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I haven’t always been good with money. In fact, I have coined myself a “free-spirited nerd“. In other words, I am really good at laying out plans, but when it comes time to implement them, I tend to sabotage my efforts. I’ve learned so many financial lessons that I hope will inspire you to take charge of your own finances.
As former banker and Realtor, I have seen it all. From people who have tens of thousands of dollars in their accounts every week yet still pay overdraft fees in between paydays to folks cashing in their retirement to buy their first house. Don’t do that.
I know my job is to help people achieve the American Dream, but there are some major consequences if you don’t get it right.
Here are 5 financial lessons I’ve learned in my 30-something years of life as a financial blogger and former Banker/Realtor.
1. It’s nice to have nice things. But if you can’t afford the upkeep, you probably shouldn’t have it.
For example, if you’re looking at buying a home but you have no funds for a down payment, the logical option would be to finance with a zero-down loan program such as the USDA or VA loan, right?
Wrong. If you don’t have savings to handle the down payment, I’m gonna go out on a limb and say you probably don’t have savings for emergencies either.
Real Estate Financial Lessons to Live By: Don’t write a check you can’t cash. Renting isn’t the end of the world for everyone. It’s simply the smart choice in some cases. But don’t take my word for it. I’m just a greedy Realtor!
2. The Joneses don’t even like you.
Why keep up with them or try to continue to win their applause when, quite frankly, you probably don’t care for them either? Instead of wanting what Mr. Jones has, how about you focus on what your own family goals are?
Do you enjoy travel but never seem to have the money to do so?
Stop financing expensive cars and boats and RV’s if you really want to pay for a trip to the Maldives with the wife. SHE is the one you should be trying to impress….not Mr. Jones. Always keep it within budget!
3. Budgeting isn’t just for people living paycheck to paycheck.
A common myth is that people who have money don’t need to follow a budget. That budgeting is only for poor people or those living paycheck to paycheck. That’s simply ludicrous!
Consider these two scenarios: John earns $100,000 gross income but saves 10% of his income towards retirement and contributes $6,500 to a Roth IRA annually.
His kids’ college funds receive regular contributions and he has a fully-funded emergency fund. He lives in a modest home (his only debt owed).
Sam grosses $200,000 per year take-home and spends all of it (with no savings, no retirement, no pot to piss in), who do you think is richer?
If Sam was to budget and put away 10% (20 or 30 is better), had no debt, lived in a modest home, he could be a millionaire in no time!
4. Trading in cars when you have negative equity is inviting Murphy (aka T-R-O-U-B-L-E) to wreak havoc in your life.
Trust me. I traded 10 cars in 8 years. You read that right. This is the single biggest financial mistake that has held me back from becoming debt free in my 20’s.
I have never paid off a car and kept it. Ever. That changes with the current vehicles we own. The next car I purchase will be with cash, and it will be modest.
There will be NO negative equity to factor in. If you’re curious about how to sell a car when you owe more than it’s worth, check out this video.
Be sure to drop any questions you have in the comment box on YouTube and I’ll be happy to answer them. (Side Note: This is my biggest financial f-up to date).
5. Consider the Risk of Pausing Retirement Contributions to Pay Off Debt
Another one of the financial lessons learned in my years of working in the financial services industry (and through my own financial mishaps) is that pausing or stopping retirement contributions to pay off debt is a risky call.
Some financial “gurus” recommend putting a halt to retirement contributions while paying off debt.
Not only does this set you back for retirement, but if you struggle with paying off the debt and, instead keep adding to your debt, while not contributing to retirement, it’ll be that much harder to start contributing again.
If you’re not a naturally “good” saver, it’s hard to say goodbye to that income every month. That’s just a fact.
If you’d like to grab a copy of my debt snowball calculator spreadsheet, enter your email and I’ll send it right over. Then just enter your own numbers and you can calculate the time it’ll take to pay off your debt. In most cases, stopping retirement altogether is not advisable.
Financial lessons will continue to be learned, I’m sure. These are just the most notable things I’ve learned since working in the financial services industry. Do you have something to add to the list? Leave it in the comments below!
Life is a collection of memories and experiences. There are ups and downs. I am so grateful for God’s grace and am on the journey to a renewed spirit, free of perfectionism. Perfection Hangover offers the sober truth – no filter.