I've made more than my share of mistakes, and I don't just mean the obvious ones like buying stuff I couldn't afford, or eating at restaurants too often. No, I think I have made bigger financial blunders than anyone else I personally know. Here's five of my biggest ones:
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| Definitely not the five big ones I'm talking about. |
#1 Stopped Being Home Owners
In early 2007 Margaret and I were both on medical leaves from our jobs. We were essentially living off our credit cards, and it was clear we were going to run out of credit before either of us was ready to return to work.
I had never missed paying a bill before in my life (other than the odd time one had got lost in the mail pile) and so I assumed that the moment you fall behind all hell breaks loose. I suggested we sell our house because I figured that our options were sell the house and keep the equity or have the bank seize it and we loose everything.
So at the end of June in 2007 we sold our house, and immediately transitioned from living off credit, to living off the proceeds of selling our house. In 2012, when those proceeds were just a distant memory, we bought a similar house in the same neighborhood for double the price. We flushed 5 years of rent down the drain, are now paying nearly double in mortgage payments, and will be done paying off this mortgage in 2037 instead of 2027.
What We Should Have Done
We should have talked to our bank about our situation, and hopefully have been let off for a few payments. We should have applied for more credit rather than assuming we would be denied. We should have looked for help from everyone who might have helped us. I should have looked for a job that was not as stressful. (of course, this is all very easy to say 7 years later when I am not in the midst of a massive depression)
#2 Payed Off Margaret's Loans
Part of the reason we were in so much trouble in 2007 was because in 2006 we were unexpectedly contacted about Margaret's student loans. Margaret had declared bankruptcy in the 1990s, just as the law was changing to not allow student loans to be included in a bankruptcy.
Margaret never heard another whisper about her loan for more than 7 years, so she logically assumed that all was well. But then in 2006 the bank let her know that they were expecting her to cough up $20,000 immediately.
I looked into their claim, and they seemed legit to me, so I suggested we get a line of credit to cover the money they wanted.
What We Should Have Done
Got a lawyer. Even at the time I kind of suspected that was a good idea, but because the reason I had for thinking we should get a lawyer turned out to be a non sequitur, we instead just ponied up the cash. In the years since I have read a number of things that have made me think that we may well have had the law on our side if we had told them we weren't going to pay.
#3 Lived Off My Inheritance
On my 18th birthday I received $65,000 that had been left for me by my father. Just about everyone I knew back then had some opinion on what I should do with the money, and pretty much every suggestion anyone ever made was better than what I actually did.
Two weeks after I graduated high school I got into an argument with my mother and stormed out of the house. I rented a motel room for a couple of weeks, then got myself an apartment. I never got a job, until the day my inheritance ran out, instead living off it like a lazy bum.
What I Should Have Done
I think moving out from home was the right choice, but what I should have done was buy a cheap condo and then gotten a job.
#4 Cashed in my RRSPs
There was a time when I actually was really on track for saving for my retirement. But when we bought our first home we weren't really prepared for some of the expenses that came with acquiring a home. I didn't like that our credit cards were almost maxed by the time everything was said and done, and so I cashed in my RRSPs to pay down our debt. I have never had any serious retirement savings since that day.
What I Should Done
Accepted that we would have to take on some debt in the short term and kept saving for retirement.
#5 Gotten a Second Car
In the fall of 2012 Margaret had a series of interviews for a good job in north Edmonton. While that is a long ways from our home, it was very close to where I was working at the time, Fuller Austin. Then just hours after she was told she got the job, I was laid off.
In the weeks immediately following my lay off the fact that we were a one car family wasn't an issue as Margaret took the car to work while I was home. But after I got a job in Nisku starting in mid-January, we knew that we would have to get a second car.
The car we had at that time was a 2012 Civic, which we were very happy with. After a lot of debate about what we would do, we decided to get another 2012 Civic as Honda was doing an end of year sell off of them.
On December 31st we gave our deposit. On January 1st Margaret was fired.
We stressed endlessly about what to do. We had already handed over $500 that we now couldn't afford, and with me working in Nisku there was the very real possibility that we would need a second car eventually anyways. Reluctantly we went in and signed the papers and took possession of the second car on January 3rd.
During the 10 months we owned two cars, the second car saw barely 1000 km use.
What We Should Have Done
What we really should have done was never given the deposit. The moment they told us that the reduced price meant we would not be getting the low interest rate they normally give we should have said, no thanks.
But even if we assume that we gave the deposit, we probably could have gotten it back, simply by telling them Margaret had lost her job and letting them reject us.
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