Monday, June 2, 2008

10 Miscellaneous Money Mistakes I've Made Part 1

I've made lots of mistakes in the past and I continue to make mistakes to this very day. That's hard to write. I'm very detail-oriented. I crave perfection. I'm intelligent. So, how can I keep making dumb financial mistakes? I think a lot of it comes down to fear. If things aren't going so well, I'm an ostrich. I don't want to have the tough conversations, whether with creditors or family. I don't want to have to admit that I don't have it all under control 24/7. I don't want to be the meany.

So, let's look at some of the mistakes I've made along the way. I'll do the first 5 now and follow up with the rest later.

1. I stayed tied to the parental purse strings for too long.

I was an only child and it was easy to stay too dependent on parental assistance both when I was single and during my first marriage (and then again when I was a single parent). I actually think it was at its worst while I was married. I had moved several hundred miles from home, hated the new city and its climate and spent a lot of time on the phone, talking to my folks at very expensive long distance rates (this was the late '70's and early '80's, when long distance cost $ 0.25/minute or more). We rented a new house that turned out to be practically uninsulated in a city where winter temperatures varied from freezing to -40 degrees. I think the one winter we were in that house our heating bill averaged $400/month. The phone bill was about another $250, the rent was $450 and we were making between $800 and $1,400 per month, if I recall correctly. Did I mention that my first husband liked to eat out? A lot. We ate out on average once a day! My parents were forever paying some bill or other for us.

2. I didn't start saving for retirement until I was in my mid-30's.

Two words. Compound interest. I missed out on so much compounding time. If I had started saving with my first job out of high school I would have been saving money and earning interest for about another 18 or 19 years! Now, it's true that I took 7 or 8 years off in the middle of that time when I was having kids but the money I already had in there would have continued to grow. Instead, I started late and have never caught up.

3. I bought my kids so many toys they could barely find the floor.

There were lots of collections. He Man, My Little Pony, Star Wars, Transformers, pretty much everything Fisher-Price put out for about a decade. Getting all those things made my kids happy in the moment, but left them wanting more in the long term. It was a huge financial drain and I have very little of it left now. A lot of it got ruined or lost in various moves. I never recouped the money I spent initially by selling toys the kids had outgrown. I remember once filling a big box with He Man figures and vehicles and taking them to the after school day care my kids attended. Why didn't I take them to a kid's consignment store?

4. Repaying my RRSP the money I took out to use as a down payment on my condo at the slowest rate allowed.

I definitely don't regret taking out about $7,200 from my RRSP for the down payment on my first place. But Canada Revenue Agency only requires that you repay 1/15 of the money you took out each year. So, when I had to start repaying, I set up a $10/week automated transfer from my bank account into an RRSP. I have to admit, there are times I've been glad it's only $10/week but if I'd even just doubled it I would have finished paying it back over 2 years ago and I'd be back to getting a deduction for my RRSP deposits.

5. Not keeping track of my spending for long periods of time.

I've always known how to budget. My mother kept track of all our family's spending and I remember knowing how to do it from the time I was in high school. In fact, there were times when I kept very careful records. But there were more years when I didn't and that was a huge mistake. When I don't write it down it's very easy to delude myself into believing that I spent less than I actually did. A shocking amount of money just disappears into a black hole and if I were tracking it I'd probably be inspired to do something more useful with it (like invest it)!

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