Wednesday, February 4, 2009

Don't Beat Yourself Up Over Past Mistakes

Saving Money Tip #63 - Don't Beat Yourself Up Over Past Mistakes. Many people in this country are carrying around debt - credit card debt, school loans, car loans, etc. Other people don't have debt but but are living paycheck to paycheck to support a high-expense lifestyle. Still others have no savings accounts - no emergency account, no retirement account, and no savings for a particular item account.

Then one day some of these people start reading some personal finance blogs and they see that there are others out there who are not in debt, who don't live paycheck to paycheck, and who have savings for emergencies, retirement, kids' educations, etc. And all of a sudden a lightbulb goes off in some of their heads and they say, "I want that kind of lifestyle" And they start to live on less than they earn, and they start to pay off debt, and they start to save for emergencies or a house or their children's college.

But as the excitement of this new "getting out of debt, putting away some money, and living on less than you earn lifestyle" wears off, it's easy to get frustrated. And they read more on others' personal finance blogs about how this person started saving when she was 20 or how a couple just bought a house with 50% down or that they already have $200,000 saved for retirement. And the person who is still paying off her debt and hasn't started her savings yet, metaphorically kicks herself for not having started saving earlier or for buying all of those foolish expensive shoes when she was younger. Or sometimes she compares herself to those who have been successful savers their whole lives and she may feel some resentment or jealously that she is not in that place, too.

Don't fall into this trap of frustration or of beating yourself up for not starting a savings plan earlier or for past mistakes you might have made. Everyone is in a different place in this financial journey. And each of us did not get the same start. Yes, it's better to start a savings plan when you are 20 than when you are 40. Yes, it's better to have never gotten yourself into debt in the first place. And yes you may have not made the smartest choices in your buying habits. But I'll bet that most of you are in the place you are in now because you were never taught how to save money. And the important thing is that you are changing because you now learned how to do it.

Many of you are only in your late 20s, or your 30s or 40s. And that is still young enough for a financial turnaround. So while there may be some backpedaling to savings while you pay off your debts, you are still in a good place. You are still young enough to have the lifestyle and financial freedom that you want. There is no reason to feel bad about your situation or to look at your past lifestyle and fret over it. It is done. Over. Kaput. You do the best you can today with whatever position you are in. We all have a starting point. And this is yours. And when you get to the point where you are out of debt and are living on less than you earn, and have savings put away, you will be that much more knowledgeable than those who never had to overcome any obstacles. You will have learned from your mistakes and become stronger in your commitment to saving. Then can take the financial lessons that you have now learned and pass them on to your children, so they can start out their financial journeys on the right foot.

In Real Life (IRL) - I can't say that I have made many large financial mistakes in my past. I have always lived on less than I earned. I never had credit card debt, and I have been saving for retirement since I was 22. But I have made mistakes. Absolutely no one is perfect when it comes to money. Much of money planning is guesswork - how long you will live, how many children you will have, whether the real estate will go up or whether it will go down. Sure I didn't get myself into credit card debt nor did I spend frivolously at a young age. But I was also given many things at a young age that some of you were not - a college education, a car, and lessons in saving money for a rainy day. And even with all of that I still made mistakes.

We bought a condominium in Florida 5 years ago when real estate was going up, up, and up. At the time we got a good deal in comparison to others around us. This year, our condo is worth at least 1/3 less than it was in 2003. I can beat myself up about it if I want to. But I did what I thought was the best at the time. And there is no use looking back. Instead I can take that mistake and learn from it. I won't be buying real estate again in a hyped up market, when everyone else is doing it.

I made another financial mistake, albeit smaller, this past summer. I booked us a train from Florida for our January vacation. At the time I booked our train ride, gas prices were over $4 per gallon. Therefore, taking the train was going to cost us very little more than driving. I was excited because usually driving is significantly cheaper than taking the train, and in order to save money we often drive. But this time we booked the train. And when January rolled around the gas prices had dropped to less than half of what they were in August. And when I did the cost comparison of driving in January versus taking the train, driving was less than half the price. Oops, there went $200.

Of course I can justify both of these mistakes. My mother-in-law got to go to Florida for 5 years that she wouldn't have otherwise been able to do. And my kids enjoyed the train much more than the car. But from a purely financial point of view, both of these events cost us money we could have used. And I'm sure I can go on with other mistakes I've made - I've bought stocks I didn't know much about, sold stocks at the wrong time, and didn't save up for a replacement car when we needed one.

But no one will do everything perfectly with regards to money especially if they never learned how. And there is no sense in looking back at things we coulda, shoulda, woulda done. Finally, there is absolutely no benefit to beating ourselves up over our past. We know what we know now with regards to finances and saving money, and we move forward from there. That's all we can do.


Bill said...

Mistakes? Boy, I've made a ton,though as a self-described "serial entrepreneur," risk entered into most of the errors. Too early, too late, too little, too much...

I think it's important point not to look back. If you didn't start at 20, then start at 30, not at 30--then at 40, etc.

In fact, start today.
Bill Muhlenfeld

Newby said...

I've made lots of mistakes. I decided to do something about it last month and this month I've managed to pay an extra $1, 500 off my credit card and immediately dropped my limit so that I can't spend it back up again.
I'm reading some great blogs on personal finance (Including yours) and my budget has finally been done.
I earn well above average and I am looking forward to that money landing in a savings account instead of going to debt and interest.

Even in my mistakes, I've learned a lot. And I'm only 35. I have time to turn this around completely, as long as I keep my eyes on the prize.

Thanks for your blog.