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As a credit counselor and instructor to first time home buyers, I teach a course called Home Economics. It’s a 1 ½ hour class on understanding how to buy your first home and manage the new mortgage payment. The FHA (Federal Housing Administration) requires such classes for certain first time buyers in our region. I joke with my attendees that when I was in high school, “Home Ec" as it was called, taught young women on how to be better homemakers. (Yeah I know, outdated and politically incorrect). Many football players and I signed up for the elective class as a way to get to eat during the school day (Cooking was one of the subject matters). It’s unfortunate that this class did not teach anything about real home economics or basic finance. After graduating from high school and going to college, I learned the hard way on doing stupid things with my money. It took several years for me to finally “get it" and I now share these pearls of wisdom with my students. So read on and learn from my mistakes and save yourself time, misery, and lots of money. 10 Stupid Things I Did With Money.......
1. Buy a Car I Could Not Possible Afford
This still tops the list of stupid things I did. I was 21 and purchased a BMW with a monthly payment equal to 1/2 of my combined monthly income from both part-time jobs. The insurance payment alone was several hundred dollars. I was still in college and driving a car which I could not even afford a full tank of gas. I would put $2 a day in the tank and ran out of gas several times. The car was also preowned and the oil changes and maintenance was being charged to my credit card, another bill I couldn’t keep up with. It was the ultimate blow to my ego when the bank repossessed the vehicle in front of friends and family on my 23rd birthday party at my parent’s house.
Lesson: Pick a car with a payment within 8% of your total gross income as your budgeted maximum monthly payment.
2. Buy $100 Hamburgers
I had a $100 hamburger about once a week. What is a hundred dollar hamburger you may ask? It looks and tastes a lot like a Whataburger but you put it on your credit card, go over the spending limit and add the accrued compounded interest and penalties. It eventually costs you $100 before you pay it off. Just plain stupid.
Lesson: Don’t put fast food or other daily expenses on credit cards that will not be paid in full each month.
3. Go Grocery Shopping When I Was Hungry
Wow – Did I really need $15.00 worth of peanut butter cookies? How did I spend a whole paycheck in one unplanned trip to the grocery store? And how did I forget to buy bread?
Lesson: Make a list. Eat beforehand. Don’t buy in bulk – you just end up consuming in bulk and save no money.
4. Forget Be Kind, Rewind. Be Kind, Return.
How ‘bout just return the video? I added up the late fees in one year from Blockbuster Video. My total late fees were in excess of $300.00. I would rent 3 videos, fail to return them on time and BAM, I just spent another $12.00.
Lesson: Return on time, every time, or do the Net Flix thing.
5. Play the Big Shot!
For a while, I did the following every pay period: Picking up lunch check for the whole college gang, buy the next round of drinks, and then, TIP way too much. Yeah, it doesn’t take long for this immature financial behavior to wear a hole in your pocket. It also becomes expected after a while and you start wearing a target as a FREE LUNCH.
Lesson: Friends don’t expect you to pay their share. Those who do… are not the former. Who was I trying to impress anyway?
6. But I Still Have Checks Left?
I know, old saying but still drive’s home the meaning. Having a checking account and not balancing it each week is disastrous. There is no excuse today for NSF’s or overdrafts with today's electronic banking, bill payment services, and emails for low balance account alerts. I started using online accounting with Quicken and will never go back. If you can’t stay out of the red, close the account and operate on cash only. Standard checking is supposed to be a convenience, not another financial burden. It took me three years and untold bank fees to finally learn this.
Lesson: Don’t leave the accounting to the bank – they always win. Balance each entry each week. Keep a buffer for a safety net. Use electronic deposits and don’t ever float a check. Floated checks sink.
7. “Excuse Me President Hamilton, I Would Love to Get to Know You."
There was a guy I went to school with who called money “dead presidents". He had a saying, “I have an appointment with Mr. Hamilton every payday" which translated to “putting a $100 bill each payday into his savings account." He actually took the time to cash his paycheck and then physically take that a crisp $100 bill to the bank. There is nothing like holding onto your money and respect its current and future value. My buddy learned early that you pay yourself first. It took me years to learn that simple but critical financial principle for success.
Lesson: Save 10% each pay period. I don’t miss it anyway and compounded interest is a beautiful thing.
8. Ostrich Farms and Oil Wells
Never, I repeat, never invest in anything you don’t fully understand. At one time, I owned partial interest in an ostrich farm and an oil well. Somehow, after investing $10,000 and losing the initial money, I still owed more money to the investment company. I still don’t understand how that happened. That was in 1987. That same investment placed into a low-yield bank CD would be worth over $75,000 today. I still have a pair of ostritch cowboy boots in my closet to remind me of this.
Lesson: If you don’t understand it, don’t do it. If it sounds like a get rich quick scheme, it is…..for the person you’re giving your money to.
9. Can You loan Me My Money?
Payday Loans: I am convinced they were invented by Satan and the stupidest thing I did for over a year. At the time, payday loans were offered through pawn shops at criminal interest rates and fees. I finally had, as alcoholics define, a moment of clarity: “If I can’t live on a whole paycheck this week, how was I going to live on less next week?"
Lesson: NO, NO, NO. Don’t even consider it. Find a way to make it to payday without borrowing from your future earnings. Besides, rolling pennies and picking up aluminum cans was a humbling but valuable life-changing lesson in the power of money, or not having it.
10. Minimum Payment Due……For The Rest of Your Life
Heed This Warning: These are three words which reek havoc to your finances. What “Minimum Payment Due" really means is “Minimum Payment Due to keep this account open and have you pay 10 times the original amount and make the creditor tons of money and rob you of your wealth and prosperity, causing financial hardship to you and your family and turn you into our financial servant."
Unfortunately it does not fit in the space on the credit card statement and the credit card companies profits would plummet if they had to post real warning labels like the tobacco companies. So heed this warning.
Lesson: Pay three times the minimum at the very least. Try to get where you are paying off the entire balance each month. You will be more apt to curb the unnecessary charging when you adhere to this basic pay-it-off each month philosophy.
Ok, Those were my Top 10 Stupid Things I did with my money. But I can safely say that the student finally learned from his street taught lessons.
Final Lesson: Respect My Money. Respect Myself. Save 10%, Give 10%, Live On 80%. Recognize my next stupid thing and fix it early. Because life isn’t over and I still have plenty to learn.
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