The earlier you learn from them, the better you will be in the future.
I have always liked being independent. Since I was little, instead of asking for birthday gifts, I saved the allowance and bought what I wanted.
Also, I never asked for a phone or a computer. I tried to save as much as possible and made deals with my parents to get them in various payments.
However, thanks to that independence, I always felt that I could do it all by myself, and that has made me make many mistakes for not taking other advice or believe I know everything already.
The good thing is that even experts have made mistakes. The important thing is what you learn as you move forward.
In this article, I will talk about the biggest mistakes that I have made in these 5 years working and learning about money, in this way you can learn from them without having to commit them, as it happened to me.
Think that it was okay to have debts because everyone has them.
When I started working 5 years ago, the first thing that everybody told me was to take a loan to start making credit.
I decided to buy a computer with a loan, and since I had never taken one, the bank gives me a 24% rate for 2 years. One year later, I bought an old car. the bank wasn’t giving loans to cars with more than 10 years, so I decided to take a personal loan, which had an 18% rate for 2 more years.
The funny thing is that I had enough savings to buy the computer and the car but decided to take the loan to “make credit.” So I ended up paying a bank $2500 unnecessarily.
For many of you, maybe that amount wasn’t a big deal. But if there were better ways, that process was completely unnecessary.
It is possible to make credit in other ways, not just by taking loans and paying it on time, like keeping your credit card below 20% of the limit.
Allowing my spending determines whether I am successful or not.
In a world with fake millionaires and with social media full of influencers showing their successful lives, sometimes I believed that I had to show it for people to see that I am doing successfully.
Later I realized that precisely when I was trying to show something, it is because deep down, I needed it.
Influencers are paid to maintain a life that they do not have so that people want to buy to be at their level. The reality is that it is just a marketing strategy and their lives are not like that. Trying to compare yourself to people who look successful on social media is trying to follow a lie.
I heard this phrase from Suze Orman, and I loved it:
This phrase is a false perception that many people mistake for reality: the more I spend then, the more successful I am. And as I am successful I am more deserving of affection and admiration. After all, who wants a loser?
Money has nothing to do with how people actually perceive you. Using money as a thermometer of success and then as a parameter of love is a trap.
Buy the wrong house at the wrong time.
When I was 21, I decided to buy a house because I thought it was a good opportunity. The apartment had three bedrooms, a laundry room, and two parking for only 50,000 in a good neighborhood. It was too good to be true, right?
As you can imagine, things didn’t go very well. Even it has three bedrooms, the apartment was very small and with cheaper materials. Also, the construction company was very irresponsible, and I had so many issues with them.
More than a good opportunity, this apartment became a source of stress and headache, but I was too young to understand that I needed the right advice before making that investment.
Over time I learned that we should not take advantage of opportunities without having the correct knowledge. At that time, I thought I was making a good investment and that I needed to buy at that moment so I would not lose the chance.
But then I realize that this apartment wasn’t a big deal, and I thought it was because of my mentality. I learned two things:
- I should never invest without the proper knowledge or advice.
- There will never be just one chance. After investing, I realized that there are better apartments with a better deal than the ones I bought.
Also, at the time, I wasn’t doing so well financially. Now, I have a better economic position and could have taken a better opportunity with my current salary.
But buying something believing that I will never get better was a hasty decision. In hindsight, I should have kept my options open and rented. This would have allowed me more flexibility in the future.
Increase my expenses when I got a better salary.
I used to think that every time I received a raise, I had to increase my expenses. That decision made that I was wasting money on unnecessary things and ended up having a financial mess.
If with the current job you can pay your bills without any problem and save money if you get a raise, that increase should be to take advantage of better investment opportunities.
This will help you have the chance to retire earlier and take advantage of opportunities like your dream house.
Not taking advantage of suitable investments.
At first, when I was in my 18 and got my first job, I felt that the savings were to buy cars and houses. For this reason, I chose not to save or invest because I thought I had all the time in the world to do it, and at that moment, I didn’t need those things.
I am going to give an example; if I had decided to save from my 20 to 28 years, $4000 per year ($333 a month) and then not save anything else until my retirement, at 60 years old, I would have $827,763.83.
But, If I decided to start saving the same amount, between my 30 and 60, I only would have $614,824.69.
The moment you decide to start saving matters.
Feeling that saving or investing is for old people was a mistake that I realize I was wrong early. Now I know that the earlier I start, the more opportunities I have to retire soon.
Don’t be afraid of investments. Spend a little time each week reading books and learning the basics until you feel confident investing. The only risk in investing is not knowing what you are doing.
Using money as a compensation system
Some people love you a lot but don’t have the faintest idea how to show it. So they buy things for their loved ones.
Parents who cannot give their children time, attention, or understanding and shower them with gifts to make up for what they feel they lack to give.
I used to make expensive gifts for my friends to compensate that I wasn’t seeing them, only to realize that they didn’t want to be friends with a person that will never be there for them.
Money can’t compensate for time, love, experiences, losses. Money only pays money.
“Top 15 Things Money Can’t Buy: Time. Happiness. Inner Peace. Integrity. Love. Character. Manners. Health. Respect. Morals. Trust. Patience. Class. Common sense. Dignity.”
― Roy T. Bennett, The Light in the Heart
Try to compensate with the same: time with time, love with love. People that want your time probably don’t want your money. So trying to compensate for one thing with the other doesn’t work.
Have an ambitious budget.
Every year, I project my savings for the next 12 months. In this way, I know how much money I am going to have in my account and know what investments or expenses I can make.
When I started doing it, I wanted to be too optimistic. In my projection, there were no emergencies, no trips, no birthday gifts. Just what I thought I could save all year, and the fixed monthly expenses.
I spent the first two years blaming myself for not meeting a practically impossible goal. Then I realize that the error was not in my extra expenses that I wasn’t aware I could have, but in my planning.
To fix this error, now, every year in my projection, I add a column for the type of savings I will make, not just saving without a purpose.
I designate an amount for emergencies, retirement plans, trips, gifts, and any new gadget that I want to buy in the first column. I also add a considered amount of money to gift myself if I meet the objectives in December.
I also make 3 projections: Realistic, optimistic, and pessimistic. This way, I know there are 3 ways that my year can go, and I don’t have to blame myself for too positive a goal.
Consider bonus as part of my cash flow.
I used to put my bonus and even extra hours on my budget projection. But it is a mistake to plan money that you do not know how much it will be in your expenses.
And it is for a simple reason: you cannot make plans with speculation. Every time I think I will get paid and make plans with them, I end up putting my savings or using the credit card for not speculating correctly.
Bonus and extra hours are extra money. They should be used as unexpected cash. For example, now I’m using it today, something that wasn’t in my budget plan or fixed any discrepancy.
Believe that Lending money means trust and friendship.
I lost a lot of money because I trust friends, and after lending them money, they stop being my friends automatically. I am not saying that all people are like that, but I have lost the confidence to lend money because precisely the 90% did the same thing.
Friendship doesn’t mean you have to give them money when they need it. You have your priorities. So, I have a new rule regarding money and friends: Never lend an amount you are unwilling to lose.
“The best way to keep your friends is to owe them nothing and loan them nothing.”
— Charles Paul de Kock
Every time I lend money to a friend, I do it as if I think that they are not going to pay me, and only with the cash that I am willing to lose. In this way, I don’t lose the money I need, and I don’t have to bother anyone by charging them.
Allow money to be a method of acceptance.
Money should never be a way to be accepted in a group because if this is why they receive you, they will abandon you for the same superficial reasons,
If you need money to impress someone, then you are trying to impress the wrong person.
And let me tell you bad news, they will never be impressed. People that accept others because of the money never get satisfied. There will always be a new car, a new phone, or a new house. Trying to play their game is a waste of time.
For that reason, now I only talk with the people that love the way I am and want to grow with me.
Don’t get too hung up on money mistakes you’ve already made. You cannot change the past. What you have to do is learn from them and look to the future. Consider them part of your financial education.
“Formal education will make you a living; self-education will make you a fortune.”
— Jim Rohn
Getting up after falling many times is useless if we are not learning and changing the way we are walking. Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver.