Thursday, February 09, 2006

Financial Mistakes

Jonathan from MyMoneyBlog is taking submissions for the Carnival of Money Mistakes so I thought that I would add a few of mine in there. While I am a Young Professional, I am obviously not one in the finance world.
  1. My biggest money mistake was not actually just one instance of messing up and losing a bunch of money. It is more of a screw-up for an entire period of my life with my money. Basically, the mistake is that I didn't take my finances seriously enough earlier in my life. I know it isn't the end of the world, I have a lot of time before retirement still, but I imagine what could have been if I had done things a little differently for the past 8-9 years.
    I came out of college at 21 making good money working for IBM, but now I look back and try to figure out where any of that money is and I am at a loss. I have always just put 6% into my 401(k) just to get the company match and that is basically it. I should have opened up a Vanguard account years ago and put some more money away all this time...DD told me about it many, many years ago, I just never acted on the advice. The worst part is, it isn't as though I am driving some nice sports car that I blew my money on (I drive a Civic) or was using my money to gamble early on...it is basically just gone. I am really not sure what happened to all that money that I should have been investing. I even lived at home for a year after college to save some money, but have nothing to show for it.
    This is the reason that one of my favorite pieces of advice is to start young. The more time that you have for your money to work for you, the better off you will be. I try to drill this into my siblings heads every chance that I get so that they will not make the same boneheaded mistake that I made.

  2. My next money mistake has to do with the purchase of our first home. The house that we found was a for sale by owner so there was no real estate agent to help guide us. We were pretty clueless about the whole process, but we knew that we needed an inspector and a lawyer. The inspector that we got gave it an overall thumbs up, he found a couple little issues, but nothing that would make us reconsider our purchase. Then the lawyer helped us close and everything went well. The problem happened a couple of years later when we went to sell. We initially tried to do a for sale by owner as well, but never got any serious calls in the 3-4 months that we had it on the market. When we went with an agent, we got an offer from the first person to look at it on the first day it was listed. Not bad, but I guess we should have upped the price a little (we actually already upped the price from our FSBO price to compensate for the commision the agents were making). The buyers had their inspector and lawyer look everything over and they noticed that there was nothing in the towns files that said we had a finished basement. The inspector also noticed that when the basement was finished, some of the central air ducts were not up to fire code because they ran through the garage. Now, keep in mind that we didn't finish this basement. The house was almost exactly the same as when we bought it except for some paint. Our inspector and lawyer just enver caught this stuff for some reason. So we had to have a plumber come in and fix the AC ducts and bring them all up to code and then have the town come to the house and basically get all the back-level perits to have a finished basement. This whole process ended up costing a couple thousand dollars for something that we had nothing to do with.

  3. Our third money mistake was that we sold our first house way too early and had to live in an apartment that was way over priced (because we needed a short-term lease) for about 9 months. Our new house wasn't even started being built, but our old house ended up selling to the first people that looked at it. That put us out on the street until our new house was built. This wasn't a huge mistake, but the apartment was a waste of money.

  4. Our fourth mistake was kind of a big one. After we sold our house we had a ton of cash to be used for the down payment of our new house. I should have put this money into ING Direct or some other high-yeild savings account, but I didn't. I thought that I was being good by putting it into my banks money market account...I didn't realize that account only got about 1.4% interest. So I missed out on a couple of thousand dollars just by letting it sit in there.
None of these mistakes were too huge, it isn't like I bought some highly touted internet stock with my life savings and then watched the bubble burst, but they cost us a few thousand here and there. Every little bit adds up over time.
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