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Financial mistakes

May 19, 2008

Most people don’t wind up in debt over night. There is usually a series of bad decisions or unexpected circumstances that start the debt ball rolling.

Still, some of us can think of one big financial mistake that makes us wish we could have a “redo” of the situation.

I’m going to share my whopper of a financial mistake and what I learned from it.

Upon graduating from college and getting my first job, I knew I had to buy my own car.

And I knew exactly what car I was going to get.

I don’t want to disparage any automakers, so you’ll have to settle for some basic details. It was a small, yet not cheap, 5-speed convertible. I had wanted this car for years.

I went to the dealership. I drove the car. I had to have the car. Before I knew it I was signing papers.

Here’s a question a person who has any logic when it comes to finances would ask: “How is one who has just graduated with thousands of dollars of student loan debt and has a job where one makes $18,000 a year supposed to afford a car that is well over $20,000?”

The logical answer, of course, is that one couldn’t afford the car … At least one couldn’t afford to buy it outright. One could (and this one did) take out a lease.

More car for less money. Perfect!

Not so much as it turned out. The payments were still too big and sucking up a huge part of my paycheck, and the insurance was very expensive.

It also turned out that the car was a lemon, broke down constantly, and naturally most of the repairs were not covered under the warranty. To top things off, my then-job ended up entailing a lot more driving than I realized it would. I went way over the allotted miles.

I ended up buying out the lease and refinancing in order to avoid huge charges for going over the allotted miles. I ended up stuck with the albatross that was my car around my neck for over six years. I shelled out thousands upon thousands of dollars for repair work during that time. I still owed a bit of money on it when I had to get rid of it.

I financially crippled myself with a car.

I also learned some very valuable lessons. When I bought my next car I first determined how much I realistically could afford to pay on a car loan. I knew that a lease was not a good option for my lifestyle and didn’t even consider it as an option. I read tons of information about the cars on the market and talked to people who actually owned them with the goal of finding the most reliable car for my money.

I think I did a much better job of choosing an affordable, reliable car that will accommodate my changing lifestyle. I think I can do even better the next time because I will make sure I have a paid-off vehicle to trade in and some extra money to put towards my purchase.

I wish I had bought a used car right out of college and been more aggressive about saving money.

If only hindsight were 20/20 …

What was your worst financial mistake? What lessons did you learn from it?

Written by admin · Filed Under Misc. 

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