This article is a list of some of the many personal finance mistakes I’ve made in my life, along with notes on what I did to turn those mistakes around.
Mistake 1: I never knew where all of my money was going.
Whenever I looked at my checking account balance, I’d have some idea in my head of how much money should be left, and there was always less there than I expected. It seemed like money just evaporated and I really didn’t have any idea where it went. I’d assume that I must have used it for something worthwhile that I had forgotten about, and if I looked through the actual list of withdrawals, it never seemed wrong. It just never made sense.
How did I fix it? I started keeping a detailed spending log using an old spiral-bound Mead pocket notebook. Whenever I spent any money at all, I wrote down that expense in that pocket notebook, explaining exactly what I bought. I also saved every single receipt that I received.
Mistake 2: I didn’t save adequately for retirement at the start of my career.
Don’t get me wrong – I did save a little. The person I trusted most at the time for career and life advice basically demanded that I do so.
However, instead of looking at it as something really useful for my future, I looked at it merely as something to check off my to-do list.
I ended up contributing about as little as I possibly could. My first employer did offer some nice matching funds, but I only scooped up some of those matching funds because I contributed so little.
The truth is that when you contribute more to a retirement plan, the only thing you actually “cut” from your spending are the dumbest and most useless expenses, which aren’t really much of a loss in terms of your quality of life.
Mistake 3: I believed spending money on showy stuff made people perceive me better.
I bought an expensive watch. I bought a really nice vehicle to drive. I bought expensive clothes. I bought several gadgets, including a “too soon for prime time” smartphone.
It turns out that the only things that really mattered during that period were the things I actually achieved at work. I could have shown up dressed like a homeless person and it really wouldn’t have mattered.
Yes, there are some career situations where your mode of dress does matter, but they’re in the minority. Rarely, if ever, do your clothes matter, nor does the car that you drive. What matters is you – your achievements, your willingness to work hard, your skills, your willingness to build skills.
Mistake 4: I had zero plans for a true life-changing emergency.
What would I do if I lost my job tomorrow? Today, I have plans in place. Back then? Not at all. I just trusted that my job would be there the next day and I couldn’t possibly get hit with a pink slip.
The same thing is true for things like illnesses and other things. Right now, I have plans in place for those outcomes. Back then? Nope. I just figured they wouldn’t happen to me.
I made plans. I wrote out documents. I took out insurance. I made sure that my life was as resistant as possible to those kinds of disasters.
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