We all make mistakes in life. When you understand how to learn from your mistakes it can make you better prepared to handle the future. However, the first step in the process is realizing that you made a mistake, because you can’t learn and grow if you don’t realize you did something wrong in the first place.
Financial mistakes can sometimes be the hardest to come back from since they can have the biggest impact on our lives… unfortunately, financial mistakes often take awhile to build up before you realize there is a problem.
Learn From Others Too
You can also learn through others mistakes. I’ve found that reading other personal finance blogs is so helpful to also learn from financial mistakes others have already made. People not only admit their financial missteps, but they like to tell others how they are learning and growing as a result, and help others learn from their mistakes.
Mistakes I’ve Made
I’ve made quite a few financial mistakes in my life. Admitting my mistake is the first step in learning and improving my financial habits. So, here are a few of my mistakes, some are old and some are new, but as I realize my mistake, I try to create better financial habits to ensure they don’t happen again.
- Going to a private college for the first 2 years and taking on student loans instead of a state school. My high school English teacher talked me into a private college because she felt that smaller classrooms were better for my introvert nature. I ended up graduating from the University of Washington, which when I researched while at the private college, is actually a better business school. It not only cost less overall, but I was able to earn a scholarship that paid for my last 2 years of college. What I learned: Just because something costs more, doesn’t mean it’s better, including education.
- Buying clothes because they were “on sale” – do I really need 20 pairs of jeans? No. What I learned: Buy clothes when you need them, not because you want them which creates a bad spending habit.
- Not creating a budget and tracking my spending. I felt I made enough and saved money, why do I need to budget and track my expenses. Everyone should do this! I only started doing this about 3 1/2 years ago and it is amazingly insightful. What I learned: Pay attention to my income, savings, and expenses on a more frequent basis! That way I can make changes quicker if I need to.
- Not educating myself on the financial markets and investment options. Understanding expense ratios, management fees, and returns is vital to ensuring your long-term investments increase over time. In the last couple of years, I have opened my own investment accounts and am actively investing my savings for the long-term. What I learned: Knowing how the financial markets work can improve my long-term investment strategy, decrease costs, and give me more control over my financial future.
- Buying a luxury SUV. Yep, I bought one in 2011 after talking to friends and hearing “you deserve to treat yourself” and “you can afford it” and even “Are you going to take all your money to your grave? Spend it now.” I have since changed my mindset about how I choose to spend my money. What I learned: Although I still have the SUV, it is a great reminder of how I wasted my money by listening to others and trying to ‘keep up with the Joneses.’
Become a Financial Winner
I’ve learned a lot from mistakes I’ve made. I feel like the progress I have made in the last few years has been huge, and a few years ago when I looked at my goals, I was determined to be financially independent sooner rather than later. I decided to make myself a financial winner and did a few things to make sure I could achieve my goals. Here are the big ones that really helped shape my future:
- Starting to contribute to a 401k as soon as I was able to.
- Living a simple lifestyle, and buying only what I need. I treat myself occasionally, but not extravagantly.
- Learning to track my spending, make a budget, and reduce expenses. This year I’ve been able to reduce my cable, cell phone and security monitoring bills by reviewing the plans I’m currently signed up with and going with one that fits my needs at a lower cost. I’ve also reduced my grocery and household spending, and re-negotiated my auto and home insurance rates.
- Educating myself on investments and the financial market. This is huge for me. I used to always think it was boring and didn’t apply to me, but it impacts my future significantly. I now make it a habit to learn something new everyday on investments, retirement security or general finance.
As I’ve made financial mistakes, I’ve learned from them and made changes, adapting my spending and saving habits. I now realize that learning from my mistakes makes me feel happy and successful – like I’ve accomplished something. Generally I develop a new habit out of my mistake, which then infiltrates into how I live my life. The most important lesson is to trust that although mistakes are inevitable, you learn from past mistakes, and you will continue to learn and grow from future mistakes. It’s all about progress, not perfection.
What financial mistakes have you made and learned from? Do you feel like making mistakes is a good way to learn?
“A man must be big enough to admit his mistakes, smart enough to profit from them, and strong enough to correct them.” ~John C. Maxwell