The Worst Money Mistakes I’ve Made

April 26, 2018

This question was posed to me recently by a fellow financial planner. His question certainly caused me to pause and think. Over the years, I’m fairly certain that I’ve made a number of unwise money decisions, but two in particular stand out as blunders I’m not particularly proud of. Borrowing from a popular late night TV sketch, let’s take a look at some of the silliest money mistakes we’ve all done or seen and see what useful life lessons we can take from those.

Buying a timeshare

While honeymooning in Mexico, my wife and I fell for the sales pitch and bought into a long-term resort condo timeshare. For those who like to travel frequently and also have the budget to support that lifestyle, vacation time shares might be a reasonable move. At that point in our lives, however – young, early career, modest incomes – we were not the ideal candidates. We also did not pay attention to the ongoing additional fees often tied to timeshare ownership.

Furthermore, we had no idea how illiquid these “investments” are. As anyone who has ever tried to sell a timeshare to someone else can tell you, the supply greatly outstrips demand. In other words, selling your timeshare is close to impossible. If you do find a buyer, expect to sell at a very deep discount to what you likely paid for the property.

What I learned from this mistake

After many years and thousands of wasted dollars, we were eventually able to dump ours and walk away. What important financial life lessons did we learn? Ultimately, we learned never to make a major financial commitment driven primarily by emotion. We were young, on our honeymoon in a beautiful location, and all too agreeable to an opportunity to repeat that experience. Marketers, of course, are very aware of this, and we fell for it all.

Now we know it is much better to first say no and then take plenty of time (days, weeks, or even months) to think things over before committing thousands of dollars to purchase something we may or may not use or continue to enjoy as much as we originally thought. As a result, we’ve avoided the purchase of numerous boats, campers, and vacation homes over the years. These days, when we want to vacation in a fun location, plenty of economical rental choices are available through sites like or without the long-term commitment or expensive maintenance fees.

Student loans (sometimes)

Student loans can be a good investment. For a relatively modest interest rate, in today’s environment at least, you can leverage other people’s money into an education that boosts your future income significantly, making the comparatively small amount of interest you pay in the short run well worth it in the long run.  However, like any financial tool, student loan debt can also be abused or misused.

For example, at one point in my career, I decided earning my MBA might be a good move, and I applied for student loans to help finance this venture. Along the way, however, my career ambitions took a different tack, and I elected to focus instead on earning my CERTIFIED FINANCIAL PLANNER™ designation and subsequently, a master’s degree in personal financial planning (a decision I have never regretted). Although I had abandoned my MBA pursuits at the time, the student loan debt used to finance that pursuit remained and still had to be paid. Fortunately, I had not borrowed a large sum for this and we paid it off fairly quickly.

What I learned from this mistake

The financial lesson here is to carefully consider the commitment of time, effort, money, and ongoing personal motivation needed to make a particular career choice work. If a substantial amount of student loan debt will be necessary to obtain a degree, we need to be prepared to remain committed to that career choice, at least until we repay the student loan debt. Otherwise, we will very likely be stuck with paying for a decision error over many, many years with zero return on our investment. Another consideration is whether or not the degree we are pursuing really has the future income potential to justify taking on large amounts of debt to finance it.

To err is human

As financial planners, we have the benefit of working with many people from a variety of backgrounds and circumstances. This not only gives us a front row seat to many of the money errors and financial regrets our clients have endured, but it also enables us to share the related financial lessons with others. In no particular order, here are a few of the more common silly money mistakes that can provide helpful lessons for us all:

  • Carrying long-term credit card debt – The insidious evil of carrying credit debt month after month is the reverse compounding effect. Just as positive compounding helps us become wealthy by earning interest on interest, the reverse is true of debt. The negative compounding begins to make our credit purchases exponentially more expensive over time. Transferring balances to a 0% balance transfer card or otherwise refinancing to a lower interest rate is a good start to reducing our debt risk. The quickest way to get out of debt, however, is to employ the DebtBlaster approach we recommend at Financial Finesse and pay off the highest interest debts first, gradually rolling up those monthly payments until the last credit card in the list is receiving a monthly payment equal to the combined payments you were making on all of your cards.
  • Lending money to family – Money decisions driven by emotion rarely turn out well, and what gets more emotional than a plea for money from a family member? If you do lend money to family, most planners recommend formalizing the loan with a written agreement that includes at least a modest amount of interest. Practically, however, treat it the same way you would treat giving money as a gift. Make sure your family loan won’t negatively impact your own cash flow if your family member borrower cannot or does not pay you back. These arrangements work best if you don’t expect to receive the money back in the first place.
  • Borrowing from your retirement plan – On the surface, borrowing from your traditional 401(k) or 403(b) savings plan at work might seem harmless, but it has some obvious and not-so-obvious risks. On the positive side, you are borrowing your own money and paying yourself back with interest. Furthermore, doing this will not affect your credit score one way or the other. However, you will be paying your retirement plan loan interest with after-tax dollars. The not-so-obvious downside to this strategy is that these same after-tax dollars you used to pay the interest will be taxed again when you eventually spend this money in retirement.

Financial planners are just as human as anyone else, and in many instances, we were not always professional financial planners our entire careers. We’ve made many of the same money mistakes our clients sometimes experience. Consequently, we understand and have compassion for the frustration and disappointment that comes from looking back on a financial mistake and wondering how on earth we could have been so foolish. Although our individual “silly money mistakes” may have been expensive, they do not need to be permanent, and we can always learn from them.