Nobody’s perfect in anything in life. I really enjoy writing about personal finance and decided to blog about it. Not only does the writing provide me enjoyment, but so does helping out others that are going through hard times or are unsure of the right financial decision to make given their circumstances. While I have studied finance throughout college and post college and have worked in the financial services industry for over 10 years, I still do dumb things with my money. I admit it. Below I summarize a handful of dumb money moves I have made and some that I still make. The important part is learning from the mistakes so that you don’t make a habit of repeating them.
Spend More to Save More
I cannot say that I have officially conquered this one. It’s a hit or miss sort of thing. Sometimes I catch myself, other times I don’t. The kicker is how good advertisers are at getting you to buy into it. This past weekend I was out shopping at an outlet mall. I found some great deals at a store: I purchased a merino sweater and three dress shirts for $75. The clerk told me that if I spend $100, I’ll save 10%. He asked if I wanted to take a look around. I decided to look and as I was doing so I stopped myself. There wasn’t anything else I needed. Why spend $25 more dollars just to save $10? I walked back over and finished my purchase without adding anything new.
Now had I actually needed more things, then the spend more, save more deal would have made sense. But since I didn’t need anything else, it didn’t make sense to me. Make sure you stop and think things through before buying more to save more.
$10 for $10 Sales
This is along the same lines as the previous point. I always fall for this one. The deal isn’t that you have to buy ten things. They are $1 regardless if you buy one or ten. Yet there I am, loading up on ten boxes of brownie mix. I can’t resist! It’s a deal!! Not for brownie mix it isn’t. When the greek yogurt is 10 for $10, then buying ten makes sense since I eat that every day. But not for brownie mix.
The same logic applies to this one. Step back and think about how often you eat the item and how good of a deal it really is. If you occasionally eat the product, then only buy a few, not all ten.
Spending Future Money
I don’t do this anymore, but when I was younger I did this regularly. Here is an example of how it worked for me. I would be applying for a new job or a raise was coming up. I would go out shopping and spend more money than I had (I put it on my credit card) because I was budgeting for the increased income that was headed my way. Sometimes the increased income did come through, but other times it didn’t. As the old saying goes, “don’t count your chickens before they hatch”. Learn to live on what you have. Once you actually do get the raise or promotion, then you can revise your budget.
Spending Money to Feel Better
When I was younger and got myself into credit card debt, I did so because I was depressed. Buying shiny new things made me feel better. It took me a while, and a decent amount of credit card debt, to realize that the “high” I was receiving was only temporary. Buying new things didn’t make me happy long-term, just for the moment.
When you get the itch to buy something, take time to understand why the reason is you are feeling the way you do. If you have a good reason, then go ahead and buy it. But if you are doing it out of boredom or unhappiness, it’s time to figure out the root cause so you can save yourself time and money in the long run.
Chasing Investment Returns
When I was younger (back around 1999), by grandfather gave all of us grandchildren a gift of $2,000. I bought myself a computer and invested the rest. I chose a tech mutual fund. I chose it because for the past few years it was returning anywhere from 50-75%. I knew I had to get in. I was going to be rich within a month! Luckily for me, the stock market crash happened relatively quickly and wiped out about 60% of my money. I decided to do exactly what I shouldn’t have done, I sold out and kept my money on the sidelines. The markets rallied for some time after that. I missed it all.
When it comes to investing, look at the long-term. Don’t invest because this stock is hot today. I have since completely changed my investing approach. I now invest in index funds and don’t sell when the market drops. I focus on the long-term and do my best to tune out the “doomsday” reports that are all over the news.
Readers, what have you or do you still do that you consider to be dumb when it comes to money?