3643: 5 Major Money Mistakes I've Made And How You Can Avoid Them by Andy Hill of Marriage Kids and Money

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[00:01:00] This is Optimal Finance Daily. Five major money mistakes I've made and how you can avoid them. By Andy Hill of marriagekidsandmoney.com Lately, I realized that I've been sharing a lot of really great things that are going on in my life.

[00:01:46] They really suck and you don't learn anything from them. Here are five major money mistakes I've made in my life. Hopefully, by sharing these money mistakes, it'll help you avoid them in the future. Number one, buying an expensive home I couldn't afford. In 2004, I bought my first home. I was so proud to be a homeowner at 22 years old. Little did I know the true cost of home ownership. And man, did I learn quickly.

[00:02:14] When I bought the home, I put only 10% down. So I had some pretty high mortgage payments for a guy only making $38,000 per year. My mortgage payment was around $1,200. When I decided that I wanted to switch careers at 23 years old, I took a pay cut of about $10,000. I did not think clearly about my mortgage payment when I made that decision. This uneducated money decision left me with a mortgage payment around 50% of my monthly income.

[00:02:44] Add in the housing costs and that was about 70% of my income. When all was said and done, I had about 30% of my tiny income to eat, watch Netflix, this was when they were sending the DVDs in the mail, and get a few beers with my friends. Number two, leasing a luxury car when I'm in debt. A few years and a few new career choices later, I landed myself at a new company making around $40,000.

[00:03:12] With my newfound wealth and a couple of extra roommates to help me pay my mortgage, I decided it would be smart to lease a luxury car. I had no business leasing a luxury car because I was in student debt and in debt with my home equity line of credit, and my income was not sufficient enough to afford it. Instead of leasing a luxury car, I could have started investing for retirement, or reduced my debt and put some money in savings so I would stop using my hellock as an emergency fund.

[00:03:41] Nah, I decided that I needed a luxury car in my mid-twenties because it made me look cool. That decision while fun set me back as I headed towards some big moments in my life. Number three, using my student loans to buy my wife's engagement ring. Soon enough, I met the woman of my dreams, my wife Nicole, and I wanted her to be my wife right away, but I had no money for the ring. Do you know why I had no money for the ring?

[00:04:09] I bought a house I couldn't afford, I decided to go back to get my MBA, and I was driving around in a luxury car. So did I decide to save up for the ring or buy a less expensive ring? Nope. I decided to drop $5,000 and I used my student loans to pay for it. Not only was I racking up tens of thousands of dollars in student loans for my MBA, but I added on another $5,000 for Nicole's ring. What a way to start the marriage.

[00:04:38] Number four, refinancing my mortgage and then moving shortly after. After we got married, the value of my home started to plummet through the Great Recession. In 2010, I owned a home valued at $140,000, but I owed $180,000 on it. Yikes. That's when I had a lovely negative net worth. When 2012 rolled around, the value had risen enough to a point where I owed less on it than it was worth. Phew.

[00:05:06] But the money mistake guy was back for more mistakes. I decided it was smart to refinance my mortgage so I could lock in a rate at 5%. Now, I had an adjustable rate mortgage at the time, and my rate had dropped down to 2.71% because the LIBER rate continued to go down. I didn't understand any of this at the time. I just felt uneasy to have an adjustable rate mortgage because it might adjust upwards someday. So I refinanced.

[00:05:35] We ended up losing out on about $13,000 through lost interest payments and refinancing fees. This was a really dumb move. Also, to make matters worse, we decided to sell the home just a year later. It made no sense for us to refinance our mortgage when we were planning to move. This was wasted money. Number five. Having blind faith in my financial advisor.

[00:06:01] Around this time, I connected with an investment broker who was going to help us with our investments and retirement plan. At this point, we were both making some pretty good money and we needed someone to help us invest it. My blind faith in this individual was a big mistake. At one point, we had saved $100,000 and we asked him where we should put it if we were considering buying a home in the next couple of years. He suggested putting it in bonds because they were a safe investment.

[00:06:27] What I didn't understand was that there was a front load fee that dropped our investment balance immediately. Additionally, the bond fund he put us in started to drop in value. Our hundred grand savings had dropped to about $95,000 in just a few months. I should have known not to put any money in the stock market or bond market if I want it back in less than five years.

[00:06:51] I hoped my advisor would advise me against such things, but it feels like the front load was more important. Painful and pricey lesson learned. Oh man, I feel like I just went through a financial therapy session. Even though these money mistakes are upsetting to relive and reshare, I learned so much from all these experiences. And these lessons have truly shaped the way I approach money now.

[00:07:15] I like to keep things simple, have patience and realize that good things come with time and education. You just listened to the post titled, Five Major Money Mistakes I've Made and How You Can Avoid Them by Andy Hill of MarriageKidsAndMoney.com. This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome? That's new.

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[00:08:35] But what I got out of this article is that everything is figureoutable. The thing about money is that it's a replenishable resource. So even if you're in a hole, it really is possible to dig out of it and learn from your mistakes. And the theme I'm seeing in many of the mistakes outlined in this article is that Andy wasn't living below his means. Spending less than you earn is the keystone habit that is going to set you up for financial success. But it's also one of the hardest habits to build.

[00:09:05] We've been conditioned since birth to want the big house, the luxury car, and the $5,000 engagement ring. It really takes a shift in perspective to push back against our consumerist culture. I was asked to talk about the money mistake I most regret. I used to answer this question by pointing out the 30 grand of debt I got into for no good reason. Half of my debt was from student loans, which doesn't seem too bad until you consider that I had a full academic scholarship.

[00:09:33] I took out loans for living expenses. It was a pretty dumb move. And the other half of my debt was from mindlessly swiping credit cards and simply not paying attention. But I actually said that I have no regrets from these money mistakes. Looking back on it, I actually think I needed to feel some financial pain to be able to appreciate the good financial habits I have now. I really like the life I've built and the mistakes I've made along the way got me to where I am. So no, I don't regret them.

[00:10:03] And that's another edition of Optimal Finance Daily in the Books. Thanks so much for your support and for listening every day, of course. Have a great rest of your weekend if you're listening in real time. And I'll be back tomorrow where your optimal life awaits.