Time for another edition of Money Mistakes, brought to you by Have Your Dollars Make Sense. This is where other bloggers or self-proclaimed finance pros admit their money mistakes. The important thing is we’ve all learned from these mistakes to make ourselves better with money. Enjoy!
Tell us a little about yourself
My name is Max and I run maxmymoney.org. I have coached over 250 Millennials to help take the stress out of money since 2017. After coaching, my clients live stress-free about money and have a simple plan they can follow to accomplish their goals. When I’m not coaching, you’ll find me reading financial books, indoor cycling or visiting local pawn shops looking for swiss-made watches.
What was your money mistake and when did you make it?
I bought a $1000 stereo system for my car. I was always envious of when I would go into my friends’ cars and their music sounded so much better than mine. I made this mistake when I was hired at my first job out of college.
What led you to make the mistake?
This was my first job where I was making more than minimum wage and was really feeling rich. I figured since I was now making the big bucks I could splurge on something fun. The reality was I was making a middle-class salary and had a mortgage to pay.
The joke was really on me as only a few weeks later my car needed extensive maintenance done to the engine. I had to put the car repair on a credit card as I spent nearly all my savings on the stereo system. So now I had an expensive stereo that I used my savings on and credit card debt for the first time.
How did you recover from it?
Over the next several months I started my first budget and began tracking my expenses. I was finally able to see that I made enough money to afford all my necessities and some desires. I needed to be frugal and started only spending money on my needs and stashing every other dollar away.
I also began renting out my spare bedroom for an additional $525 per month. I eventually rented all three of the rooms in my house, moved into an RV and profited over $11,000 within the first year.
I began to make some drastic changes to how I managed money. I figured the ones who make the largest sacrifices would reap the greatest benefits.
If I could successfully manage the modest salary I was making and make extra from my house I could manage larger sums of money in due time.
What would you have done differently?
My mindset on money began to shift. I started to only buy things that are in alignment with my future goals. Does a $1000 stereo system help me have cash–flowing assets that allow me to have 100% control over my time? Answer: No.
Since the stereo system did not help me with my financial goals I should have said no to the purchase.
How can others avoid the same money mistake?
Ask yourself: is buying this going to make my life demonstrably better in the next six to twelve months?
If the answer is yes, buy whatever it is without much hesitation. Continuing to think about something you know is going to enhance your life is a waste of your time and energy. Buy it and move on.
If the answer is no, really figure out why you want whatever it is. My bet is that as you think longer about the potential purchase you may decide against it. That’s a 100% discount and the best decision you can make.
Most importantly, what did you learn from your money mistake?
Pleasure items are great in time. The only time I am going to spend money on things that only bring me pleasure and not toward a goal is when I have cash-flowing assets paying me every month. Until I have a certain amount of positive cash flow each month pleasure items will be on my vision board only.