If Only I Knew Then … Tales of Financial Hindsight

Colleen Oakley
Posted

financial regretsWhen I moved to Atlanta from New York to be with my husband six years ago, I needed a car.

I scoured Craigslist and eschewed the advice of my father: Hondas, Toyotas and Nissans last forever. Why, you ask? I had owned practical cars since I could drive. I wanted something cool. On a whim, I test drove a used Volkswagen. Blinded by its leather seats and visions of me cruising down the freeway with the sunroof down, I bought it. I didn’t have a mechanic look at it nor did I ask for the Carfax. In fact, I didn’t do anything remotely intelligent before purchasing it.

Five months later, after it broke down for the eighth time, I sold it for scrap, losing $6,000—and adding to the pile of debt that my husband and I had been accumulating like stamp collectors.

I would take that purchase back in a heartbeat. But since I can’t, maybe I can prevent someone out there from making the same colossal bad decision.

“When we realize that other people have made some of the same kind of financial mistakes that we have made—or might yet make—it helps us realize that we really aren’t alone in our financial struggles,” says Kevin Hansen, author of Secret Regrets. “That fact alone can help give us the strength to either do something now to fix the situation if it’s fixable, or help us to learn from it, so we never make that mistake ourselves.”

With that in mind, I asked three near-retirees to share the wisdom they’ve gained from looking back on their biggest financial faux pas to keep up us all from following in their footsteps.

money mistake 2My Big … Lifestyle Mistake

“I was a financial consultant for 40 years, but I didn’t practice what I preached. I know how long it takes to build up a retirement nest egg—I even had software to figure it out to the penny each year. But I never did it for myself.

“Instead, I rationalized a “high lifestyle” to my then-wife by saying that fancy cars and big houses looked good to my rich client base. So I had two Mercedes, four BMWs, a Corvette and three Porsches. Oh, and don’t forget the top-of-the-line gold Rolex. How the heck did I ignore the retirement planning advice that I gave to other people?

“Because I was an idiot.

“Now I don’t have enough money to properly retire. And I’m living on paltry savings and a $400 monthly pension, while job-hunting. If I did have a chance to do it all over, I’d live more frugally—saving big when I had a big year, and saving something every year, regardless.”

Paul, 66

An Expert Weighs In: ”This is a really good illustration of the fact that the money or the job won’t always be there,” says Sophia Bera, a CFP® with LearnVest Planning Services. “Time is your biggest resource—not money. As your lifestyle increases, you’ll have to put away even more money to keep up that lifestyle in retirement.” She points out that high earners often fall into this trap: If you’re making $300,000 annually, but only maxing out your 401(k) with $17,500 each year, that isn’t even 10% of your income—and it probably won’t come close to replacing the recommended 70% of your income in retirement. Bottom line: As you make more, you need to save more.

RELATED: Why I Would Never Buy a New Car

money mistake 1My Big … Debt Mistake

“I was deep in debt and dreading the concept of bankruptcy, so I took out a mortgage on the condo that I owned free and clear to pay off thousands of dollars of credit card debt.

“Several years down the road, I’d let my credit card balances climb way up there again—and I wound up having to declare bankruptcy after all. If I had a chance at a do-over, I’d go bankrupt earlier, instead of tapping the equity in my home. Due to my bad move, I couldn’t afford to discharge my mortgage when I filed for bankruptcy because I still needed a place to live and I didn’t have money for moving costs. As a result, I’m now paying horrific monthly mortgage payments on a $90,000 mortgage that’s worth less than $60,000.”

Cynthia, 69

An Expert Weighs In: ”Using the equity in your home to pay off higher-interest debt is usually a good move,” says Ellen Derrick, a CFP® with LearnVest Planning Services. “But that’s only if you close the accounts after you pay them off! It’s the same advice that I would give someone who wants to do a balance transfer to a 0% credit card: It only works if you don’t use the freed-up credit as an excuse to spend more.”

  • guest

    ”Using the equity in your home to pay off higher-interest debt is usually a good move”

    ARE YOU KIDDING ME HERE??? Never, ever, ever, ever, ever consolidate secured debt with unsecured debt, especially if you are in financial trouble.

    • engchik

      I used my home equity line of credit (2.2%) on my condo to pay off my credit cards (10.1%), that said, I had about $2000 debt, and now i do not use the LoC, and my CC debt is about $600. i think it can be okay, some of the time.

    • Another Guest

      I fully agree. You NEVER use secured items (house, retirement, etc) to pay off unsecured debt (credit cards). The wise thing to do, would have been to stop paying the credit cards for 6mo-1year, but continue to make the ‘payments’ to yourself (put into cash savings). Then use the savings that you accumulated by paying yourself the credit card payment amounts, to negotiate a settlement with the credit cards of 75%-50% off of the balance. You would have paid off the credit cards and still owned your home free and clear. You would have been debt free and never had to bankrupt. Added bonus, the process of settling credit cards for less than the balance is that you have to close the accounts. This then forces you to live off of cash, not credit, and therefore you would have learned how to properly budget & never have ran the cards up again… Second bonus: Settling your credit cards does hurt your credit score, but not nearly as bad as bankruptcy.

  • Maggie Hernandez

    Just to throw in my 2 cents… I hope readers don’t get the impression that VWs are “bad” cars. The one in the story may not have been properly maintained, wrecked, who knows. We just traded ours with over 200,000 miles on it! I can think of only maybe 2 repairs that were done on it, the rest was routine maintenance.

    Any car will break down if not maintained, even Hondas and Toyotas. Likewise, most (but not all) cars will run for a long time with proper maintenance. Always have a mechanic check out a used car if you’re considering a purchase. Big dealerships usually do that for you and recondition the car, but that still won’t make up for years of abuse.

  • Laura

    Go bankrupt sooner?! How about controlling your spending? Bankruptcy hurts everyone placing your burden and carelessness on the backs of those of us who work hard and deny our impulses for the sake of our future!