There are currently 325 million Americans. They owe more than $1 trillion on their credit cards, another $1 trillion on their students loans, and yet another $1 trillion on their car loans.
So it’s safe to say, more than a few have made some serious spending mistakes. Let’s hear from three of them.
They’re financial experts who got burned long before they became who they are today – and in some cases, their self-inflicted wounds spurred them to learn how to never be indebted again. If they could rebound, so can you…
Mistake No. 1: Paying max price for a minivan
“I spent $10,000 on a minivan that was only worth $3,000,” says Jeff Kneal, who runs CouponBahama.com.
Overpaying for a vehicle isn’t uncommon, but this was…
I took out a personal loan for $8,000 to buy what appeared to be a nice minivan for the family. Well, shortly after buying it, it needed repair after repair after repair. I ended up spending about another $2,000 in repairs over a four-month period.
It got so bad, Kneal says, “I ended up buying a cheap, $1,000 economy car, just so my wife and kids wouldn’t get stranded on the side of the road anymore. I was only able to sell the minivan for $3,000.”
Mistake No. 2: Going it alone
Before Lyn Alden founded her own investment strategy firm, she was a struggling college student loaded down with student loans. But her mistakes started after she graduated.
“Once I graduated, I didn’t refinance my high fixed-rate student loans,” she says. We have been in a decade-long period of unusually low interest rates, and my private federal loans were taken out earlier with a fixed rate, when we had higher interest rates. Not shopping around for refinance options, or ways to consolidate my high fixed-rate student debt, was a ‘big win’ that I left on the table.”
A big mistake I made was not having a roommate after I graduated college. I could have saved $500 a month on rent and utilities every year for seven years. If that money were saved and compounded at a 7-percent rate, it would be worth over $50,000 today. Besides, living alone for long periods of time is bad for mental health.
Mistake No. 3: Marrying badly
Kevin Darné is a self-styled relationship expert, having written the book, My Cat Won’t Bark! (A Relationship Epiphany) and running a website called Love Alert 911. His biggest financial mistake was also his biggest relationship mistake.
“The biggest money mistake I ever made was marrying the wrong woman!” Darné says. “Whenever you pair up a saver and a spender, more often than not, the saver will not be able to compete with the spender or get them to change their habits. They see debt as a way of life and as long as they’re able to make the minimum payments they feel all is right with the world.”
That wasn’t right for Darné. They got divorced — and then he did the same damn thing…
Even after my divorce, I turned around and gave my next girlfriend one of those “additional credit cards” for your “loved ones.” The card is a separate account in their name, but you are ultimately responsible if they don’t pay it. The original limit was for $500, but very quickly they raised her limit to $1000. Guess what happened next. Feel free to laugh at my pain!
Concludes Darné: “Marrying the wrong person or co-mingling funds with the wrong person is probably the biggest threat to one’s personal finances. Simply put you can’t control what someone does who has access to your funds.”
Next week: Part 2 of dumbest debt mistakes.
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