Wednesday, April 12, 2017

8 of My Worst Financial Decisions During My 20s and 30s

What's up everyone!  In my last post I shared 10 of my best financial decisions during my 20s and 30s, and of course I had to next share 10 of my worsts.  First of all, I still can't believe how freakin' quickly my 20s and 30s went by.  One day you're turning 21 and your best friends are attempting to kill you with massive quantities of alcohol, and on another you're turning 38 and one beer knocks you into comatose sleep on your favorite couch.  Yes, time is the undisputed champion and we're all merely sparring partners.  But when it comes to amassing wealth, time can be our friend.

Image result for turning 21 drinking alcohol

With this post I want to specify all of the mistakes I made with my money during two pivotal decades if we consider compound interest and the importance of getting an early start.  It's my goal to have you consider your own future decision making and avoid my financial errors.  We learn better from making our own mistakes, but costly ones need not be made at all.  If we can avoid being stupid with our money by reading the stupidity of others...heck, that's even better!  So here they are in no particular order.

1)  Taking out more student loans than I needed.  While at UC Santa Barbara, circa 1996-2001, I was getting about three-quarters ($9K) of all of my expenses paid for by grants and other financial aid.  I needed about $3K in subsidized federal loans to come out even each year.  But what did I do?  I took out $5K loans instead.  With that extra $2,000, I ate like a king (shopping at Trader Joes), paid for my car insurance, gas, and who knows what.  I can't even remember it all.  End result: $40K in student loans after my undergrad and grad school.  I should've had $20K!

2)  Becoming the incredible Hulk during my undergrad years.  I went from a scrawny 160 pounds to a buffed out 182 pounds.  UC Santa Barbara was like a country club where everyone had to look like a fitness model.  (Probably still is).  Of course, being an ectomorph, I had to consume like 2000 calories a day, meaning paying for the expensive meal plan my first two years and then loading the grocery cart at Trader Joes and Albertsons my last three years.  I also spent thousands of dollars in my 20s buying whey protein all in the name of vanity.

Me with the blue lei at Goleta beach with my roommates, 1999.  The person on the left was an exchange student from Germany we dubbed, "The Guy!" 

3)  Buying a slightly used Plymouth Neon during my first year working as a public school teacher.  The car was purple!  I don't know what I was thinking back then.  While I had it, it needed engine repair, and leaked oil.  I would eventually donate it to charity.  But boy did I spend money on that car.

4)  Buying a McMansion as a personal residence.  In my last post you learned how I have made money from my home.  This doesn't negate the fact that my ex-wife and I bought way too much house.  The mistake I made was leaving a hot real estate market like Silicon Valley after selling our townhouse in 2005, and thinking all markets in California were similar.  So when we saw a 3200 sq. ft. home only five miles from the beach in Oceanside being sold for only $745K, we assumed it was a deal.  In San Jose, a similar home would have been sold for a million.  This was during the housing market bubble.  In a post about refinancing your home, I mentioned how little money we get back come tax time from mortgage interest.  So I've paid thousands of dollars in interest already.  Property taxes are $6K a year!  And furnishing it was no joke.

5)   Buying a classic car.  So for my 30th birthday, I thought it deserving to buy myself a 1965 Corvair Monza.  Price tag: $6500 on Ebay, btw.  At the time, I knew nothing about how classic cars were valued or even how or why they'd increase or decrease in value.  I was going through some weird pseudo-mid life crisis and thought $6 g's was a small price to pay for my very own So Cal cruising machine.  I spent another $1K on a sound system.  When it was time to propose to Jessica, I needed cash for a diamond ring so I put up the car for sale.  Long story short, I only got $3500 for it.  Jessica got one carat instead of two because of it, LOL!

6)  Getting a divorce.  This one was for the best and in the end everything worked out but at the time my ex-wife and I were pulling in nearly $11K a month as school administrators.  We jointly owned the McMansion from #4 above and a time share we had gotten suckered into in Charleston, SC.  Our split was amicable and she agreed to let me keep the house in return for about $2500 cash (half the appraised value of the furnishings, electronics, etc).  Why?  The housing market had crashed and the McMansion was (still is) upside down.  Plus she was moving out of the area.  It became my new bachelor pad and I rented out three rooms for a stretch of three years.  However, this is something I needed to do to stay afloat.  I couldn't afford the mortgage, taxes, insurance, and maintenance on my own salary.  Glad we didn't have kids or the divorce would've been worse!  Oh and she kept the time share which was fine by me.

7)  Spending about $20K on a wedding.  My ex-wife wanted the full wedding experience in 2003.  We lived in San Jose at the time.  We got a florist, photographer, and wedding planner from San Francisco.  And of course it was all for naught.  See #6 divorce at top.  I'm so glad Jessica agreed to a courthouse wedding in San Marcos, CA.  We saved so much money!

8) Spending over $10K to remodel my master bedroom and bathroom (DIY status).  It was really cool to do most of the work, and our master bedroom and bath look awesome, but in all honesty, I still consider it a financial mistake.  I could've put that money to work and be closer to buying another rental property.  Your personal residence is a liability no matter what you do to it.  Sure it may appreciate in value, but over the course of 30 years, your outflow of cash far exceeds what you will most likely profit from it.

Alright, so there you have the 8 worst financial mistakes of my 20s and 30s.  I also had two kids in my late 30s and they would be considered big financial mistakes in some circles.  But thankfully, life isn't all about money.  I mean, look at these two cuties:

Priceless!  Alright my peeps, I am out.  Until the next one.
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