You're not the only one making money mistakes. People make money mistakes all the time — a sneak peek at ours — so lighten up about them!
Money mistakes are not the enemy. Financial problems come and go, and you're always learning for how to manage your money better in the future.
And yes – this is coming out of the mouth of a recovering perfectionist who used to fear making mistakes. I'm talking sweat-provoking, sleep-depriving, visceral fear at the thought of it.
It's not that I think I'm better than anyone else; it's because I cannot stand the idea of being the cause for either:
a): someone else's discomfort or inconvenience
b): a huge money disaster in my life that causes me to live on my mother's couch
Does any of this ring true for you?
Without Making Mistakes, Your Opportunity to Grow is Much Less
There are two problems with fearing mistakes:
- The tremendous amount of self-made pressure
- Developing a fear of trying new things (because *gasp* what if you make mistakes?)
From personal experience I can tell you that being an audience member in a self-created fear factor show is no fun. Not only that, but it can stunt your growth big time. This means you're not finding solutions that work for you, and are getting caught up in the muck that doesn't. It's a never-ending loop!
So how do you free yourself from the loop effect? By making some mistakes and learning from them.
Common Money Mistakes
There are lots of money mistakes out there, and I'm going to share with you some of the more common ones.
Common, yes, but they can definitely cause financial stress in your life.
- Overwithdrawing on your checking account.
- Missing the mortgage payment.
- Forgetting to pay a bill on time.
- Spending money on a cheaper product and then having to buy it over and over because it wears out much faster than if you had purchased a more expensive product to begin with.
- Spending too much money on Christmas and the holidays, and having to deal with a January (and February) money hangover.
- Not setting up automatic withdrawal of your paycheck into your savings account each month.
- Buying savings bonds and then losing them over the years.
- Getting a late fee on library books or anything else.
- Filing your taxes late.
- Getting locked into a car payment or lease payment for the rest of your life.
We've looked at some common ones…now let's go into the biggest money mistakes you can make.
Biggest Money Mistakes
What are the worst money mistakes or the biggest money mistakes you can make?
First off, a disclaimer here (actually, two):
- This is my opinion (granted, I have years of experience working with people on these sorts of problems).
- You can come back from any financial mistake, no matter how big it is. So don't get disheartened!
Now that I have that out there, I'd like to list out the biggest money mistakes a person can make:
- Buying too much of a house — in both size, so that the maintenance costs are really high, and taking on too much of a mortgage (so that you are living house poor).
- Not creating a will.
- Not having health insurance.
- Not having life insurance.
- Not starting your retirement savings.
- Not starting your retirement savings early enough.
- Relying on social security benefits alone to retire on.
- Not confronting your money problems.
- Hiding your bills in a shoe box and hoping they'll go away.
- Saving for your child's college education instead of saving towards your retirement.
- Not sharing finances with your partner.
- Not caring about finances because your partner is “handling” them.
- Not submitting your taxes. At all.
Our Personal Money Mistakes (Oopsies)
It's generally not mistakes that hold us back, but the fear of mistakes that holds us back. This plays out big time in finances, because let's face it, financial mistakes can be, well, costly.
And guess what? I am certainly not immune to making financial mistakes, nor am I immune to having financial problems (yes, even though I'm a personal finance blogger! Actually, it's great blog fodder).
Money Oopsies #1: IRS Letter Saying We Erred on our Taxes and Owe $2,315
About a month ago, on a Friday (way to ruin the weekend…) we received a letter in the mail from the IRS. Gulp. And it said we owe them $2,315 from our 2012 tax return. Double gulp.
And guess who does our taxes each year? Me.
After I called our investment people, we figured out that I had made a sale of a stock in 2012 without reporting it. Since I had never done this before, I thought that I would not owe taxes on the gains from this until we actually withdrew the money (which we have yet to do). Wrong.
The IRS had gotten a form saying what the gains were, but because I had not reported what the cost basis was (what it cost us to buy the funds in the first place), they thought we had gained a whole lot more than we did.
We fixed this error by providing the correct forms and an explanation to the IRS. The new estimated amount we owe is just $65. Whew. And since I'll probably be investing for the rest of my life, I now understand much more about tax rules on gains.
Financial problem averted by confronting the money mistake I had made. Whew!
Money Oopsies #2: Shutting Down a Checking Account with Automatic Deposit Missed
Several years ago when I was moving from Florida to Texas, I shut down my checking account. Unfortunately, I had completely forgotten that an automatic bill pay was still active on the account. So I was dinged with a $39 fee. You can bet I haven't ever done that again! Plus I honed my skills on asking for fee-forgiveness when a mistake is made.
Money Oopsies #3: Missing a Payment when We Changed Money Guards
Remember when Paul and I switched places to heal the money friction in our marriage? The experiment went well, but there was a missed bill payment during the changing of the money guards (not the mortgage). Paul caught the mistake several days later, and we were not assessed a late fee. If we had feared money mistakes and not changed the guards, we would still be on separate pages when it comes to finances. Imagine all the gained ground that would never have happened.
Fortunately, this one didn't cause a financial problem at all.
Overcoming the Fear of Making Money Mistakes
I'm here to tell you that no matter what money mistakes you make, you will prevail. Things will get better. Need some more reassurances? Check out any of the episodes on Gail Vaz-Oxlade's show ‘Til Debt Do Us Part, or dig into Suze Orman's tragic story of collecting $50,000 to invest at around the age of 30 from her loyal diner customers…only to lose it all because she blindly handed it over to an investor (*spoiler alert* this was the catalyst to her becoming what she is today).
So how can you feel comfortable moving forward with your financial decision-making and test the waters out without suffering from huge financial catastrophes? Here's a few tips:
- Test the Waters: Investing for the first time? Don't mortgage the farm (or anything even close to that). If you start out with small denominations of money with whatever you are doing, chances are good that the risk will be less. Yes, the gains may be less as well, but you're testing the waters so that you can make a few mistakes, learn from them, and implement changes for larger future gains.
- Educate Yourself: Read articles, books, and do lots of research on what you want to do. Not only will this put you ahead of the curve, but it will also give you a bit more confidence in what you are trying to accomplish.
- Ask Questions: Ask anyone from my previous job about me and they might say, “oh yeah, that girl who asked all those questions“. It's true, I ask questions constantly. And you know what? I learn quite quickly this way. Find people who are knowledgeable about what you want to do or who are where you want to be, and ask them questions.
Money mistakes do not have to define you, even though they might feel like they do while you are living them. I've made more mistakes than I care to count. I gave myself some reflection time, made my apologies, and the world did not end. In fact, since I took the time to learn from them, I actually gained even more confidence as well as figured a few things out the second time around. I would not be where I am today without having made these mistakes.
What are some of your money mistakes made, and did you learn something from it? Are you holding back from a money decision because you're too afraid of the potential costly mistakes?