you’re interested in learning more about the refinancing process or our experience, you can check out the detailed post here.
Biggest Money Mistake #8: Restaurant Food
When I think back to how much money we wasted on fast food, casual restaurant food, and takeout when we were first married, I hate myself a little. You can see this reflected in the first budget, as well as tons of posts I have addressing food costs.
I have wished, so many times, that we had gotten off the eating out train, saved money, and eaten healthier. We can’t change the past, but we can change how much we’re currently spending on food.
If you are struggling with eating out, I have some great ways to save on food. Some take as little as 5 minutes, while others take more effort. Check them all out here:
- The Empty The Freezer Challenge
- One Trick That Saves Me $1,400 A Year
- The eMeals Experiment
- 11 Astonishing Ways To Save Money At The Grocery Store
- How I Scored A $125 FREE Sam’s Gift Card – Without Lifting A Finger
- How We Finally Started Eating Clean On A Budget
- It’s Like Amazon, But Cheaper. How To Save Money on Real Food
- Drive-Thru Meat: How To Save 32% Or More on Chicken, Steak, and Pork
One of the best things about the internet is the ability for it to save $1,000’s if you look hard enough. There are sites dedicated to making extreme couponing as easy as possible, making extra money, and even for finding the best online deals. There are other amazing blogs dedicated to helping you live better on less money, budget, and even make your career better so you can earn more money from it!
The internet is an amazing thing, and I so wish that I had taken advantage of it sooner to buy drugstore essentials like shampoo, razors, makeup, and even medicines at huge discounts. I’ve never been an “Extreme Couponer” (although I did come pretty close there for a while) but I do love shopping the best deals at CVS and Walgreens each week. Sites like The Krazy Coupon Lady make this take less than 15 minutes a week, and I usually save 80% – 100% on items that we need or will use in a timely manner around the house.
When my husband was inured and off work for 8 months, I discovered couponing and embraced it to save money, but I didn’t always do it right.
Instead of buying only things we would use, I bought everything that was a good deal, regardless of it’s level of use to us, and ended up wasting more money than I saved. Now I’m smarter about my spending/couponing habits, and it’s definitely paid off, since we routinely stick to a $450 “everything” budget. (Our Everything budget is groceries + household goods) Could we get it lower? Probably, but $450, for us, us a happy medium between ease-of-use and frugality. Plus, it’s much less than many families spend on groceries alone every month.
Biggest Money Mistake #10: Diapers
Diapers are a horrible expense for many parents out there, and I’m going to have a very honest moment right now: We are currently wasting money on diapers.
When I found out I was pregnant, I immediately started couponing for diapers, and I built up a stockpile that allowed me to not buy ANY diapers for 1 1/2 YEARS – at an 82% discount (I do the math + explain my strategy in this post). But after a year and a half, I just got busy. “I didn’t have time” was my excuse of choice, but in reality it was just an excuse.
Now, my excuse is that we’re potty training, and every case of diapers we buy “will be the last.” Ha.
Anyone who’s ever potty trained knows where we’re at right now, and it sucks.
But, I have been greatly cutting down on the number of diapers we’re going through per day, because when she’s home and not at the babysitters, we’re going diaper-free. Yep, it’s all naked baby butts all the time at the Lindow household, so we desperately hope that anyone who decides to stop by calls first, so there’s not a scandal!
If you’re pregnant, trying to get pregnant, or have kids in diapers, check out this post I wrote that details my diaper savings strategy + how you can duplicate it in about 15 minutes a week!
Like it or not, everyone makes money mistakes.
There is absolutely no way that you can head off every single mistake, no matter how much personal finance education your school or parents made sure you left home with, or how much research you do.
But you can minimize mistakes by recognizing them before they go to far, heading off mistakes you may not have thought of, and correcting mistakes once they’ve happened.
No one is perfect – especially not yours truly – but that’s why I love the personal finance community so much. There is an unbelievable amount of transparency within the community of personal finance bloggers + our loyal readers and it’s not for our own personal gain. It is mean to help people, as many people as possible, make smart financial decisions.
So let’s help each other today: what is the biggest thing you’ve wasted money on? How did you fix it? Share you stories in the comments to help others!
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