We’ve all made financial mistakes but I’ve made some real crackers, find out what not to do!
If you’ve read some of my posts you’ll know that Mr2p and I are on the cusp of having enough to retire early. Given that we will be retiring in our early 50’s you would be forgiven for thinking I mostly had my sh*t together when it comes to all things financial.
Letting the side down would be the work in progress situation with how I deal with DD2’s financial dependence. But other than that, you would think, retiring early, having not earned big bucks? That woman must be pretty hot on her finances.
Oh how wrong you would be! Sorry, but in comparison to many personal finance bloggers I so do not have my sh*t together, not now and not ever.
Today in the spirit of sharing and encouraging you to do as I say not as I’ve done I will let you in to a few of my financial secrets. These are not my financial secret mastery, more my secret mistakes.
Personal finance blogger mantras
If you read other personal finance blogs you will know the standard held to be fairly ideal is:
- Have your financial lightbulb moment, preferably before you go to college/university
- Pay off all debt in super quick time
- Max your salary by moving sideways, onward and upwards in a succession of jobs – chasing the money
- Take on a lucrative side hustle that brings in a decent wodge
- Invest your spare cash in the stock market
- Cut your cable
- Pay the mortgage minimum and invest any extra funds
- Don’t have kids/wait until you’ve retired
- Retire any time after 30, depending on how much you enjoy your day job.
But you know, in reality everyone’s journey is different and many of us don’t have the urge to retire early, often because it’s not something we’ve ever heard of.
Most of us don’t get our financial act together until we’ve learnt the hard way what our finances are all about. And the fact we have to make hard decisions about our finances. We can’t have it all.
You might have no intention of retiring early. You might love your job. But whatever path you chose you might want to not make the financial mistakes I have. Read ’em and weep folks!
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13 financial mistakes I have made
Establishing yourself financially before having children
Having a child super early. I was a teenage single mum and didn’t manage the little money I had very well. However, in my favour I also didn’t get into debt during this time even though I was on benefits/welfare for 5 months.
Maximising your earning potential
Not chasing the money by moving jobs/departments. I stayed with the same government department for 30+ years. Indeed I was in the same grade for 18 years!
I had plenty of different jobs during this time but I think I could have gained more promotions if I had got outside my comfort zone and applied for other jobs.
I was comfortable in my department, I was seen as an expert and this gave me a warm fuzzy feeling. It was too easy to stay there.
When I finally woke up to maximising my day job earnings I got my act together and applied for a promotion into a different department. 18% pay rise after years of 1% caps, thank you very much! Why didn’t I do this earlier?
Downsized our house in our 30’s
We downsized our house in order to become mortgage free quicker. This is probably our worst financial mistake. House prices have increased a fair chunk in SE England in the past 10 years so we have lost out on the price increase on a larger house than we currently have.
This may be as much as £70,000 more than our current house has increased by! Ouch.
Would we do differently if we had our time again? Not sure. If I look purely at the £70k then of course we wouldn’t make the same choice.
But there were a lot of other emotions tied up with that decision so it’s not so straightforward.
Side hustle your way to riches
No side hustles for me. No lucrative work from home jobs to earn extra money. However I did couponing in the days when you could use multiple coupons in supermarkets without buying the product. Loved those days, I used to save up to £300 a month. Good times whilst they lasted.
I have finally started taking advantage of bank account sign up bonuses. We’ve made over a £1000 so far for little more than an hour’s work for each account sign up. Better late than never!
Stock market Investments
I didn’t start investing in the stock market until 2001. When I did invest it was a lump sum into an active fund which I didn’t then review for a further 15 years – oops! 2nd time of investing in 2008 I got it half right, monthly payments but still into an active fund.
I think I got it right 3rd time by investing with Vanguard tracker funds every month into Mr2p’s SIPP. I should have started earlier and reviewed our investments, moving them as necessary.
Hold on to your cash
We kept too much in cash. When we started saving money we threw everything into Cash ISAs. At least in those days you earned a reasonable 4%+ rate of interest. Not so these days of course.
We were investing this cash for the long term so should have stuck it into a Stocks & Shares ISA.
Mr2p has either been self employed or worked for employers without a pension scheme since 2000. I did open up a pension for him and we have paid in a reasonable amount. However I was using 10% as my guideline.
To have a decent pension these days 10% is not enough and even more so when your plan is to retire early. In the past 4 years we have thrown most of our spare cash into this pension, better late than never!
We bought a house 2 years ago when we got carried away with searching for our forever home area. We made our money back in terms of house price and renovation costs.
However we serviced a mortgage and paid utilities for 18 months so definitely a financial mistake. I did get the council tax reduced to nil for the 1st 6 months due to the house being deemed uninhabitable!
I had my 2nd child just as I was in a position career wise to benefit from working in London. If I had not got pregnant I would probably have been able to gain a couple of promotions quite quickly.
Continuing to work in London after maternity leave was a non-starter. It’s a 2 hour commute and childcare had to fit around my hours of work.
Not investing in myself education wise. My Mother feels this is a mistake as she is convinced everyone should go to university.
Being the person who always tried to do everything my Mother didn’t want (e.g. left school at 16, home at 18, teenage single mum) needless to say I have never invested time in getting a degree.
Would it have helped me with my career? Probably, in terms of confidence and widening my horizons. Am I willing to say my Mother was right? Nope!
For the early retirement brigade cutting cable seems to be an absolute must. But we have cable/satellite TV, have always had it and probably always will.
Mr2p is not a reader, he’s a do-er but enjoys his nature, gardening and DIY programmes. He’s a very visual person so TV works for him.
Me? I grew up without a TV so could live without one. Non-negotiable though. If we had freeview we would save approx £40 a month. But freeview doesn’t have the range of channels Mr2p enjoys. Cable is staying!
In the ideal world we would plan and live close enough to walk/bike or take public transport to work. However we have 2 vehicles that are not in Mr Money Mustaches Top 10 cars for smart, financially frugal people.
Mr2p has a van, I am not driving that van!
I work full time and most of my recent jobs have involved managing staff across multiple locations. Public transport is a non-starter when you are on the south coast.
The car I use is the main family car which we use for all non-work trips. So it’s not even a cheap runabout. At least it was 3 years old when we bought it so most of the new car depreciation had already happened. We will use it until it becomes regularly unreliable.
As I’ve learnt more about investing I have become interested in the idea of dividend producing shares. These are shares of a company that you buy and they pay out dividends every quarter/year.
Nicola over at The Frugal Cottage is slowly building her dividend portfolio. If you are retiring early having a passive income of dividends paying some of your bills is very helpful. You don’t have to cash in your investments and the dividends could continue ad infinitum.
I’ve read so much about what you should look for in a dividend share that I’ve got analysis paralysis. I’ve shied away as I don’t feel confident enough to invest in this manner.
Anyone got a time machine?
So there you have it 13 financial mistakes I have made. Would I go back and change them if I had the opportunity? Maybe, maybe not. I am a great believer in learning from your mistakes.
Would I be the person I am today if I had not made these financial mistakes?
Even though we’ve made these mistakes we are still on track to retire early. We will have enough to live the life we want within the next 2 years.
Yes, we could have had more money but does that matter? Not to us because we will have enough! And enough is all you need.
Hopefully you won’t make the same financial mistakes I have. However making mistakes doesn’t mean you cannot learn from them and make great future financial decisions.
You can still accumulate a lovely lump sum of money. You can still retire early if that is your goal. Life would be easier if you didn’t make mistakes but you’re human.
It’s your financial life and you are free to make as many mistakes as you want. But perhaps you don’t need to make as many as I did!