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Money lessons learned the hard way

Personal-finance bloggers share embarrassing moments.

By Karen Datko Sep 27, 2009 2:53PM

This guest post comes from Mr. ToughMoneyLove at Tough Money Love.


Recently the Tough Money Love blog had its first anniversary. To help me celebrate, I invited my blogging colleagues to tell us about a personal-finance lesson he or she learned the hard way. Many responded with their own versions of the hard truth.


I encourage you to read every one of their contributions for their entertainment and educational value.


Patrick at Cash Money Life writes:

I learned about high mutual fund expenses the hard way when I made my first mutual fund purchase. The fund was front-loaded and came with a 1.5% annual expense ratio. It gets worse. The fund basically mimicked the S&P 500, so an index fund with an expense ratio of 0.20 or less would have been a much more efficient way to go. It was an expensive lesson, but I learned that brokers do not always act in your best interest. Since then I have taken it upon myself to learn as much as I can about the basics of personal finance and investing.

Pinyo at Moolanomy shares his story about falling into vending machine hell:

The worst one I made was going to a "free" business opportunity seminar. This one was about candy vending machines. Got all pumped up about the opportunity without doing any research whatsoever. Then fell for the classic "buy your equipment today for half off -- a one-time-only deal." Well, you know how the rest of the story goes.

"FMF" at Free Money Finance says his worst financial decision was putting savings in a bank not insured by the FDIC. Then it went under. Ouch! For more details about this painfully hard lesson, read his full post.


From Peter at Bible Money Matters:

A personal-finance lesson that I learned the hard way years ago was that credit card companies aren't stupid. I remember going to college, and seeing all those credit card companies signing people up for credit cards -- giving away free T-shirts and Frisbees. At the time I thought that they must be losing money on the deal, counting it as a marketing cost. How naive was I? For the credit card companies, giving away those cheapo tees and other freebies was an easy way for them to rope unsuspecting college students into a lifetime of spending and debt, all while creating some sort of credit card brand loyalty. Only years later, after I had paid off my last credit card bill, did I realize how I had been duped. I learned my lesson about credit the hard way.

J. Money from Budgets are Sexy tells us about a clever scheme that suddenly went south:

When we first bought our house I started throwing all our paychecks and savings/emergency funds against our maxed-out HELOC (our second mortgage) in order to defray a few weeks of interest. At the end of the month I'd take it back out and use it to pay our bills, mortgages, etc. This worked for three months until the housing market (collapsed) and froze our credit line. Since it came without warning, I wasn't able to pull back any of the funds in time, thus denying us almost $10,000 in straight-up cash. We tried to game the system and we lost, and now we keep all savings and emergency funds in a money market account.

From "MLR" at My Life ROI:

When I was in high school, I thought it was a good idea to postpone car maintenance to save money. How'd I learn a lesson? A blown head gasket and torn-up rotors. What an expensive mistake. Yes, indeed, deferred maintenance has reached deep into my bank account a few times as well.

From "PT" at Prime Time Money, a story of procrastination:

I've recently learned to do a better job of keeping track of my rebates and gift cards. We recently let some rebates and gift cards expire because we simply didn't keep up with the expiration date. We lost about $75 in the process. Not a huge sum, but it still hurts. One option would be to never use expiring products again. But I think if it's unavoidable, we'll just make sure we use the rebate or gift card right away. If we can't do that, then I'll add a reminder to my Outlook calendar at work so I won't miss the expiration date.

Neal at Wealth Pilgrim reminds us that the pain of financial discipline can be much less than the pain of regret:

I owned a home that I had rented out. The rent was paying for the mortgage and I had no equity in it. I sold it because I was afraid of having the renters move out and didn't have the money to pay for two mortgages. Needless to say, the house doubled in value after I sold it. Yikes.

From Stephanie at Poorer Than You:

As a 17-year-old, I bought into the story that everyone told me: Student loans are a normal part of life, and you'll get a job and eventually pay them off. I ended up at a college that was too expensive for me -- though I didn't know that -- and in a major that wasn't likely to earn me the money I needed to pay the loans I was getting. By my third year, I'd maxed out the amount I was allowed to take out in federal student loans, and also maxed out a credit card trying to make up the difference. I was miserable and terrified. I ended up dropping out of school for nine months to get my act together and figure out a way to pay for school. By that time, I was too far in -- my credits wouldn't transfer to another major or another school. I managed to switch my major to multidisciplinary studies and added another concentration to my first major, which allowed me to graduate more or less on time. Now I've got $42,000 in student loans, and you could say that I'm still learning my lesson.

"FFB" at Free From Broke confesses to wasting his raises on lifestyle upgrades. He ended up with little to show for all of his hard work.


Penelope at the Pecuniarities blog burned herself with an outrageous car buying experience:

When my sister and I needed to buy our first car after moving to California, we knew nothing about how the system works: credit (history, reports, scores, etc.), loans, cars and car dealers. We didn't have a lot to spend so we believed the first person we met who said he could help us. He then drove us from the small used car lot where we met him to a KIA dealership where another car salesman convinced us that because we had no credit history, the only way we could buy a car was with a 24% APR. We were confused, tired and famished after being there for three hours, so we finally just accepted the deal they gave us. Not only did we make an awful mistake with taking the deal, we paid too much for a car that our relatives later told us wasn't a good car. Moral of the story and epilogue: Learn how the system works -- not just the financial aspects (credit, loans, etc.) but about car shopping. At least things worked out for us in the end: We lived frugally, saved as much as we could and paid off our loan after 13 months, which saved us a few thousand dollars.

John the Mighty Bargain Hunter finds regret in acting too soon and on bad advice:

I watched some stock go down 99% after the dot-com bust. Then I got scared into selling it at that price by someone who didn't even own it. If I had taken my "friend's" advice in context -- what the heck did he have to lose? -- I would have noticed every big-name insider in the company buying like crazy, bought a bunch, and watched it go up over 2,000%.

Brian from Building Wealth Together learns a hard lesson at the poker table:

Online poker is not your friend.  I lost around $10,000 playing online poker in college and grad school. It went so fast, I don't even have an exact amount. It was just ... gone!

Brian, I hope that wasn't student loan money you gambled away.


Last but not least, "Silicon Valley Blogger" from The Digerati Life learned a hard lesson from not being diversified in the market:

Let me date myself for a moment. I started investing in 1990, just before the Iraq-Kuwait war hit. My mistake was to invest in LA Gear at its price peak or $30 or so in the summer of 1990. I put almost all my money into this stock then -- all of $12,000.  When the Kuwait invasion triggered the 1990s recession, this stock descended rather rapidly to a price of $2. I bailed out at $15 to save roughly half of my net worth. My biggest mistake?  Not diversifying and not really knowing much about the stock I had purchased. I swore never to pull a stunt like that again.

Thanks to my colleagues for reminding us that mistakes made by others can be helpful lessons for us all.


Related reading from Mr. ToughMoneyLove:

Published July 31, 2009



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