Since I made a post about the 6 Beneficial Financial Decisions I Made in the last year, I didn’t want to give a false impression that I only have made good decisions in the past year. That is far from reality. The truth is I have made just as many financial blunders in the past year as well and I want to dive into them. All the blunders I have made are either corrected or have been reeled in and are manageable, except for one. However, that is in the works to being remedied. Here is the not even remotely comprehensive list of financial blunders I have made in the past year.
High Cost of Rent
Once I graduated pharmacy school and before I found the FIRE community, I knew I was going to be earning enough money to get the new apartment in the nice area with all the nice finishes and still have money left over to fund my lifestyle. I am putting about 45% of my monthly earnings toward my rent. Just as a very general rule of thumb for the everyday American, I’m still not even close to the 50-30-20 budget. That “typical” budget doesn’t fit with the FI lifestyle I want to live and living in my current apartment doesn’t help. Right now, I am locked into a 1 year lease that I will definitely NOT be renewing once it is up. Luckily for me, I am still able to put money away to save. However, what kills me is my savings rate could be so much higher if I didn’t commit to my current apartment. Now that I have made this mistake, I know I want to live in a place that is cheaper than what I pay now and any difference in rent will go right into savings!
Bought a New Car
Everything I have read about finances and the FIRE community pretty much say the same thing: DO NOT BUY A NEW CAR!!. I, stupidly, did not listen to that advice. Pride, vanity and other circumstances led to that decision, but the fact of the matter is I bought a new car and am paying for it (literally) now. I got into a wreck last year which totaled my car and the need for a car was of the utmost importance for me at the time. So here we are… Do I regret my decision? Well, yes and no. I do love the car I have, it’s a 2018 Honda Civic. If I would have been just a little bit smarter, I would have looked at the same model of car that came out in 2016 and would have saved so much! But you can’t change the past, only plan for the future. Now I am putting money away each month for my next car which is hopefully not coming for a long time, but I want to be prepared for when it does.
Not Maxing Out Retirement Savings
This one is tough to call a blunder, but it is nonetheless. I have been saving for retirement since I got my first job and have been putting the “standard” 10% of my paycheck into savings. I had not pulled the trigger of maxing out the available accounts to me. Through my employer, I have access to a 403b with a 3% match, a Roth IRA, and HSA. I have been putting 10% into my 403b and the minimum amount into my HSA to get the company match (if I give $5, they match $19.25). While I am doing a pretty good job, I certainly am not optimizing all the opportunities I have at my disposal. I have now pulled the lever on contributing the max to both the 403b and Roth IRA, but I have to wait until the nest enrollment period to pull that final lever of maxing out my HSA. Maxing out these accounts will greatly help in the long run and I wish I had the knowledge to do this sooner.
I will be the first to admit a major love/hate relationship with Amazon with most of the time it being more love than hate. I’m sure that statement is true for many, many people out there. Unfortunately for me, it’s not just Amazon that gets my impulse buys, although most of the time it is, but I get suckered into those impulse buys at the grocery store, clothes shopping, and Target runs. Now that I have been tracking my spending and seeing exactly where my money is going, I have been more intentional with my purchases. Do I still slip up and impulse buy something? Of course! But I have found two simple ways to drastically cut those impulse buys. the first is to make a list; it can be for food or clothes or whatever. The act of making the list and sticking to it has made a ton of difference for me. The other tip I can give is to have your items stay in your online cart for 72 hours. This allows you to really evaluate if the product in your cart is something that you really need.
For some people out there, this may not be a problem for you. For me, however, I was starting to spend a ton of money on books. While I have every intention of reading all the books I have bought over the past year, my reading moods act like a pendulum throughout the year. I was in the habit of buying two books a month, and the crazy thing was, I was budgeting for them too! In my mind, it was so easy to justify buying them because it was within my budget for the month. Each month, I was buying one presidential biography because I have this very lofty goal to read at least one biography of every US president. I was so excited to tell my idea to my dad, who is a huge history buff, but his response was “why are you spending all of that money on books?” That comment really got me thinking, “Why was I?” and the answer is to create a bookshelf that would look cool with all the presidential biographies on it. Now I use that incomplete bookshelf to remind me to be more intentional with my spending habits.
When I first decided to stop eating out so much and to start cooking from home, the first place I went was to the meal delivery service. I loved everything about the service when I first started. I got great tasting meals with ingredients delivered right to my door! What’s not to love??!! In short… the price. I made the justification of paying $60 a week for 3 recipes which yielded 6 meals for myself. Based on that I was getting $10 a meal. I thought to myself that I was spending more than that if I were to eat out instead of cooking so it was worth the price. Not only was I paying the $60 a week but I was still going to the grocery store for the essential and more honestly non-essentials. My monthly spending on food/groceries was getting way out of hand. Now I use the app called Mealime which I talk about in my 6 Beneficial Decisions I Made This change has significant cut my grocery spending and I now love to cook!
All these blunders I have made in the last year has made me so much more intentional on my monthly spending, I still make the occasional “bad decision” but I have changed a lot of my spending habits that has helped me save over the past year. Mistakes are inevitable, but in order to grow we have to learn from those mistakes.
What are some of your financial blunders you have made but have now corrected? I would love to hear about them in the comments below!
Steven | Rx for FIRE