10 Really Stupid Things I Did With My Money
Posted: Thursday, June 22, 2006
by John Hopkins
http://bankerpros.com
As a credit and financial counselor, I teach a workshop to first time buyers entitled Home Economics. It's a 1 hour class on understanding how to buy your first home and properly manage a new mortgage payment. The FHA (Federal Housing Administration) once required such classes for first time buyers with a challenging credit history. I joke with my attendees that when I was in high school, "Home Economics" was an archaic course elective, instructing young women on 'how to be better homemakers.' (Yeah, I know - outdated and politically incorrect). Many football players - myself included - signed up for this class as a way to cruise through the long school day. Today (30 years later) I find it terribly unfortunate that this class did not better prepare me with some basic financial street smarts. After graduating from high school and attending four years at college, I learned about basic finance and the power of money the hard way - by doing very stupid things and making bad choices. It took several years for me to finally gain my education in fiscal responsibility and I now share these pearls of wisdom with my home buying students. So read on and learn from my mistakes and perhaps save yourself time, misery, and lots of money.
This still tops the list of stupid things I did, and see others following in my footsteps. I was 21 when I purchased a BMW 318I, with a monthly payment equal to 1/2 of my combined monthly income from both part-time jobs. The insurance payment alone was several hundred dollars. I was still in college and driving a car which I could not even afford a full tank of gas. I would put $2 a day in the tank and ran out of gas several times that first year of ownership. The car was previously owned and the oil changes and maintenance were also beyond my limited budget, forcing me to charge such expenses onmy credit card, another bill I couldn't properly manage. It was the ultimate blow to my ego when the bank repossessed the vehicle on my 23 rd birthday party while I was visiting my parent's.
Lesson: Don't buy a car with your ego. Choose a car with a payment within 8% of your total gross income as your maximum monthly payment.
2. Buy $100 Hamburgers
I bought a $100 hamburger about once a week. What is a hundred dollar hamburger? It looks and tastes a lot like a Whataburger, but when you put it on your credit card, go over your credit card spending limit and add the accrued compounded interest and penalties, i t becomes a $100 hamburger before you pay it off. This dining practice is j ust plain stupid.
Lesson: Never buy fast food or charge other daily expenses on credit cards that will not be paid in full each month.
3. Go Grocery Shopping When I Was Hungry
Wow! Did I really need $20.00 worth of peanut butter cookies? How did I spend a whole paycheck in one unplanned trip to the grocery store? And how did I forget to buy basic staples like bread and milk?
Lesson: Make a grocery list. Eat beforehand. Stay away from Costco and Sam's Club if not buying for a business or a large family. When single, don't buy in bulk statistics show you just end up consuming in bulk and really don't save any money.
4. Forget 'Be Kind, Rewind.'
How bout just return the video?' I added up all the late fees in one year from Blockbuster Video. My total fees were in excess of $200.00. I would rent three videos, fail to return them on time and spend another $12.00 in additional late fees.
Lesson: This lesson goes for any type of video or gaming rental; return on time - every time - or do the Net Flix thing.
5. Play the Big Shot!
For a year, I did one of the following almost every pay period: Buy lunch for the whole college gang or buy everyone the 'next round of drinks'. It doesn't take long for this immature financial behavior to wear a hole in your pocket. It also becomes expected after a while and you start wearing a target as the token FREE LUNCH.
Lesson: Friends don't expect you to pay their share. Those who do are not the former. Who was I trying to impress anyway?
6. But I Still Have Checks Left?
I know. Claiming you 'can't possibly be out of money when you still have checks left' is an old joke but still I learned its ugly punchline. Having a checking account and not balancing it each week is the financial equivalent to driving a car while blindfolded. With online banking and other smart devices such as low account alerts with emails, there is no excuse for NSF's or overdrafts. In 2002, I invested in a Quicken program which does just about everything, including reminding you to pay which bills, and when. I could never go back to writing checks blind. This goes for using an ATM card, which contributes to over 90% of the purchase transactions today. If you can't stay out of the red, close your banking account and operate on cash only. Standard checking is supposed to be a convenience, not another financial burden. It took me three years and untold bank fees to finally learn this lesson.
Lesson: Don't leave the accounting to the bank like a casino, they always win. Balance each entry each week. Keep a $200 balance buffer as a safety net. Use electronic deposits and don't ever float a check hoping to make a deposit before it reaches your bank. Floated checks sink, and take you and your wallet down with them.
7. "Meet Mr. Franklin every payday."
There was a guy I went to College who referred to money as "Dead Presidents". He had a saying, "I have an appointment with Mr. Franklin every payday," which translated to him putting a $100 bill into his savings account. He actually took the time to cash his paycheck and then physically take that beautiful crisp $100 bill to his bank. There is nothing like holding onto your money and respect its current and future value. My buddy learned early that you pay yourself first. It took me years to learn that simple but critical financial principle for success.
Lesson: Save 10% each pay period. you won't miss it after a while and compound interest are two of the nicest words in the English language. Don't have time? Use savings direct deposit with your employer or set up a savings account auto draft for your checking.
8. Ostrich Farms and Oil Wells
Never - I repeat - never invest in anything you don't fully understand. At one time, I owned partial interest in an ostrich farm and an oil well. Somehow, after investing $10,000, I still owed money to the investment company that promised me big returns. I still don't understand how that happened. That was in 1987. That same cash investment placed into a low-yield bank CD would be worth over $100,000 today. I still have a pair of ostrich cowboy boots in my closet to remind me of this.
Lesson: If you don't understand the investment, don't invest. If it sounds like a get rich quick scheme, it is..for the person you're giving your money.
9. Can You loan Me My Money?
Payday Loans. I am convinced they were created by Satan and the stupidest thing I participated for over a year. In the early nineties, payday loans were offered through pawn shops only. Now these loans are mainstream at even the biggest lending institutions. Why? Because they are obscenely profitable. I finally had, as alcoholics define, a moment of clarity. "If I couldn't live on my paycheck this week, how was I going to live on less next week?"
Lesson: You cant borrow your way back into financial solvency. Don't ever consider taking a payday loan. Just say no. Lock yourself in the house. Anything! Find a way to make it to the next payday without borrowing from your future earnings. Besides, rolling pennies and picking up aluminum cans was a humbling but valuable life-changing experience on the power of money, or not having it. You can't truly learn that perspective if you don't eat Ramen or mac & cheese for a week.
10. Minimum Payment DueFor The Rest of Your Life
Heed This Warning: These are three words which will reek havoc to your finances. What Minimum Payment Due really means is ' Minimum Payment Due to keep this account open and have you pay twenty times the original amount and make the creditor tons of money and rob you of your wealth and prosperity, causing financial hardship to you and your family and turn you into our financial servant."
Unfortunately, this definition does not fit in the space on the credit card statement and the credit card companies profits would plummet if they had to post real warning labels like the tobacco companies. The new government disclosure rules are forcing them to better warn the consumer, but trust me - they will find a way to part you from your money with some sort of ongoing usage fee.
Lesson: If you do finance a purchase on revolving credit - make it a practice to always pay three times the minimum at the very least. As a better practice - try to control spending where you pay off the entire new balance each month. You will be more apt to curb the unnecessary use of revolving credit when you adhere to this basic pay-it-off philosophy.
OK, Those were my Top 10 Stupid Things I Did With my Money. But I can honestly say that I finally learned from these street-taught lessons.
My Final Lesson: Respect money. Respect myself. Save 10%, Give 10%, Live On 80%. Understand we live in a volatile financial society and don't take anything for granted - Health, employment, and mostly - Money. Recognize my next stupid thing early, and try to avoid it because life isn't over and I still have plenty to learn.
2010 John Hopkins. All rights reserved.
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Top-level comments on this article: (1 total)Just for the record, Alexander Hamilton was not a president, but he was the first Secretary of the Treasury. Hamilton, by the way, is on the US $10 bill. Benjamin Franklin is on the $100 bill (but he wasn't a US president either.)
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