Financial regrets, we all got'em. As a non-profit credit counselling agency, we've heard many stories of sorrow and success, but we also maintain strict confidentiality, so anything we hear at Credit Canada remains private. However, there is no shortage of people out there who are more than happy to share their money mistakes and post about them publicly on sites like Reddit—the sixth most visited website in the world, with the majority of its users coming from Canada, the United States, and the United Kingdom.
7 Money Mistakes made by Real People
We recently checked out a thread that asked users, "What is your biggest financial mistake?” We pulled together some of the top money mistakes that seem to be plaguing real people, just like you, to offer some solutions and show you that if you have financial regrets, you're definitely not alone.
1. Working Too Much in School
When you're a student, the world is your oyster and you think you can do and take on anything, including being a student full-time while working a part-time job (in most cases, for minimum wage), plus participate in extracurricular activities, maybe be a teacher's assistant, and of course volunteering. But working too much during your college or university years can backfire, jeopardizing your grades, which can prevent you from getting scholarships, as well as taking full advantage of learning and career opportunities. Piling too much on your plate could not only burn you out, but could also mean staying an extra year or two in school, which can easily cost you more than what you would have earned with a part-time job, plus what you could have received in scholarships. Instead, consider picking up a side gig, or just working a seasonal job during the months you're not in school. And if you are a student, you should definitely learn how to budget as a student to make the most of your efforts and money, so you can hit the ground running once you graduate and not have to deal with debt.
2. Not Saving Early Enough
When you're in your 20s, the future and retirement can seem so far away. But as we get older, not only do we realize just how quickly time flies, but it also becomes more difficult to save due to all of our financial obligations, like rent, utilities, and everything else that comes with being an adult. Unfortunately, many of us don't save as much as we could when we're younger because it's so easy to think, "What's the point? Enjoy life now while you still can, right?" But there is such a thing as a happy medium. Of course you should enjoy yourself while you’re in your 20s, but you can also practice some good money management skills, so you’re not paying off debts or playing catch up with savings later on in life. Millennials in their 30s saddled with debt should definitely look for ways to take back control of their finances and money.
3. Not Realizing How the Little Things Add Up
We all do it; spend money when we don't have to. And one area where it is so easy to do is buying lunch instead of making it ourselves. It doesn't seem like a big deal, but when you do the math, eight dollars here, ten dollars there, five days a week really, really adds up. Don't believe me? Just use our Budget Calculator and see for yourself. I get it, buying lunch or breakfast makes us feel good, at least emotionally. But when it comes to our physical health and money, it ends up costing us a lot more—not to mention the additional mental stress of not saving and spending unnecessarily, which does take a toll every time you tap your credit card when you know you shouldn't. At Credit Canada, we are obsessed with finding extra money in places you didn't think there was any, and we are constantly thinking of ways to cut back on things like fast food, to-go coffees, and other seemingly small expenses that can quickly add up. (Check out 11 Bad Spending Habits You Need to Break.)
4. Misusing Credit Cards
If you only put into practice one tip from this blog, do this one: Pay off your credit cards in full every month, on time. The interest you pay on credit cards can devastate you financially. I know it's hard sometimes to pay off the balance in full every single month, but try to get into the habit. And when you can't, pay off as much as you can and make it your goal to pay off the balance in full the next month. If you're faced with a purchasing decision where you know you won't be able to pay off the balance on your credit card by the end of the month, just don't purchase the item, if of course you can avoid it. (I get it, emergencies happen, like vet bills and dentist bills, but they shouldn't be happening every single month.) Watching how much the balance on your credit card increases every month just in interest is downright scary. Try our Debt Calculator and you'll see what I'm talking about.
Some people pay $50-$100 in interest a month for years, which ends up being thousands of dollars down the toilet, and in most cases, for things we'll forget about by the time our statements arrive. If you’re already in the never-ending interest cycle, check out the Pros and Cons of Debt Repayment Methods to help you decide which repayment strategy is right for you to help you save the most in interest costs.
5. Buying a New Car When You Don't Need It
You've worked hard, you spend a lot of time commuting in traffic, and you want to be able to show the success you've had, so you decide to get a brand new car. But just because you can afford it doesn't mean you should get it. Yes, having a new car is nice, but is it really worth the cost every single month? In most cases, the answer is no. We all like nice things; who doesn't like a new car? But at the end of the day, there is so much more you can do for yourself by cutting down the car payments. If you can, enjoy having no payments for a while! If your car or truck is still perfectly operational, squirrel that money away and don’t look into a new (or used) automobile until it’s absolutely necessary. Those payments you won’t be making can go a long way towards starting a healthy emergency fund, and/or investing some of that money into a tax-free savings account, GIC or other high-interest investment.
At the very least, consider switching to a car that will decrease your monthly payments. A friend of a friend was leasing a car that was costing him a whopping $2,400 a month! His priorities changed (girlfriend got pregnant) so he switched to a vehicle that is now only costing him $400 a month—still expensive, but better, and that's what matters. Now he's saving $2,000 monthly and still driving a pretty nice car. Bottom line: Do what you can. Saving something is better than saving nothing.
6. Overspending on a House
First of all, if you're lucky enough to be in a position where you can purchase a home, congratulations! However, there are definitely some pitfalls you should avoid when borrowing for a home, such as not shopping around for a mortgage, taking a payment holiday, not reading the fine print, and consolidating consumer loans into your mortgage. And the same rule about buying a new car applies to mortgages: Just because you can technically afford it, doesn't mean you should do it. If you’re approved for an $800K mortgage, it doesn’t mean you should borrow that much. You don't want to be house poor, where you don't have enough money for regular day-to-day expenses because all your money is going towards your monthly mortgage payments. That's no way to live, and there are other great things in life than just having a nice home, which is wonderful, but there needs to be a healthy balance, financially.
7. Not Saving Up Before Having Kids
Kids are a blessing, but they're not cheap. Just like everything else in life, you will do yourself an enormous favour by saving up for the new expenses you'll have as a parent, such as daycare, diapers, clothing, food, etc. You also have to consider the pay cut you'll incur when you go on maternity/paternity leave. One suggestion is to try living on the budget your household will have once you have children, before you actually do, just to see if it's manageable. If not, what changes can you make today that will make your future much easier? And, if you already have little ones, check out How to Be a Financial Supermom (this works for dads, too!).
Contact Credit Canada for free debt counselling and expert advice
Anyone can struggle financially from time to time, so it's important to know you’re not alone. Sometimes the best we can do is learn from our mistakes, or from other peoples' mistakes. So rather than live with regret, how about turning things around instead? You can speak with a certified Credit Counsellor for free financial advice and money management strategies. And if your debt seems overwhelming, a Credit Counsellor can also suggest debt relief options, like debt consolidation, which might work for you. The counselling session is completely free and confidential. Just give us a call at 1.800.267.2272 and we'll book you a free counselling session with an expert who will look at your particular financial situation and give you all your best options for achieving your goals.