So often I hear people say, “I’m not good with money.” Why not, I’ll ask. They’ll usually tell me about a money mistake they made: “Right out of college, I got too many credit cards and landed myself deep in debt,” or, “I’ve never made saving a priority; when I get money, all I want to do is spend it.”
I think handling money is more of a soft skill than a hard one. It has little to do with reading a spreadsheet and more to do with learning from our mistakes. In fact, some of the most financially well people I know are people who made big money mistakes early on and decided to grow instead of give up.
Today, I’m sharing with you a few of the money mistakes I’ve made and what I’ve learned from them:
1. Budgeting Down to the Last Penny: When I first learned about budgeting, I was so excited to find out where my money was really going that I planned every money move for the month down to the last penny and I was strict in following that plan. This worked like clockwork until the first unexpected expense came along. Yes, I had a tiny emergency fund that I could (and did) draw from, but these expenses weren’t really emergencies, just unexpected little things.
Tip: Every budget needs breathing space for the unexpected. I try to leave a small percentage of my budget — about 5% — unallocated so it can absorb the shock of those expenses you just can’t plan for. Plus, over time if you don’t need the money, it can create a nice cushion in your bank account.
2. Skipping Money Dates: I truly believe that money dates can make an enormous difference in your marriage and your financial life. But even I’ve been guilty of letting them fall to the wayside. In fact, during the chaos of moving this summer we skipped money dates for a few months in a row and we’re still picking up the pieces of what we should have been tending to during that time.
Tip: There’s no excuse for missing a money date. Think of this as a monthly appointment you can’t miss. If something comes up, reschedule instead of pushing it off until the next month. Think everything is going well and you don’t have anything to discuss? Spend a few minutes checking in with your finances and then enjoy some quality time with your partner. Afraid there are too many things up in the air and you don’t have much to report at the moment? Talk about what you can and key in on the questions you both need answers to.
3. Waiting to Save for Retirement: Despite my keen interest in finance, retirement wasn’t a top priority for me right out the gate. I had other things to tend to, like student loan repayment, planning a wedding, and getting into the rhythm of day-to-day expenses. I know now that the earlier you start, the better off you’ll be in the end. Even if it’s a small amount, the snowball effect of compound interest will ensure that investment pays off big later on.
Tip: Don’t get stuck in “woulda, coulda, shoulda.” Start where you are, with the situation you are in, and the money you have. Begin by contributing a small percentage of your budget and commit to growing that percentage each year — you’ll be amazed at how it will grow.
4. Keeping All of My Savings in My Bank Account: Don’t get me wrong, it’s convenient to have everything in one place. After living for a few years with so little money in savings, I loved looking at our bank statement and seeing all of the money we had worked so hard to save. But it was a little discouraging to see it only adding a couple of pennies a month in interest. My husband and I finally decided our longer-term savings could do better — and I’ve been impressed with how easy it is to move money back and forth if need be.
Tip: If your long-term money is sitting idle in your bank, consider a high-interest (or high-yield) savings account. These generally earn somewhere in the neighborhood of 2-3% compared to the bank average of .09%. Because your money isn’t invested, you don’t have to worry about what’s happening in the stock market. Wondering which account is right for you? Check out this Nerdwallet post.
5. Investing My Retirement Dollars Too Conservatively: I still remember the day my dad told me about how much our family had lost so far during the great recession. When I finally began investing my own money, I was a bit gun shy. You didn’t have to tell me the stock market could go down — I knew that very well. But I didn’t grasp that ebbs and flows are part of investing in the market: If you miss out on the low lows, you’ll likely also miss out on the high highs. It took me a few years to finally invest a bit more aggressively; thankfully, I still have enough time before retirement to make up the difference.
Tip: Wondering if your investment strategy is aggressive enough? Check in with a financial professional who can help you select the right asset mix for your goals.
6. Treating Our Money as My Money: Of all the money mistakes I’ve made, this might be the biggest one. For the first few years of our marriage, I took 100% responsibility of our finances. I thought I was doing us a favor — but in reality, I wasn’t giving my husband any say in how we handled our money as a couple. When I finally realized my husband needed to be a part of our money conversations, money dates became our saving grace.
Tip: Make room for your spouse in the money conversation. Get started by joining my Date Night Club. It will help you get a handle on your finances and make sure you both are on the same page about where your money is going now and into the future.
If you have some financial mistakes that you made in 2019 (or even before) don’t carry these into 2020. Instead, find ways you can learn from them and move on.
I’m getting a head start on holiday break by taking a break from Facebook Live, IGTV and blog posts until Dec. 31. Happy Holidays!