Money Mistakes And How To Rebound From Them

Unless you’ve got unlimited resources, you’ve probably made a major mistake with your money at some point that you’ve come to regret and learn from. But no matter how poor you are with money, there’s pretty much always a way to recover and become financially stronger than before.

Writing at Bargaineering, Miranda names some major money goofs, as well as what she’s learned from her tailspins.

Miranda admits piling on the debt in her college days, both in student loans and credit cards. The experience made her wiser about taking on debt in the future and regretful that her free spending put her several thousand dollars deeper in the hole than she could have been.

She also recounts how she failed to keep up with her taxes once she started doing freelance work from home. Now she’s learned to pay taxes quarterly and prepay state taxes to avoid being overwhelmed at tax time.

What is your biggest financial mistake, and what did you learn from it?

Have You Made a Big Money Mistake? How Did You Fix It? [Bargaineering]

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  1. dakeypoo says:

    Pay cash for everything except a house. If you can’t pay cash for it, don’t get it.

    • plasmatop says:

      Good luck getting good terms for the loan, if you can even get the loan at all. What is worse than bad credit history? No credit history.

      • obits3 says:

        You’re right. That’s why I my rule is:

        Pay credit for almost everything and they pay off the balance every month.

        • Tim says:

          I stay away from extremes. Pay credit for some things, cash for others. Pay off the credit card when you can, but hold a balance every so often.

          Everything in moderation.

          • Eviile says:

            including moderation.

          • myCatCracksMeUp says:

            Yeah, to get the highest credit score you need to occasionally carry a balance. I do this with a couple of hundres of dollars for a month or two every year or so.

      • dakeypoo says:

        You don’t actually have to use the credit card to build your credit. I do actually put everything on my card, then pay it off at the end of the month, but that’s because I know I have the cash to do it.

        • runswithscissors says:

          You haven’t met some of the “only ever pay cash for your house” crew around here…

    • FryingPan says:

      Wait, paying cash for everything was your “biggest financial mistake”?

      I kid, I kid…just giving you a hard time =)

    • mrsam says:

      And when you do buy a house, pay down as much as you can, to get down the amount borrowed as little as it can be.

      Any interest you’re paying is basically money that’s being pissed away without getting anything in return. I basically put down a 67% down payment for my current abode; I financed only about a third of the price. Paid off my mortgage in five years, now all I pay are property taxes.

      The only exception to this would probably be occasional financing giveaways, like 0% financing deals on new cars, or a negligible interest rate that’s way below the inflation rate. That’s basically free money that’s somebody’s giving you; so as long as you have the cash anyway, why not take it, and park the cash in an interest-bearing account? Over the life of the loan, you’ll probably get enough back for a few beers. Not a lot, but better than nothing.

      • rockelscorcho says:

        Just be smart and get yourself a rewards credit card. Pay it off every week, not month. Use the rewards, build credit, and pay it off every time. If you do that, it’s Win-Win-Win.

        • Bibliovore says:

          No need to pay it off every week unless you have trouble remembering to send payments in otherwise — and even then, consider instead setting up a payment reminder, or a scheduled payment that will go through on the due date. Then just keep earning interest on the money until the payment is due.

      • MaxH42 thinks RecordStoreToughGuy got a raw deal says:

        And in case anyone gets the urge to yammer about how wonderful the mortgage interest deduction is, let me make you an offer: you send me $100 a month, and I’ll send you $25, maybe even $30!!!!! How can you pass up that deal??? Free money!!!1!!eleventyseven!!

        • FatLynn says:

          Sigh. This again. Okay, let me explain again. Over 30 years in the stock market, it is reasonable to assume a 5% return rate. Let’s say I earn 100K, with a marginal tax rate of 25%. If I can finance my home at 6%, and put the rest of the money in the market, it is better than putting more on a down payment. The mortgage interest deduction is part of that calculation.

          • SonicPhoenix says:

            There are a lot of assumptions in those calculations. It really only works out for high-earners that have a high marginal rate but somehow escape the AMT. In my case, for example, the mortgage deduction is worthless since it plus my other deductions don’t exceed the standard deduction.

          • hansolo247 says:

            but in your example, how many actually put the difference in the stock market?

            next to none.

      • partofme says:

        Similarly, any money you throw away on rent is “getting you nothing in return”. There is an optimization problem here. I actually did the math a couple weeks ago, and it’s surprising how it turns out. I posed the question a few different ways: what’s the optimal down payment for a given price and current rent… what’s the optimal price for a house given your current situation.. and some others. I was really surprised about the second one. It was nearly entirely driven by current rent. Down payment available barely touched the number. And even as the limit of down payment went to zero, the optimal price tended toward a fairly sizable positive number.

  2. raydee wandered off on a tangent and got lost says:

    My biggest financial mistake was letting my parents bully me into attempting college before I was ready, because they were of the mindset that “you can’t be successfull if you don’t go to college” and also bullying me into buying my first car, again before I was ready, because they didn’t want to drive me around.

    So eventually I had to choose between making car payments and making student loan payments, because of course they couldn’t help me out financially. I managed to pay off the car, but by that point, I was nearly out of a job due to my store closing, and the job market being terrible.

    Ten years later, I’m still trying to finish paying off my student loans for an education that is now not only terribly out of date, but entirely worthless. I never could find a job in the industry. I went from retail job to retail job for a long time, and now I’m working in a completely different type of business.

    If I could talk to my fresh-high-school graduate self, I’d have so much advice.

    • obits3 says:

      Mine was similar on the car issue. Just out of college I wanted a new car. I wanted a Ford Escape because I thought that it would be practical.

      My Dad said he had a deal for me and kept stalling for four months. Over that time, he convinced me that I was young and should get a Mustang. Truth be told, I love driving it and it is the most fun car I’ve ever had, BUT if I could do it over, I would have purchased an Escape.

      • raydee wandered off on a tangent and got lost says:

        yeah. Car insurance would probably have been better for a young driver with a practical car rather than a sporty little thing. ;)

    • George4478 says:

      >>bullying me into buying my first car, again before I was ready, because they didn’t want to drive me around.

      You were just fine with them driving you around and confused about why they had an issue with it? Perhaps they should have just refused to drive you around and let you reach the ‘I need a car’ conclusion on your own after you walked everywhere.

      • raydee wandered off on a tangent and got lost says:

        If I had a choice, they wouldn’t have driven me around; I was looking for a car, but I knew I wasn’t financially ready yet, and had been considering other options, like a motorcycle or something cheap and small. We were in the boonies, no public transportation, and Mom only really needed to drive me to work/class, because Dad could pick me up on the way home. He worked nearby.

        As it was, if they’d let me wait a couple more months, I could have just straight up bought a used clunker with cash from a friend-of-a-friend. It couldn’t have been worse than the car I did eventually get, because in addition to car payments, something failed spectacularly on it every 6-8 months. In the five years I owned it, we replaced everything under the hood except the windshield wiper motor.

        But Mom wanted me to have my own car so that I could become the family taxi service.

    • plasmatop says:

      The college thing is so true. The way higher education is these days is a joke. They don’t teach you anything useful in most fields. You end up paying tens of thousands of dollars so you can get a piece of paper that shows employers that you can endure years of pain and misery and be a good little worker bee.

      My parents also forced me to go to college right out of high school because that is what big bro and sis did, so of course I had to do it as well. I was there one semester and then left. I started my own business and successfully ran it for five years. I made about fifty thousand or so a year doing it. Eventually I decided to go out and get a “real job” and wound up managing a hotel. Now I work at a credit union and make close to six figures. No college degree at all. Also make about twice as much as my siblings who both have college degrees. They are lucky and don’t have loads of student loans because someone was nice enough to pay for it for them.

      • cheapMexican says:

        The college ‘pain and misery’ was a big part of the experience, and I don’t miss it one bit, but in retrospect, the return on investment’s turned out to be quite big :-)

        I still remember one of my hardest professors’ favorite sayings… “You ain’t gonna be bitchin’ about this class when you’re driving that new sports car around!…” Well, I am too cheap to buy a sports car, but every time one passes me in the freeway I crack a smile.

        I guess the key is to find one of those few fields where they DO teach something useful? — or go into the financial/law industry, I hear that works out well, too.

        • plasmatop says:

          People that are truly brilliant don’t need college. Just look at some of our country’s richest people. My parents (dad especially) was a huge advocate for going to college. When I told him after one semester I wasn’t going back he told me that I would suffer a life of misery because I would end up in a dead end job and always be in financial trouble.

          He is still disappointed I didn’t get my degree but he is happy I proved him wrong.

          • cheapMexican says:

            Brilliant does not equal rich (and viceversa).

            Think of the people that designed your iphone (Not Steve Jobs, but the guys that *actually* did the work). Same thing for the people that designed the car you drive, the jets we ride to get from LA to NY in the time it used to take to get to ‘the next town’. These are the people that are truly brilliant, and I bet you that a) they all (ok, the vast majority) went to college, b) they do pretty well financially, and c) almost nobody knows who they are.

            Using Bill Gates as an example of why college doesn’t matter is no different than saying you are not going to college because you are going to be the next LeBron James. Sure, 0.01% of the population may be that brilliant/good/lucky, but for the rest of us regular schmucks, a college education is a huge leg up.

            • pecan 3.14159265 says:

              People always use Bill Gates as an example, but they always forget that Bill Gates …went to college. He didn’t graduate, but he went. Using him as an example of why you don’t need college is contradictory because going to college helped Gates to bring his vision of Microsoft to life.

    • Clyde Barrow says:

      @raydeebug, wow, you are something else. I take it you are the “glass if half empty” personality type? Your comment fails on every level. An education is not a single entity that promises success nor does it stay current as with everything in life, continuous improvement is the path forward. Did you stop educating yourself? Why? Did you apply for continuning education and certifications? Once you get your undergrad’s or MBA, certifications within your field are highly and sometimes more important with an employer.

      I got my Associates in ’97 in CAD but never found a job as it was extremely competitive and I had no experience. A friend of mine recommended to “just send out resumes in an similar area of work because all an employer can say is “no”. Well I did and 18 months after graduating with that degree I got a job as a Industrial Engineer. I ended up doing work in process flow charts, time-studies, floor plant layouts which I hated to do in college. Soon I went to college again getting my undergrad’s in Eng Tech in quality/process engineering. From there I got my MBA. Now I work on my certifications and work for the federal gov’t. I didn’t quit and just because one job didn’t work out I found other opportunities. I also was open-minded to become mobile. Employer’s won’t be coming to you, you need to go to them.

      I never got a job in CAD. I worked in engineering for years. Now I work in finance. I don’t have a finance degree but my course work gave me education in it and working contracts in engineering so I was able to get hired. This past January I got my certification in LSS as a black belt. Now I am studying for a certification in finance.

      Do you see where I am going with this? Can you connect the dots?

      I have heard your sad story so many times but it does nothing but come back on you. Don’t blame your parents or your college degree.

      • Karita says:

        That’s an unnecessarily nasty response. I agree with everything raydeebug said. I’m not a negative person, but with $200,000 in student loans, a law degree, a masters degree, and a job as an attorney that pays $35,000 a year, I look back at things and wish I had not listened to the people encouraging me to go to school. Especially since I paid for/financed every penny of my higher education, because it was the “smart thing to do”.

        Kids just out of high school are clueless, and it’s better if they’re given viewpoints other than “go to college and you’ll get a great job.” So good for you and your successes, but there are a lot of us out there that worked just as hard as you, or even harder, and don’t have the same level of success you have.

      • raydee wandered off on a tangent and got lost says:

        I love learning, and if I could get away with taking a dozen classes on any number of subjects that interest me–without having to worry about needing to work and pay bills–I’d jump on it.

        My regret is not that I went to college, but that I went before I was ready. If I had waited a year and built up some financial reserves, learned more about what I really wanted to do with myself, and did more serious shopping around for the kind of classes I genuinely wanted to take, my financial situation would likely be a lot less problematic.

        I was pushed too far too fast, and I made a lot of bad decisions because I was too rushed to give my options the full amount of research and deliberation that they deserved. They were huge decisions, and I knew that what I did then would set the course of my life for years to come–and I wanted more time to make sure I was making the right choices. I was not allowed to have that time.

        My parents at least learned from the mistakes we made, and my sisters, both now out of high school, are having an easier time of it. They’re taking schooling as they can, and working their way through without building up colossal debt.

  3. AngryK9 says:

    Oh yes, I have made plenty of mistakes. Namely, I gave my ex girlfriend access to one of my credit cards when she was in a tough spot. NEVER AGAIN!

    • raydee wandered off on a tangent and got lost says:

      Hah. I spent a couple years with a total bum of a boyfriend. I mean, I’m not the kind of girl who expects her gentlemen friends to pay for everything… but to at least split the bill.

      My biggest money saving success? Being single.

  4. cybrczch says:

    Mine was dial-up online services (I’m looking at you, CompuServe) in the late 80′s and early 90′s, when I was a poor delivery person trying to pay student loans. Eventually my credit card bumped up to its limit, and I had to do something. I started paying more than the minimum amount due, slashed discretionary spending in other areas, and found better online deals. By 2001, I had managed to pay my credit card off, and I haven’t carried a balance on it since.

  5. tchann says:

    My first job gave me my biggest financial lesson. I worked at a church camp the summer before my senior year of high school. I was basically working from 9am to 9pm (sometimes midnight) with room and board included, for $25/day. At the end of the summer, I took a look at my bank account (which had been opened at the beginning of the summer in anticipation of this job) and realized that somehow, I only had $200.

    That’s when I realized exactly how much I’d spent on eating out, junk food, and frivolities. That plus a YM article on a teenager with $10,000 in credit card debt had me pretty damn frugal through college.

  6. EdnasEdibles says:

    Being young with debt is a big one. I should have attended a public university or a community college so I didn’t have student loans the size of the ones I have from a private university. I also ran up too much debt on credit cards and got a car loan before I graduated. That’s an insane amount of debt for a 23 year old to have. Starting out on your “adult life” with as little debt as possible is key. I’m already taking steps so that my own child will be able to do that.

  7. Bsamm09 says:

    Buying a boat — actually the boat is the cheapest thing. Gas, upkeep etc kills you wallet.

  8. Bativac says:

    I bought a 1974 Cadillac ambulance while I was in college, thinking I could fix it up into a bastardized version of the Ghostbusters’ Ecto-1. (My girlfriend at the time talked me into it and lent me half the money via credit card cash advances.)

    Three years and several thousand dollars worth of credit card debt later, I sold it to a guy for 10% of the total I had put into it. I’m still paying off some of that debt. Never buy a classic car unless you have someplace to store it and lots of either and expertise or money.

  9. CrankyOwl says:

    My biggest financial mistake was turning all my money over to a stockbroker – who came highly recommended by several friends whose money he’d been managing for years. At first he was great, but when the stock market started doing badly several years ago, he came up with a new “investment strategy” that I didn’t really understand. I lost a lot of $$$ and finally fired him. He eventually surrendered his license. For all I know he’s working at K Mart now. Lesson learned: don’t ever invest your money in something you don’t understand and/or can’t explain to someone else.

  10. FatLynn says:

    I bought a condo during the boom. Oops.

    Fortunately, I bought small, so I can pay my mortgage, even on a TA stipend, but I don’t even have enough equity now to do a useful refi.

  11. HalOfBorg says:

    We moved our car payments from the higher rate loans to low, fixed rates on credit cards, then moved them to better ones again. Ended up at nice, low fixed rates.

    Until the credit card company said they were gonna jack up our minimum payment to a level we could never afford – unless we agreed to much higher rates. Bastards.

    We are currently doing a refi on our house to move to %4 and pay off all our cards – so then I can wait for the banks to decide it’s arm-twisting time.

  12. DeathByCuriosity says:

    Hanging on to high-interest rate credit cards. Dumbdumbdumbdumbdumb! My husband shopped around for a better interest rate and did a balance transfer. Now we’re in the process of reducing our debt and putting less on the cards while paying off what we do put on them.

    Constantly fixing a crappy car instead of buying a better used one. It took a HUGE repair bill of $1K to wake me up and get me to a used car lot, where I bought a reliable used car that has needed nothing more than standard maintenance. Also, the mechanic was very scammy, but I didn’t realize that until after he’d pulled my car apart and I was in too deep. He did the dirty air filter routine, and he also told me that my car was designed in a way that required him to pull out the dash to fix the engine (wtf…I don’t know anything about cars, but this sounds suspicious), so he had to charge more for the extra labor. It was a huge scam and I wasn’t surprised that his shop went out of business later that year. I was very young and naive and I learned some important lessons about mechanics!

    Not my mistake, but a mistake made by family members: using a store credit card from a major home improvement chain to buy a washer and dryer because they were “desperate” for them. Almost five years later, they are STILL being bitten in the ass by that card because they were too poor to pay it off and it has a high interest rate. Those appliances are costing them WAY more now than they were worth. Having to shovel every bit of their extra money toward that card instead of savings is hurting them financially and preventing them from getting back on track. I think they almost have it knocked out and things will be better for them soon, I hope.

  13. Martin says:

    I came home from a six-week vacation and in the mail I found a notice “A warrant has been issued for your arrest…” I had closed out a checking account before all the checks had cleared. I had to pay off the bounced checks, of course, and also a $50 fine.

  14. stevied says:

    As a child never lend $ to your parents because they will seldom pay you back and if they do they will forget to pay you the 1% interest compounded daily.

    Huh?

    Mommy and Daddy borrowed $1 from me to pay the paperboy, pizza delivery dude or whatever. They just need an extra buck to complete the transaction/not break a $20 etc.

    I learned about compounding interest from the deal.

    1% interest compounded daily.

    $1 today is $1.01 tomorrow. Fair enough. No big deal for all involved.

    Want to wait till the end of the month to pay me? Sure, no problem, you owe me $1.35

    1% compounded daily…. do the math…. I get paid $1.35 at the end of the month. Wanna wait till the end of the year and pay me $38 I will be happy to wait.

    Needless to say Mommy and Daddy didn’t pay me the $0.35 and they never borrowed $ from me again. Yo, stupid siblings, Mommy and Daddy want to borrow a buck from ya.

  15. runswithscissors says:

    Like all Consumerist Commenters, I’ve never made a financial mistake and I read every contract, agreement, TOS and financial document front-to-back before I sign anything.

    Anyone who fails to do as I do deserves nothing but scorn and shame.

  16. Yorick says:

    Education was my mistake too. Going back to get updated, anyway. I should have chosen my course type more wisely, or not gone back, because what I learned I never got to use, I wasted a year and it’s going to be 20 years minimum to get it paid off. Meanwhile I can’t afford to do it over.

    Also, I keep forgetting not to be generous, that keeps biting me too.

  17. TheSurlyOne says:

    I’ve made quite a few bad financial decisions, especially in my early 20s. When I was 21, I was working full-time for $9.65/hr (around $280/wk after taxes and deductions for insurance). I was also an almost-full-time college student (some quarters, I took a full load, others I didn’t).

    My sister bought a new Honda Accord in 1996 and I decided that I wanted one for myself. Never mind that I had a barely three year old Honda Civic in great condition! Out of pure stupidity, I traded it in for one of the last ’96 Accords they had on the lot. My sister had the loaded EX model (sunroof, power everything, alloy wheels, etc.), but I could only qualify for an Accord DX (aka- the ‘stripper’). It had A/C, AM/FM cassette and that was it- crank-down windows, manual door locks, no cruise control and I even had to lean across the car to adjust the passenger side mirror! The ridiculous thing was that my payment was $60 more per month than my Civic and the Civic had all of those features and I gave it up!?!? I also financed the Accord for 72 months, adding insult to injury! =(

    The day after I bought it, I realized what a mistake I had made. I was stuck with that thing for just over three years and hated every day of it! I was t-boned at an intersection when an old man ran a red light and the car was destroyed. I ended up with 28 staples in my head, a broken arm and a herniated disc in my cervical spine (that eventually ruptured)….but even as the paramedics were putting me into the ambulance, I felt relieved to finally know I was free from that awful car! =)

    I ended up with about $6000 from the insurance settlement after the loan and medical bills were paid. So I found a ’92 Accord (8yrs old at the time, but with only 82k miles) and paid cash for it- no car payment! I drove it for almost six years, debt-free!

  18. coldfire409 says:

    When I was still living at home, but I was very close to moving out on my own I had a credit card with a modest $1,000 limit. I would put some purchases on it but pay it off in full every month. While I was living there my parents were charging me $200/month rent. Well I was about 6 months from moving out and my parents suddenly needed a plumber. They were renting the house but the landlord was screwing them on the repair because a pipe sprang a leak. Since I had a credit card I had to pay for the repair and that was close to $500. I figured that with that I could not pay rent for the next two months but no I still had to pay. Then my stepdad got arrested and they needed another $200 to bail him out of jail the next month. Of course I had to get a cash advance and put it on the card.

    My mom literally was forcing me to use my card anytime she needed something instead of her using her own money. And then to top it all off my mom took my car because hers had a flat tire and rear ended somebody. I got sued over that and she has yet to pay anything that I loaned her. It got to the point I literally had to move out sooner than I wanted to and I had moved out of state. I probably could have taken my mom to court over all of that but I worked my ass off to pay off the $500, but that credit card was deflated on. I had to suffer with bad credit for a few years, but I did get back on track.

    Now I don’t let anybody drive my car and I won’t pull out my credit card for anybody for any reason. My mom has also stopped talking to me because she said I shouldn’t bring up the money she owes me, but in one month she cost me nearly $1,200 which was how much I made in an entire month.