Finance and Money - Dumb decisions I made

Look, I'm not a financial advisor. I'm not extremely rich. However, I know some things when it comes to finance and how the economic world works. When it comes to money I have self-educated myself, and still do, and have put into pratice everything that I talk about. 

It would've been great if my family tought me some of these things when I was younger. Unfortunately, my mom and dad didn't know anything in terms of financial education / financial independence. All I got from them, in terms of financial education, was "get a job that pays well". That's it.

So, as the title says, here are some financial mistakes I did during the years. Granted, I learned from each experience, but looking back, it would've been better had I chosen differently.

The first thing I consider a mistake is "buying" a new car when I was almost 23. To give you the full picture, I didn't have ANY money saved for buying a car - nothing for a down-payment. I had to acquire two loans from two different banks in order to get the car. 

First loan was for a down-payment (about 10% of the car's price) and the second loan was for the remaining cost of the car. For this second loan, in order to keep my monthly payments low, I chose an 84 months payment schedule. 

Needless to say, the bank was happy to help me out; I ended up paying almost double the amount I took for this second loan. Back then I didn't understand how interest works. I figured that if the monthly payments are manageable, it's a good deal. Well, it wasn't. 

It was an impulsive buy. I really really wanted to have a car. I enjoyed driving and it is by far the preffered way of transportation in my neck of the woods (because public transportation is pretty much sh*t, although there is visible progress in the past couple of years).

So, what could I have done differently? Well, instead of "buying" a new car, with two bank loans, I could have taken a single, smaller, loan and bought a used car. At that time I did consider this option but, since I never felt particularly lucky, I discarded it. 

Also, in 2010-2011, there weren't any apps/sites that you could use to see if the car is "legit" or not. In eastern europe (a.k.a my neck of the woods 😀) there was somewhat of an unwritten rule that pretty much all second hand vehicules had hidden faults. The most common one was clocking/messing with the odometer of the car. Other issues were from crashes that were fixed poorly/on a budget.

So, I didn't want to risk it. However, I'm pretty sure that with some extra research and talks with some people, I would've been able to find a decent used car.  

Some of you might think - "You were 22 - wouldn't it have been better if you didn't buy a car at all and invested your money instead?"

True, that's usually the smartest thing to do, but there is a line that everyone should consider. How much time are you willing to trade? Because, ultimately, that's what it comes down to. You put your money into, for example, the stock market for a number of years with the hope that the returns will be maximal. But time flies ... you'll never be this young ever again. Now don't get me wrong, I do think that investing is a great idea and I'll do a separate series of posts about it.

Anyway, without being too philosophical, the point is that you can usually find an acceptable compromise, regardless of what you want. 

The second mistake I did was getting into credit card debt. We had these buy now pay later cards where you could spend with "as little as 2% per month interest" on whatever you bought ... well, that was the way it was advertised. 

The point is that the EAR (effective annual interest rate) was 24%. Needless to say I maxed out pretty fast because I was feeling that I could do some much needed "upgrades" - buy a new TV, buy a new bed etc.

I remember I was paying every month the minimum ammount for this credit card debt and once every three or four months, whenever I had some cash on the card I was taking it out because always something unexpected happened. 

And that's an important thing to consider. Sh*t happens. 

It happens a lot, when you think about it 😢. Also, it usually implies money in order to fix it. 

However, knowing and accepting this, you should start preparing for it. That's why so many people talk about an emergency fund. This is money to "save your skin" when unexpected things happen (car breaks down, computer doesn't start, a pipe starts leaking etc.)    

Anyway, I was so angry and I didn't see a way out of this cycle. It was like everything I made was vanishing almost in an instant and I had sooo much month left at the end of my paycheck.

So, what would've been the smart thing to do? Easy - I should've never accepted that damned card. The banks actually count on the fact that you WILL MAX OUT the card. And most of us do. 

I remember I switched jobs and one year I had a great bonus. Initially I thought about buying some stuff, but, my girlfriend at the time - now, my wife 😊- had a better idea. Get rid of the damned thing by doing a full payment of the debt. And that was the end of it.

Never again had I owned such a card. 

Oh, and as for that new car I bought at the end of 2011... I still own it to this day - it's 13+ years old. It's kind of my way of trying to make the best out of a bad situation; by extending the ownership period, you "win"/"get back" more money. Given the crazy things happening in the automotive industry, I plan to keep it for another 6 to 18 months (or till the wheels fall off, should it first come to this 😂).

To conclude, always try to find a compromise and be smart with your money. And if you absolutely have no other way and have to go into debt, PAY CLOSE ATTENTION, READ AND UNDERSTAND EVERYTHING in the contract you're about to sign. 

Also, make sure you're not spending your future money on something that will have little or no value in the years to come. In other, more financial, words, never invest in liabilities. Only invest in assets.