The Dumbest Financial Mistake Ever Made
Have you ever made a really dumb money decision? I mean, like….so stupid that you are kicking yourself later. I did that a few times, even though I’m an accountant. But there are some tricks that can help you get back on track after making a terrible financial mistake.
One of my worst money decision ever was to buy a super cheap minivan to haul our family across the country when we moved to North Carolina from Seattle. It was a hunk of junk and didn’t have many features, but we had already sold our other cars and wanted something cheap.
It cost $6,000 and we paid cash. Right when we drove it off the lot, it started making some odd noises. So we put it in the shop and paid about $750 to get some repairs done.
Then we started our journey across the United States. Somehow, it didn’t break down on the way to North Carolina. But a week after we arrived, I was driving down the road with the kids when smoke started filling the cabin. The engine was on fire! That was a bad day.
We spent another $1,000 to repair the issue, but in the end, we decided it was better to get a more expensive car with fewer problems. So we traded it in on a new purchase. The dealership only gave us a $1,200 credit for the car.
So we spent a total of $7,750 on a hunk of junk and got back only $1,200. We basically threw away $6,550 in cash. Now, imagine me kicking myself and saying, “Do you know what I could have done with $6,550 if I hadn’t thrown it away?” We would have been better off just buying the more reliable car to start with.
How Do You Recover Financially?
I was kicking myself for a while on that one, but the fact is: once you make a bad money decision, there is no going back. You can only go forward from there.
We all make money mistakes from time to time, like buying things we later regret, signing up for a bad loan with huge payments, or putting things on credit instead of waiting. But what really matters is what you do next.
Overcoming your financial mistakes is essential to getting on the road to financial freedom.
Here’s how you do it:
Step 1. Stop Kicking Yourself. This is a difficult first step. I had so much regret on all those thousands of dollars that were lost that it weighed on me. But there is nothing I can do to take the decision back so I had to move forward. You can do this too. Don’t beat yourself up over something you can’t take back. Instead, go to step 2.
Step 2. Learn From Your Decision. Why did this bad financial situation happen? What can you learn from it? Can you stop yourself from ever doing it again? These are some good questions to ask yourself. The important part is that you don’t repeat the bad decision ever again.
Step 3. Set up a Plan to Recover. If this bad financial decision has hurt your ability to properly manage your finances, then it is time to pull out the budget and start over. You will need to recalculate how much you plan to spend in certain categories to handle your mistake. Did your decision reduce your savings, rack up a credit card, or saddle you with a new debt payment? If so, how can you adjust your spending to repair the problem? You will need to make room in the budget to put the money back in savings over time or to pay down a credit card or loan. You may need to be more frugal for a while and cut back your expenses in other areas to help.
I hope these 3 tips help you recover from your financial mistakes. But the best solution is prevention. We should all try to be more careful with our financial decisions from day to day. But when you make a mistake, come back to the 3 steps to recover from bad financial decisions.
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