My “Normal” Story is Filled with Money Mistakes

My Personal Finance Story Part 1:

It’s been 6 months since I’ve started this blog, and while you can read some about me here, I thought this would be a good time to let you know a little bit more about me and my financial history/story. I know, I’m doing things a little backwards. Most bloggers start off with their stories. It’s just that it usually takes me a while to start to open up. So here we are – better late than never – right?

I would love to say that I never made a money mistake, but of course that isn’t true. But, I’m getting ahead of myself.

Chris and Kate

Have you ever made a money mistake? I’m sure you have. I’ve read of others’ money mistakes, and how they overcame them. I’ve enjoyed reading the stories about how they destroyed their massive debts, or been able to save so much money that they can retire early. Like really early – like 33 years old! Crazy right?

Well, I’m not any of those people, which is good. Otherwise you would be reading the same thing here as you could at their blogs. My story is different, and yet it’s similar to many. We were normal.

Just a warning – this turned into a two-part story, but you won’t have to wait long for part two . . .

The Early Years (Yrs 1-4)

early years Chris and KateMost people seem to make their money mistakes early on in life, and my wife and I were no exception. Combined, we had $16,000 in student loan debt, which is piddling compared to some fantastical stories and even the national average ($34k). But it was our debt and our mess.

Together it took us 2 years to pay off this debt. One year for my student loan debt – before we were married. And one more year after we were married to knock out hers.

While we both had relatively good jobs – I’m a mechanical engineer and she’s a registered nurse – we didn’t take advantage of the financial freedom that we had. Mainly because we didn’t know we had it. Is that you? Do actually have more than you realize. If only I knew then what I know now.

We didn't take advantage of our financial freedom, because we didn't realize we had it. Click To Tweet

First Major Money Mistake

During this year (our first year of marriage) we made our first money mistake. I’m sure you could have guessed that we purchased a brand new car. It was only the second car I had ever owned, and it seemed like a good decision at the time. We cheerfully took on a $400/month car payment and $16,000 in car debt.

Because of our income, not because of our financial acumen, we were able to pay it off in two years. I don’t think this affected us financially as much as it could have. Because we actually still own this car – over 10 years later. But we were definitely out-earning our stupidity.

Not that I would ever recommend a new car purchase, but if you were to buy new, you should plan to keep the car as long as possible. The longer the better. As I wrote earlier, every year longer you can keep that car is another year you can spread out the initial cost of the car.

The “Life is Easy” Years (Yrs 5-8)

Second Major Money Mistake

So if you’re keeping track, we paid off $32000 in debt over our first 3-4 years of marriage – not too bad, right? I think we were pretty normal, maybe even better than normal. It was time for the next step in life mistake. We had to have a house. It didn’t help that we were expecting our first child, and the downstairs neighbors weren’t exactly child friendly. The pressure to buy was enormous – at least in our minds.

Looking back, we should have stayed put for another year, but hindsight is always 20/20 right?

So we saved up a huge down payment on a great house and bought at a great time. Just kidding. That’s not how it went down. It would have been better if we had waited, but that’s how you learn I guess.



What actually happened?

We saved up a little more than 5% for a nice little house in a quiet neighborhood. We were so anxious to purchase that we couldn’t wait to get out of our apartment. Our first son was born in March of that year, and we closed on that house in May of . . . 2008. Yup, right before the bottom fell out of the housing market.

That was the year of the dishwasher incident. See this post for more info.

Several things happened as a result of that money mistake of a house purchase in 2008.

  1. We probably paid more than we should have, but we were impatient.
  2. My wife and I took advantage of the first-time home-buyers loan ($7500 to be re-paid through taxes over the next 15 yrs).
  3. We also had to apply for closing cost assistance from the New York State Mortgage Agency – which came with its own stipulations.

If we had waited only a year to buy, we would have had the benefit of several things. I know we can’t go back, but I can admonish others to approach big money decisions carefully.

  1. We could have purchased the same house for less – assuming it was still on the market.
  2. We could have had a first-time home-buyers credit ($8000 free and clear – Not a loan)
  3. The extra time would have allowed us to save up more than a 5% down-payment.

Time Flies when Things are Going Well

first house in New YorkEven though my wife cut back her hours drastically to take care of our little boy. My job was stable, and my income was increasing. We were able to cash-flow many home improvements. We saved a lot of money by doing most of the work ourselves. At least that was what I always told myself. As I was mechanically inclined, this turned into a great hobby – fixing up our house.

During this time we had another little boy. The only new debt we acquired was for another vehicle. Paying with cash would have been wiser, but at least it wasn’t a new car. We had learned part of the lesson. We were able to pay off this debt in under 2 years. By the way, we still have this vehicle too.

 

Summary

We stayed in this house for 6 years. Our savings account was relatively healthy (We had 3 months or so of expenses), and the only debt we had was our mortgage. I thought we were in a great place financially.

Perhaps we were, nothing difficult had happened. We hadn’t made a crippling money mistake. We spent the money we had – we were living within our means. That’s the advice that all personal finance experts spout (myself included). But that doesn’t set you up for success financially. If you always spend everything you make, at the end of the day you’ll have nothing left. That was a great description of “us”.

We vacationed, and went out to eat, bought “stuff”, and . . . lived. Because that was what we wanted.

But that was all about to change.

You guessed it – You’ll have to come back for part two . . . to make sure you don’t miss part two why not subscribe to my blog? You’ll get each new post delivered directly to your e-mail. You’ll also get a few freebies on this page, and any other things I put up there in the future.

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-Chris

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13 Comments

    • Thanks Lance, the funny thing was, we didn’t feel like it was a trap at the time. But looking back, I sometimes wonder what if . . . But hindsight is 20/20 right? Thanks for commenting.

  1. Yes, we made mistakes but we didn’t know any better. But thankfully we learned from them and are on the right path before before old age sets in.
    And by the way, that picture of me in the pink shirt is when I am pregnant. Just thought I would mention that because you didn’t. Otherwise I just look…large. 😉
    Otherwise, great post! Looking forward to part 2.
    Kate

  2. You were normal! Most folks don’t bat an eye over car loans and large mortgages. But we strive to be weird in this community and spend below our means, increase the gap, and save & invest. Yep, you’re weird.

    I knew Kate was pregnant in that shot with just a glance at it! (And Kate, Mr. Groovy & I didn’t get on the right path until our mid 40s but better late than never, LOL)

    • Thanks for stopping by, Mrs.Groovy. You’re right, we were normal. Normal kinda sucks though. IMHO
      Kate reminded me a few times earlier this week that I forgot to mention that she was pregnant. Lol. I won’t make that mistake again. 😁

  3. I love this story! And I can’t wait for part 2. For a couple who purchased in 2008 you guys are doing extremely well in getting out unscathed.

    My SIL still lost $100K (not opportunity cost or time, pure and simple math) after 12 years. She brought her condo a week before the first banks failed. There’s also a bunch of abondoned and foreclosed homes in our neighborhood too that just reminds me how scary RE can be.

    There’s no money mistake. A 16K car is what I consider pretty frugal if it could last awhile. Nice job Chris!

    • Thanks for commenting, Lily. I appreciate it. I feel that we could have done better, but you’re right, there are plenty of others who have done worse, much worse. Thanks again.👍

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