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Plan Well, Retire Well

Saving and investing your money
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Bad decisions I made with my money


Last month, I wrote about some of the things that I have bought or done with my money that I think were well worth what they cost. So it's only fair that this month, I look at the opposite: mistakes I made with my money. I suppose I should be writing about things I bought that weren't worth it, but I had a hard time coming up with that list – not because there aren't things that were a waste of money but just because they're harder for me to remember. (Is that a coping strategy? Denial? I'll leave that to the mental health experts to decide.)

Putting off comparing insurance rates

I had the same insurer for my home and auto coverage – and later, umbrella, too - for years. I knew I should check around to see whether their rates were still competitive, but it just seemed like too much work. When I did finally shop around, I saved $1000 a year. That's not a typo. I was stunned. And I felt foolish for not having compared other company's rates before. Ironically, it wasn't even their prices that finally pushed me over the edge. But my next mistake will tell that story.

Charging a credit card up to the max

My father in law passed away. My mother-in-law had the money for the funeral, but going to the bank even under normal circumstances was a big deal for her. The funeral home took credit cards, so my husband and I put it on our card. It put our balance on that card at about 90% of our credit limit. (That's called the utilization ratio.) She gave us the money the next month; no problem there. But apparently that was the month that my auto insurance checked my credit report to determine my premium when my policy renewed shortly after that. I received a notice of adverse action. That's the official notice required by law when you are denied credit, insurance, etc. based on your credit report. I could still renew my insurance, but the notice informed me that I was going to pay more for it. To put it mildly, I was ticked. It was the straw that broke the camel's back. I compared my coverage and rates with some other companies and took my business elsewhere.

90-days-same-as-cash

I think it was tires that we bought. I can't remember for sure. But I remember that we got credit through the store and had 90 days to pay with no interest. You know where this is going, since this is my list of mistakes that I made with my money. It turned out that we couldn't pay if off within the 90 days. We had to pay interest back to the first day we bought the tires. I don't remember the rate, but it was probably higher than if we'd used our regular credit card. That's when we swore we'd never use a credit card or store credit again if we couldn't pay the whole thing off within the first month so there'd be no interest.

Timing the market

I had a 401(k) in my first "real" job, and I contributed to it. That was smart. I was mainly invested in stock mutual funds, which was appropriate for my age. But I got worried that the stock market was going up too much, too fast. So I pulled my money out. It turned out, I got that right. The market crashed shortly after that, on Black Monday, October 27, 1987, losing 23% in one day. I felt vindicated: I had done the right thing. But if you're going to time the market, you have to be right more than once. I had to decide when to get back into the market. And I waited a long time, while the market made steady gains. By the time I re-invested, I had missed out on a lot of gains. Stock Market – 1, Karen – 0. I would have been better off staying the course than trying to figure out the right time to buy or sell.

Getting too caught up about getting a good deal

I still remember the day I went to the grocery store and discovered a great sale on fun size candy bars. I put one bag in the cart. Then I thought to myself, "That's a REALLY good deal!" And I put three more in the cart. When I got home and was taking them out of the grocery bag, the voice in my head had changed to, "What were you thinking!!!! It's nowhere near Halloween. They aren't even one of my favorites. But I'm sure I'll devour them anyway long before Halloween gets here."

I can still get too excited about a good deal, but I think I've gotten a little better at stopping to think about whether it's really something I need or will use. If my resistance is down and I end up coming home with it, I have no qualms returning it.

We probably all have stories like these. The challenge is to change our behavior so that we don't keep making the same mistakes over and over again.

What is a mistake that you have made with your money? What did you learn from it, and how do you try to avoid making the same mistake again?



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