By Vicki, from Women Who Money
It always feels good sharing smart decisions you’ve made. But people won’t trust you if you don’t own up to mistakes too. While I made some great money moves right out of college, there were definitely things I could have done differently in the following decade.
Now, I can share the financial lessons I learned with my adult kids. But I also want to share them with others who might learn from my mistakes.
While none of these were huge errors, it wasn’t just too many lattes or avocado toast. 😉 Some of these choices cost me hundreds of dollars, but others set me back thousands (and more) over the years.
Reflecting on choices I made in my 30’s twenty years later, I can see how I could have protected my finances better, grown my net worth faster, and diversified my retirement portfolio more.
7 things I did in my 30’s that weren’t the best financial moves
1. Didn’t increase my 403b contributions. Luckily someone in human resources suggested I fill out paperwork to start investing for retirement when I first got my job at 22.
After that, I just kept checking my statements for years but I didn’t increase my contributions for almost a decade. I always thought increasing it “down the road” as my salary grew made sense. I didn’t know about the magic of compounding.
Money Tip #1: Now that I’m in my 50’s, I can see what a small increase in contributions each year could have done for my investments over my 30+ year career. I wouldn’t have missed $25 or $50 a paycheck at all.
Make sure you understand what compounding is to avoid the mistake I made. You’ll quickly learn why time is your “BFF” when it comes to investing!
2. Sold my starter home. The first house I bought was a small ranch with a big yard. When I moved to a bigger house, I used it as a rental for a year and sold it after that. But since I still live in the same town today, that house could have been a rental for the last 25 years.
I ended up buying other rental properties, but still regret selling my first house.
Money Tip #2: Many people who want to try real estate investing start out with single-family rentals. I obtained a mortgage at a decent rate when I bought it and the rent I was charging beat the 1% rule.
Since we live in a resort area with good schools, this house was not hard to rent. It paid for itself (and more) each month, and would have been paid off years ago.
While real estate investing isn’t for everyone, it is a way for many people to diversify their portfolios. It could be something for you to consider too.
3. Didn’t track expenses or use a budget. I’ve always had money in my bank account and paid my bills on time (including paying my credit card in full each month), so you might think I didn’t need to track expenses or use a budget.
But I also didn’t add to my emergency fund as my expenses grew or add to my investments regularly because I knew we always had to keep some extra money in the checking account “in case” something happened.
Money Tip #3: Creating a simple spreadsheet or using a tool like Tiller to keep track of where money was going and using a budget would have helped me better fill other “buckets” of money for my future.
Instead, I kept a large balance in my checking and savings accounts where it basically lost money due to inflation. And didn’t earn market gains because it wasn’t invested.
4. Bought a brand new minivan. Buying a minivan wasn’t the issue because it was a great vehicle for our family. But there was no reason we had to buy a new minivan.
We used a great local mechanic for years and he also bought/sold used cars with his business. I’m sure he could have got us a deal on a nice used van for half of what we paid (or less…)
Money Tip #4: If you think you’re someone who can walk into a car dealership and “just look” – think again. That’s exactly what I believed.
We had no intention of buying the first new van we looked at. But after driving a new car with all the “bells and whistles” – and seeing a monthly payment we could afford at a low-interest rate, we bought it. And we even got talked into the extended warranty. (I blame it on the lack of sleep during those baby years!)
5. Used a Home Equity Line of Credit (HELOC) for a kitchen remodel. The second home I bought was on a great street but it required some updating. While nothing needed to be done right away, I wanted a new kitchen. So I got one.
I also got the stress of having two young children in a house under construction and a makeshift kitchen in a small closet for over a month. And more debt.
Money Tip #5: Rather than using a sinking fund and saving up for the remodel I went to the bank. Of course, my bank gladly gave me a HELOC loan – and the payments to go with it.
While I could afford the payments, there was no reason to rush to remodel the kitchen. I paid more than I should have because of the interest payments and really got no benefit from getting it done so quickly.
6. Paid PMI when I bought another home. Not only did I buy a house that needed some remodeling, but I also bought it quickly and didn’t have a big enough down payment saved up.
While I bought it at a good price in the exact location I wanted, I also had to pay private mortgage insurance (PMI) for a couple of years.
Money Tip #6: Private mortgage insurance cost me thousands of dollars before I could have it removed. While I would have missed out on the house I bought waiting to save a bigger down payment, other houses on the same street came up for sale every year.
7. Didn’t start saving for my kids’ college in my 30’s. I always assumed my kids would be going to college but saving for it wasn’t a priority. I had 18 years before they’d leave the nest. Right?
Well as you can guess, time flew by and while I did end up saving quite a bit for them – the money wasn’t invested early enough to benefit from compounding over the years.
Money Tip #7: There are many ways to save for college. But starting to save early (even with small amounts) will help the money grow as your kids grow. Just like I could have increased my own 403b contributions each year, I could have started saving for college earlier too.
This is another example of how tracking expenses and using a budget could have helped me through the years!
While making these choices didn’t prevent me from becoming financially independent, all these decisions certainly slowed my progress and affected growing my wealth over time.
If I hadn’t been a disciplined saver and fairly frugal in other areas of my life, I could have ended up with lots of debt.
I really wished I would have learned the importance of investing early and not just saving. There are plenty of sayings about learning from your mistakes, but don’t discount learning from the mistakes of others. It’ll save you a lot of time and money. Two things we all value!