After reading several posts from the M-Network Group about their best and worst financial decisions, I decided to think about and post my own.
I'll start with my family's worst financial decisions because it should be easier for me to think of these!
Our Worst Financial Decisions
Buying An Expensive SUV - This was one of our worst financial decisions. My husband had been with a company that provided him with a company car for twelve years. Every two years he got a newer model SUV and it was paid for by his company. When he decided to change jobs, we knew we would need to purchase another car. We agreed to buy a used car. My husband wanted to get something modest like a Nissan Altima. I pushed for him to get an SUV. His new job was not a downgrade and I didn't want him to downgrade in vehicle. Looking back now, I think I was worried about what other's would think. I didn't want anyone to get the impression that we weren't doing well. (Talk about trying to keep up with the Joneses!)
Paying For The SUV With A HELOQ - To make the decision to buy an expensive SUV even worse, we decided to take out a Home Equity Loan to pay for it. My husband gets the credit for this bad decision. I was uncomfortable using our home as collateral for a loan to pay for our car. My husband insisted this was a good decision because the interest rate on the HELOQ was lower than the interest rate for a car loan. I gave in - and we are still paying for that HELOQ (even though we got rid of the SUV two years ago!) - and the balance on the HELOQ has actually gone up instead of down! (due to a combination of only paying the minimum and actually adding charges to the loan!). Not only was it a really really bad idea to risk our home as collateral for a car, this was also a terrible plan for us because of our lack of financial discipline. If we had taken out a regular car loan, we would have been forced to pay a large amount each month and have the loan paid off in 4 or 5 years. Instead, by using a HELOQ we were able to only pay a small minimum monthly payment (which is what we did) and we could take up to 20 years to pay it off! (Which it probably would have if we hadn't found Dave Ramsey and begun our journey to Debt Freedom!)
Not Saving Money When We Had A Lot Of Disposable Income - After we got married, my husband and I made a good decision and purchased an inexpensive two family home. We fixed it up, rented out the second floor, and lived very inexpensively on the first floor (our rental income paid for 75% of our very low mortgage). During the first five years of our marriage we didn't have children and we both worked and earned good salaries. During this time we had the opportunity to save a lot of money. Instead we managed to spend everything we made, and then some. We somehow managed to rack up about $10,000 of credit card debt! The saddest part about it is that we really have nothing to show for all this spending. We took a couple of average vacations and bought a little furniture - certainly not enough to account for thousands of dollars of lost disposable income!
Not Being Able To Keep Our First Home As Rental Property - We lived in our inexpensive two family home for a total of nine years. In 2000, with two young children, we decided to purchase a larger single family home. We should have had plenty of money for a down payment on a new home and still be able to keep our two family as rental property, but because of our poor financial management, we needed to use the money from the sale of the two family as the down payment for our new home. It still bothers me today that we could be making some nice rental income each month had we only paid attention to our finances earlier!
Taking Out A 401K Loan - When I was pregnant with our first child, we made the decision that I would quit my job and be a stay-at-home Mom. At that time, we had $10,000 in credit card debt and felt that we needed to pay off this loan in order to be able to afford for me to stay home. So we took out a 401K loan to pay off the credit cards. Looking back I'm not sure why we thought it was better to pay monthly to our 401K loan than to pay monthly to our credit cards. It felt like we paid off our credit cards, but in fact we just transferred our debt from one thing to another. Then, just like I always read about, we went ahead and racked up another $10,000 in credit card debt. On top of this, we lost out on the interest that our 401K investments would have made during the time it took us to pay it back. If you're thinking about a 401K loan - reconsider now!!
Well, I'm sure we have made other financial mistakes but those are the ones that come to mind first.
Now to think of some of our best financial decisions . . .
Our Best Financial Decisions
Buying An Inexpensive Two Family Home - I know I mentioned above how we could have done better with this decision, but this was a good financial decision. Instead of paying rent, we were paying into the equity of a home. This was good. Also, we avoided the mistake of buying an expensive home (like a lot of our friends did) that required two incomes to pay for it. We were smart enough to purchase something that we could afford on one salary so that when the time came I was able to quit my job to be a stay-at-home Mom.
Contributing To Our 401K Consistently & Early On - Again, I know I mentioned above that we made the mistake of borrowing from our 401K, but we could have done worse. As soon as we were able, we contributed the maximum into our 401K's, and continued to contribute consistently. (Until this year when we temporarily stopped contributions so as to pay off all our debts as soon as possible.)
Realizing That Small Amounts Of $ Can Make A Big Difference - In the past I didn't think that small amounts of money could hurt us or help us. I avoided trying to earn extra money because I didn't think it would make any real difference in our finances. I also didn't view small expenses as anything to worry about. I now realize that small amounts of money can make a big difference in our finances. Every small purchase I avoid helps our bottom line. And every small amount I earn also helps our bottom line. This realization has greatly improved our finances, and will continue to improve our finances for our lifetime! I now think about (and budget for) every small purchase, and I no longer see it as a waste of time earning small amounts (for example, working at the Church earns me $28 each week. In the past I would have found this too small to make a difference. I now see it as more than paying for my daughter's weekly piano lesson!).
That's all I can think of for now. I'd love to hear about other's best and worst financial decisions either in comments or in your own blog! :)