All of us make terrible mistakes with our money. Some of us more than others, but inevitably we all do it every once in a while. Since it’s the start of a new year, it’s always a great time to reflect and make sure we don’t repeat the same mistakes we’ve made before. Think for a second about your biggest money mistake. What was it? The biggest mistake I’ve made so far is buying a car on an impulse. I was 19 at the time, and I’m only 23 now, so I’m sure I’ll probably make a worse decision one of these days, but it was certainly a nightmare to remember for the rest of my life. Here’s my story:
When I was a sophomore in college, I was pretty above average money-wise. I had only accumulated about $12,500 in student loans halfway through my undergraduate education, I didn’t have a credit card, and I had over $2,000 saved in the bank. The only problem with a 19-year-old with that much money in the bank? Poor decision making skills.
At the time, I was super eager to get a new car. I was currently driving a 1989 Crown Victoria (in maroon red everything – from the paint job to the seats to the dash) and was determined to get a newer car. I had been skimming through Craigslist and found a late 90s BMW 325i – for only $2,000! It had a decent amount of miles, but I had that much money in the bank! A car with airbags, and a BMW nonetheless?! What could go wrong.
So, I went out, gave it a test ride, and the family pressured me into making a quick decision. The next day I drew out cash from an ATM and my best friend drove me to the owner’s house and bought it. Hooray! A nice-ish BMW to show off and an old Crown Vic to sell – win-win, right? WRONG.
As an ironic sign of my terrible impulse decision, the car overheated on the way back to my apartment from the owner’s house! Frantically, I called the family I just bought it from and they said that it was normal for these BMWs to overheat and that I had to keep an eye on the coolant level. In retrospect, I should have immediately demanded them to send a tow truck, take their car back and GIVE ME MY MONEY! But I never did that. And after spending another $1,000 at a repair shop (and an overwhelming amount of frustration), I finally found out that the car had a cracked head gasket. Game over.
I ended up managing to sell the BMW for something like $800 or so to a mechanic that wanted to try and give it a fix, but in the end I had spent well over $2,000 on this nightmare and ended up without a car for a while. On the positive side of things, I know I won’t make a mistake like that again. My current car is a gently-used Sonata that I got for a bargain on the last day of 2013 from an authorized Hyundai dealership. If I ever try to go the Craigslist route again to look for a car, I’ll definitely take my time and do a longer test drive and have the vehicle checked out by a mechanic I trust.
The second biggest money mistake I’ve made since purchasing that lemon of a BMW is accepting an offer for a credit card. If you don’t have a credit card yet, DON’T GET ONE! Argue me all day but the pros of getting a credit card never outweigh the cons. Don’t think you’re better than everyone else – that’s what I did and it didn’t work out as well as I originally thought. I did really well in paying off my balance in full for a very long time, but since I was able to keep a 0% interest rate on my card for years I eventually let me guard down (I just called and asked for a lower APR once the old promo expired and they happily renewed my 0% promo) There was no interest charged and therefore nothing to worry about not paying the balance off in full, right? Wrong again. Now, after a few years with the same card, my 0% interest rate finally expired and I haven’t tried to renegotiate. The $18 interest charge doesn’t bother me though since I’m paying it down quick and will have a zero balance by end of next month.
My money game plan is finally on track. I’ll have my credit card balance paid off in full within another 30 days or so and I’ll also have my emergency fund in place. I can start to breathe a little easier and kick my debt snowball into high gear. What’s your worst money mistake? Maybe you’re facing it right now?