Let’s face it, we’re bound to make financial mistakes, however, we can grow, learn and fix these.
Below are 7 financial mistakes that I have made and how I fixed them.
1. Spending outside of my means
I’ve had a total of two credit cards. I had originally taken a credit card out for $20,000. I now ask myself why or how I would need a $20,000 a credit card? I did end up lowering it down to $7,000. It wasn’t until I had moved out of home and had started spending so much more money than I had ever originally planned too. My credit card bill was getting higher each month and I didn’t know what to do.
I decided to refinance. This had helped a lot, however, after refinancing I got another credit card for $5,000 because there was 0% PA on balance transfers. Again, what was I going to use that for? I had totally convinced myself that I could afford to pay it all back to the bank.
I didn’t give up my first credit card at the time and was still spending a lot of money on it and ended up becoming frustrated with myself for doing so.
I refinanced for a second time. I cut up my first credit card and said goodbye to it. It felt damn good too. The only problem was that I still had my second card and ended up using that one instead. Another major mistake.
I wasn’t even budgeting correctly. My money was going left, right and center. I really did convince myself that I was able to pay it all off. How could I have paid it all off if I wasn’t budgeting correctly and if I didn’t have enough money to last me until the next payday?
I’ve since changed the way I look at money and where it goes. I’ve also learned why it is super important to track what I am spending and sticking to a set budget.
Related article: Why You Should Track What You’re Spending
2. Using Buy Now Pay Later
Using the buy now pay later feature isn’t a bad thing, however, it can get out of hand if you constantly use it. There is a website in Australia called Afterpay. Afterpay allows you to buy now and pay for your items in four installments.
A lot of my online favourite shops have the Afterpay feature, so you could imagine how many customers are actually using this option.
I am definitely guilty as charged.
If I saw a cute outfit I liked, I would just put it on Afterpay. Sometimes the item would cost $200 and at the time I thought it was no biggie, cause I could pay $50 each fortnight. The more I put it on Afterpay the more I owed.
My mindset was that I could afford to pay it all back. I didn’t take into account that I still had to pay for food, bills, and any other additional expenses (excluding rent and loans, as I had always put that money aside each payday). I really only thought that I had the funds to pay for it.
I wasn’t looking at the bigger picture. I didn’t have my priorities set out properly. A lot of my money was going towards using the Buy Now Pay Later feature and it took me a while to realize this and why it wasn’t necessary to have the latest clothes.
3. Using my credit card
As mentioned above I had taken out two credit cards. Having a credit card isn’t a bad thing. It becomes a bad thing when you use it to buy things that you couldn’t normally afford to buy or just because you want that item.
I bought a lot of items on my credit card with the mindset of, “Oh, I’ll just put it on my credit card and pay for it later”.
That was a mistake. I ended up owing over $4,000+ on one card alone.
You can read about how I want to pay off my credit card here.
One of my number one tips is to start by paying off the smallest amounts on your card each week and work your way up towards the larger amounts that are owing.
4. Upgrading to the latest phone
Alright, so this is kind of embarrassing writing this and explaining how and where exactly my head was when it came to having the latest iPhone.
I had always wanted to make sure that I had the latest iPhone. I went through a never-ending cycle of upgrading my phone less than 12 months into my contract.
I would sell my old phone and use the extra money to pay off the rest of my contract and upgrade to the new phone.
One time I had upgraded from an iPhone 6 to 6s and then to the 6s Plus in about 18 months. My phone bill ended up being over $120 each month. I decided to sell my 6s Plus and downgrade to the iPhone 5s, which I used the buy now pay after feature. I realized that 16gb of storage wasn’t enough, so again I sold the phone and took out a SECOND contract for a 64gb iPhone 5s.
This totaled my phone bill up to $140 each month. Yes, I could make two payments of $70 each fortnight. What was I thinking?
By this point, it was becoming a joke.
Eventually, I sold my iPhone 5s and paid off the second plan with the leftover money I had. Then I purchased iPhone 7 outright on my credit card – A BIG MISTAKE. Sure, I had a $5,000 credit card at the time so I thought I could pay for it all. No, I couldn’t.
Then I sold my iPhone 7 and paid out my contract (which in fact was the original iPhone 6s Plus plan).
I still have an iPhone 7 which is currently on lease for $85 per month. NO MORE NEW PHONES FOR ME. I definitely do not need to upgrade to a new phone each time a new one gets released.
My plan is to keep this phone for the next two years and once the lease is over I can still keep it and only pay around $40-50 each month.
This is definitely a lesson learned.
5. Not comparing loans
I have been with one bank ever since I was a little kid. I have used the same back to take out loans and credit cards.
One thing I didn’t do was shop around for a cheaper interest rate when it came to applying for a car loan. I decided to fill in an online application with my bank and go from there.
The interest rate was around 12% for a 7 year unsecured loan. I thought by taking out a 7 year loan, my repayments would be cheaper and I wouldn’t have to stress out so much. The specialist at the bank had recommended that I go on a 5 year secured loan with an interest rate of 8.49% and I did end up going with that rate.
Eventually, I started to compare and look at other banks and see what their interest rates were like. Looking back I wish I had compared loans before applying for a new car loan.
6. Not comparing car insurance companies
When I had purchased my first car I had picked a popular insurance company because I thought they were reliable and trustworthy.
They are definitely reliable and trustworthy, however, being under the age of 25 car insurance can get quite dear.
Originally I was paying $140 for an old 2005 Honda Jazz. I knew there was a cheaper option out there somewhere.
I had found another reputable car insurance company and had started paying only $50 each month for my old Honda.
I purchased a brand new car a few years later and still use the same car insurance company. I only pay $70 each month. Savings = $70 per month.
I wish I had looked and compared car insurance companies before diving into the first one.
7. Not comparing food prices
A few weeks ago I was buying dinner items and I had to buy some pasta sauce. I had checked in the cold section and noticed that cold pasta sauce was $7 for a small tub.
I thought $7 was a complete ripoff.
I had checked the other pasta sauces that were not in the cold section and saved myself $5. Score!
Previously, without even thinking I would rarely compare food prices and it would really break my bank account.
Now I usually check out the weekly catalogue between two supermarkets and compare prices. This helps to check when you want to buy fresh fruit and vegetables.
It really does help to check and compare prices at supermarkets. You could save yourself a few extra dollars or even a few hundred.
What are some financial mistakes that you have made? What did you do/how are you working towards fixing them?
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