7 dumbest things I’ve said about personal finance

51 thoughts on “7 dumbest things I’ve said about personal finance”

  1. It was middle of 2008.
    We just lost nearly 40% of a sizeable exercised stock option bonus in the crash

    “Let’s pull the remainder out of the market and put it into cash”, Mr and Mrs PIE said.

    As if this wasn’t bad enough, our financial advisor at the time agreed with us.

    Dumb and dumber.

    1. Wow, that’s quite the predicament! I’m surprised your financial advisor agreed – maybe it looked better to his bottom line if your money was out of the market? I can’t rationally think of any other reason why! Thanks for commenting, and excellent addition. 🙂

  2. Don’t feel bad, everyone is guilty of at least 5-6 of those and probably many more you did not mention. It’s a part of developing your financial maturity I think. Luckily, you learned your lessons and they did not set you too far back.

    The issue for me/us has always been when we “need” something for the kids. We rarely did actually need the particular item, but “everyone” had it. That’s a tough one to break because you feel like you’re sacrificing for your kids so you are being a good guy, but in reality cash is cash, so it hurts you just the same.

    1. Yup, the difference between “want” and “need” is always one of those sticking points. I definitely felt that issue too, and usually my wants became needs. 😉

  3. That’s a great list – sharing it with my 17-year-old boy who is just starting to get into reading and learning about personal finance. Here’s one related to PF- “My kids deserve the best!” Well….nope, they don’t. They deserve the things they need. Then we make plans to get the occasional “wants” and enlist them in figuring out a way to get them. The pressure on parents to “do all” for kids is crazy – and happy I learned that early. But those words did come out of my mouth when they were little…

    1. Thanks Vicki. Yeah, I’ve always thought it strange that people think that they, or their kids, somehow “deserve” the best. My view is we don’t really deserve anything beyond what is required to live. Aside from that, we can make the choice to obtain more stuff, but that’s far from an issue of “deserving” them. It’s choices.

  4. We’ve all said or thought some pretty silly things about personal finance, but the key is you lived and learned. Now you are sharp as a tack when it comes to personal finance! Enjoy the vacation!

    1. Thanks Green Swan. Yeah, it is fun to look back at the mistakes that we’ve made *after we’ve corrected them*. Of course, in 20 years I’ll probably look back to today and come up with another list of stupid stuff that I used to believe. Hmm….

  5. Great list of dumb things. I particularly like (don’t like?) the first, “I need to buy a house to build equity.” Too many approach homeownership with the wrong ideas about how it fits into their financial planning and well-being.

    1. Thanks James! It’s true, that “equity” business cons a lot of us into buying homes under the pretense that it’s “an investment”. They certainly CAN BE, but you gotta work at it, and work hard. It definitely isn’t automatic.

  6. Ha, have done most of these myself.

    We bought our car when we did to take advantage of .9% financing a few years back – not a fancy car but that still got us in the door!

    1. Wow, 0.9% financing ain’t bad either! Still, the depreciation is what hits us the hardest when we buy our cars new. Exciting and fun, but wholly unnecessary!

  7. Haha, good post. Don’t get me started on mine: car habits, “buying the biggest house you can afford”, “timing the market” etc.
    And it’s good to fess up to the past mistakes. But it’s still amazing that with a few mistakes in the past we are all still doing well. There is a difference between a mistake here and there and the outright irresponsible lifestyle of many American who celebrate these 7 dumb habits. Glad you turned the rudder around and best of luck!

    1. Yes, the “buying the biggest house” thing…I’ve heard that too. I didn’t take that particular advice, but I still lost so much money in home ownership. So much money…..!

      Thanks for the words of encouragement!

  8. Thanks for sharing! I think we often get more value out of learning from people’s mistakes than emulating their successes. This is especially true here, where none of these are uncommon mistakes. In fact, the average person on the street would probably consider each of these a good financial decision!

    1. Ha! Sadly, I think you’re right, Matt. Especially the homeownership one. It’s true that you *can* build equity in homes, but it definitely doesn’t always happen. 🙂

  9. The dumbest thing I’ve probably said is “my base salary is only X but I’ll be getting an annual bonus of Y to make up for it”

    Don’t get fooled into this one. Bonuses are the first thing to go when things get tougher for your boss (and they will). When that happens you’ll end up less than satisfied with the base that is left.

    1. Yeah, bonuses are a big trap. When you consider your yearly bonus as part of your salary, then you’re just asking for trouble. Like you said, what happens when you don’t get one?

  10. Great list! I’m guilty of the majority of them as well. One I used to buy into was “We’ll always have a car payment” (so why not get the new car for just a few more dollars a month), as if car payments are a fact of life.

    1. I used the same rationalization with homeownership, Amanda. If I’m paying a monthly “rent”, I might as well OWN the place that I’m paying for rather than…flushing money down the drain. Ugh!

  11. My best humdinger was thinking that student loans and mortgages were “good debt.” It was all good until it was time to pay up, right?
    Thanks for sharing–it’s a great way to see how far you’ve come. Congrats!

    1. Ooo, good one! Yeah, I’ve heard the “good debt” thing too. I understand the rationale behind it, but if you have any interest in retiring super early, student loans can definitely be a negative influence.

  12. Nice list! One of mine was “Cashing out this 401k isn’t a big deal, I’ll be able to build it back to this same point in no time, when I get a job out of grad school.”

    I had just started grad school and didn’t even have an internship lined up yet – I was just gambling that it could get replaced at some point. Mrs. SSC estimated it would have covered a year’s worth of FIRE costs by the time we could tap into it. Sigh….

    Same with credit card debt, “I can pay this down in no time when I get a job out of grad school…”

    Like others pointed out, it’s amazing the dumb mistakes we’ve made and yet, here we still on the verge of ER/FI and all the freedoms that come with it. Some sooner than others of course. 🙂

    1. Whoa, that’s a doozy! A friend of mine stopped contributing to his 401k because he has so many bills to pay. Then again, he’ll probably never retire.

      Thanks for the comment, as always!

  13. Great list. Two of the dumbest things I’ve heard is using 0% interest credit card to pay off your credit card debt and taking a pay day loan to pay off your debt. Just dumb ideas.

  14. Solid list, Steve. I was such a suave, swashbuckling investor that I called my work retirement plan administrator and put ALL of my blossoming 401k ( 1999-2000 ) into a”Tech” fund….cause I couldn’t lose. At least I first solid off my “boring”, well diversified portfolio to do so. Nice going ! :/

  15. I know some broke parents who push their young adult children into getting credit cards because they will “never be able to get a house if they don’t start building their credit now”. After debating the point for half a minute I stop because they’re not capable of being open minded.

    1. Ha! Yeah, I’ve heard that same line, too. Granted, having credit can be a good thing, but who’s to say that you need to OWN a house in the first place? 🙂

      Thanks for your comment!

  16. I paid off my car and decided I was never going to have a car payment again. Result I spent $3000 year in maintenance. Car broke down multiple times with young family leaving them stranded. Dumb mistake. Should have just leased. So got a leased VW for $260/mth with no money down. Very reliable and keeps my family safe. Will never pretend I should own a car again. I’m not a mechanic.

    1. Ha! More power to you, Omar. It’s true…if you have no intention of doing your own work, maybe ownership isn’t in your best interest. Good on you for recognizing what truly works for you.

  17. Haha, I’ll say that you’re human man! 🙂
    These are the types of errors that we look back on & kick ourselves although seem fine at the time :O..

    I’d say for me it would have to be cockiness that I knew more about the market than what I actually did, not really a specific example

    1. I had a wee bit of cockiness too…not over the stock market, but over my salary and the kinds of things that I saw people buying, assuming that they made less than me and shouldn’t be able to afford it. 🙂

    1. Ah yes, the “there’s always time to do the right thing…later!” excuse. Yup, I’ve said something very similar. Too young to think about retirement? I promise that you won’t be saying that once you hit your mid 30s. 🙂

  18. My investments regrets (like most of my regrets) are inextricably tied to my simultaneous misunderstanding of the benefits of time as well as its fleetingness.

      1. Its twofold:

        (1) When you’re younger, you don’t realize how time can appreciate consistent yet small investments into a healthy sum;

        (2) When you’re older, and you have less time, you regret #1;

  19. My father-in-law recommended his Ameriprise Advisor who was practically incontinent at that point. So we went to his younger partner who suggested I start with a SEP (I am an independent contractor) but he included it an annuity. That’s a criminal mentality, equivalent to a thief who instead of backing up a moving truck into your driveway and taking all your stuff at one time, breaks into your home every year for the remainder of your life in order to steal just enough so don’t notice anything is missing. Every day I check to see if there is any money I pull out out without surrender charges. I am 50% out.

    I would never use an advisor again but I was happy to see the fiduciary requirement passed.

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