I thought today would be as good of as any to recap over the last 39 years of my life, my biggest financial mistakes. We all have them, the thing we need to do is recognize them and learn how to do it better next time.
Mistake #1
Not paying off credit cards each month in their entirety.
This is a BIG one as it is where debt accumulates and fast!
Consider this: if the interest rate on your credit card is 20% and you have a balance of $1,000.00 and you just make the monthly minimum payments each month (roughly $25.00) it will take you 176 months to pay off the balance and you would have paid $1,464.63 EXTRA in interest! Yikes! This has made that $1,000 TV you bought actually cost $2,464.63!
Was that really worth it? Credit Canada has an excellent "Free Debt Cost Calculator" on their site that you can plug in your numbers and figure out how to pay off your debt faster.
Mistake #2
Buying a condo in a rising market and selling it 2 years later when the market swung into a downturn.
In hindsight (which is ALWAYS so much clearer) I should have held onto my condo, rented it out (because that was an option- but I just wanted out) and waited for things to recover.
Instead I ended up walking away with barely any $$ left over after the real estate fees, legal fees, moving costs, etc. Really, I should have considered all "closing costs" BEFORE I decided whether to sell...had I done this I would have known there would be virtually nothing left in the end! Rookie Mistake!
As a tip: Any good Mortgage Broker can figure out what those closing costs are, I do it all the time for my clients.
Mistake #3
Leasing a car instead of buying.
Unless you own a business (and even then it is a case by case situation) this is not always a good idea. Businesses have the benefit of writing off the lease payments on their taxes. Also, business persons typically put far more km's on their cars than the average commuter, so it may be smarter to get a new vehicle every 3 to 5 years (depending on the lease) therefore avoiding costly mechanical repairs.
Average Joe/Joanne's of the world (I fell under this category) should not lease a vehicle just because the payment is less (and it usually is). Lease payments are often what you see advertised on the big signs outside of a dealership. Really at the end of the day, if you have only driven 20,000km/year and you have been paying a lease payment that saved you maybe $100/payment, you ended up losing. How? Well, when you gave the car back after making a monthly payment of $500 for 2 years (this equals $12,000), and you walked away with $0. in your pocket, that was a loss. That's right, you put down $$ on a vehicle that you drove for 2 years and basically "rented" the car.
Had you bought the car (with a low interest rate - some manufacturers offer 0% financing), you would own it in 5 years and be able to sell it (if you wish) to get some $$ out of it to put down on a new vehicle (if necessary).
Industry Canada has a "buy vs. lease" calculator that is great to add to your "vehicle homework" when thinking of a new car.
This is a thing my Dad used to preach (really he didn't preach - but he made his point VERY clear), "Select a vehicle, do your research to make sure it will not be a lemon, and buy it" There was also the Dad sermon about "looking first to see if there is a second hand one available to save you $$"...because - "cars depreciate the most in the first couple of years of their life you know". Thanks Dad...I did get that message...when I turned 36 mind you, but I got it.
As I have made so many other financial "mistakes" in my life I really feel these were my big 3. I will be covering others in upcoming blogs, but they were more "didn't know" mistakes vs. "knew but just did it anyway" blunders.
Well, off to watch the hockey game and have some cake with family and friends.
Remember, a mistake is never stupid if you learn from it.
Until tomorrow...
Liz
No comments:
Post a Comment