7 Financial Mistakes and the Lessons I Learned

Everybody makes mistakes; the most important thing is that we learn something from them. If we don’t learn a lesson, then we will probably do it again. Without further ado, here are 7 of my financial mistakes I’ve made:

Financial Mistake #1

I went bankrupt when I was 20. Compared to what most people go bankrupt on (amount-wise), I feel like a dumb@ss now. It damaged my credit and haunted me for 10 years.

Lesson Learned: ALWAYS try to tackle debt before turning to bankruptcy.

Financial Mistake #2

Buying a $4,000 Tempurpedic bed. Did we really need such an extravagant bed? Nope. Personally, I don’t think it’s much better than our old bed (which we had for like 8 years). Now, my back hurts almost every morning and it’s freaky heavy.

Lesson Learned: More expensive doesn’t always mean something is better.

Financial Mistake #3

Gambling away $500 at a semi-local casino and then gambling away more on our last vacation to Lincoln City.

Lesson Learned: After going to Vegas, gambling other places is wasteful—you don’t even get free drinks. Also, maybe gambling isn’t the best form of entertainment.

Financial Mistake #4

Draining our savings (like 6 years ago) to pay off our debt. That just ended up being a really stupid idea, the debt soon returned and we were out of savings. We solved the debt problem but not the issues that created the debt in the first place.

Lesson Learned: Don’t use your savings to pay off debt. Take the time and work toward it for maximum realization and long-term success, because sometimes it’s good to feel the pain of debt.

Financial Mistake #5

Accepting my 1st car loan for 29-something percent when I was a teenager. WTF was I thinking; why didn’t I know that was bad?

Lesson Learned: Car loan people are out to get me and it’s important to truly understand how much loans will really end up costing you in the long run.

Financial Mistake #6

Buying a desktop computer at Dell and applying for credit with them. Yep, another 29-something percent APR (annual percentage rate), at least I’m consistent. Even though I was adding a little extra with each payment, it seemed to never affect the balance too much.

Lesson Learned: Retail credit can be a bad idea. Save up the cash if I really want something that badly.

Financial Mistake #7

Co-signing on a cellphone for a friend because they weren’t approved. This actually somehow added her and her dad onto my account. That b*tch had no intentions of paying the bill whatsoever, and ended up running my cellphone bill up to $1,500 in 6 weeks.

Lesson Learned: Don’t co-sign. If somebody can’t get approved for something themselves, there just might be a good reason. If you do it anyways, be prepared to pay it all and just consider it a gift.

 

What are some of you financial mistakes and the lessons you learned?

How to Save for Retirement When You Don’t Have Much Money

It’s hard to think about saving for retirement when you’re having trouble making ends meet now. But save you must; you’re going to need a nest egg to crack open when you reach your golden years. If you’re living on a low income now, you’re going to use your savings that much more later on.

If you’re still in your 20s, you have time on your side — not only can you reasonably expect your income to increase as you progress further into your career, but you also have many more years to let your money grow through wise investments and compounded interest. Even if you’re older, savvy planning can help you accumulate a respectable retirement nest egg.

Contribute as much as you can as often as you can, and take advantage of any tax breaks that are available to you and any retirement programs offered by your employer. If you can, put off retiring to maximize your savings and Social Security. No matter what, try not to spend your retirement money until after you’ve retired.

Contribute Regularly and Consistently

When it comes to saving for your retirement, regular, consistent contributions are the magic bullet that will help you hit your target number. If you don’t make much money, you probably don’t have hundreds of dollars a month to stash away in an IRA, 401(k) or other retirement fund. But even if you can only contribute a little bit of money, it’s still better than nothing — and the longer you have until retirement, the more you can accumulate wealth.

If you’re in your 20s, your retirement plan contributions will pack a lot more punch, even if they’re relatively small. If you start saving at age 25 and save just $2,000 a year, assuming an eight percent rate of return on your investments, you’ll wind up with $560,000 by the time you’re old enough to retire. Even if you’re older or you can’t afford to save that much, you’ll be glad you saved what you could when you’re staring retirement in the face. Use a compound interest calculator to figure the rate at which your savings will grow.

Take Advantage of Tax Breaks and Employer Programs

absolutewealth.com 2Saving for retirement has an added benefit, in that it can help you save money on your tax bill. Traditional IRA and 401(k) plans allow you to take a tax deduction in the year you make the contribution, which can be helpful if you’re living on a modest income and don’t expect to see a significant increase in your earnings in the future. You can use your bigger tax refunds to make additional contributions to your retirement savings accounts.

If your employer will match contributions to a 401(k) or other plan, do your best to max out those matched contributions. That’s extra retirement money that you don’t have to earn. Alternatively, if you can find a job that offers good retirement benefits, you may want to go ahead and take it. A generous retirement package can make planning retirement on a modest income much easier.

Put Off Retirement

The longer you delay retirement, the more time you’ll have to save money and the more time you’ll have to let your savings grow. For low-income workers, delaying retirement by just one year can increase your retirement income by as much as 16 percent. Even switching from full-time to part-time work after you reach normal retirement age can help you stretch your savings dollars.

You should also consider delaying the age at which you apply to collect Social Security benefits. For each year after retirement age you delay claiming benefits, you actually become eligible for more money. You’ll receive maximum benefits by waiting until you’re 70 to claim them. You can use the Social Security benefits calculator to get an idea of what your benefits will look like.

Don’t Touch the Money

As your retirement savings grows, avoid spending it unless you absolutely have to, to cover medical costs, death expenses or another emergency. You may be able to avoid early-withdrawal penalties if you use your retirement money for certain expenses, like college tuition, disability or a first home. But if you spend your retirement money, you won’t have it later, so make this decision carefully.

Saving for retirement on a low income isn’t easy, but it can be done. If you can put aside even a small amount of money regularly, avoid spending the money you do set aside, and maybe delay your retirement by a year or two, you could be relatively well off by the time you’re old enough to retire.

5 Myths About Trend Investing

Angile QuantOne of the most basic strategies for achieving the most gains in the stock market is to invest based on trends.  In the simplest terms, this strategy allows investors to capitalize on stocks moving in a particular direction. While it might seem that the obvious choice is to invest when a stock is on an upward trend — with the stocks earning progressively higher gains over a long period — but it’s also possible to make money in the short term on downward trending stocks, which have progressively lower highs.

Trend investing requires paying close attention to the technical aspects of trading, watching how certain stocks perform over time and accurately predicting whether the trend will continue, using tools like predefined trend searches. You can learn more about those tools here, but they aren’t the only factors to keep in mind when making your investment decisions. You should also understand certain myths that have tripped up other investors, so you can avoid the same mistakes.

Myth #1: Fundamental Trends Don’t Matter

Many investors focus on specific companies, watching a particular stock’s performance over time and investing based on those numbers. While that’s important, you also cannot underestimate the important of fundamental trends, or the overall shifts within the economy or an industry that can influence a stock’s performance.

For example, in the late 1990s and early 2000s, many publishers dismissed the rise of the e-book, claiming that consumers would never give up on printed books. Even when Amazon introduced the phenomenally successful Kindle e-reader, many publishing industry experts claimed it wouldn’t last. Today, e-books significantly outsell printed books, and those publishers that didn’t adjust their business models accordingly saw major losses. Bottom line? Even though a company might be doing great now, you cannot ignore the overall trends that influence sales and their impact on stock performance.

Myth #2: Trends are Permanent

Roller skating. Troll dolls. Boy bands. What do all of these things have in common? At one point or another, they were all the hottest thing going — and today, the only time you hear anything about them is when they appear on some list of nostalgic items. By definition, trends are impermanent things — even in the world of investments.

The stock that’s hot today might be in the tank tomorrow. The idea behind trend investing is to learn to identify when trends are reversing direction, and act accordingly. It’s important to identify the low points that are normal, and which signify an overall change. Understand that it’s very unlikely that a stock will continue in the same direction indefinitely.

Myth #3:You Will Always Make Large Gains

Trend investing is not the right strategy if you want to make huge gains quickly. In fact, you won’t always earn major dividends on the investments you make based on upward trends. Trends can happen slowly, so while you will steady gains, they may not appear immediately significant.

By the same token, you can lose money with a trend investing strategy. If you fail to predict shifts in trends accurately, or wait too long to act, you could risk any gains you have made. That is why you must be vigilant and aware of all of the factors influencing your investments.

Myth #4: Trend Investing Takes Away the Risk

Angile Quant 2Some investors rely on trends to guide their investments under the misguided impression that because a stock has made consistent gains, it will continue to do so — and therefore, you can confidently invest without fear. The truth is there is always risk when it comes to investing. You have to determine your own risk threshold and make choices accordingly, understanding that there is no such thing as a 100 percent guarantee that you’ll earn gains without any losses.

Myth #5: You Should Bet Everything on Trends

Trends are a useful — and effective — tool for making investment decisions, but you should never put all of your proverbial eggs in one basket. Risking everything on a particular trend is never a smart move, as trends shift quickly, and a single misstep could mean major losses. Regardless of how much you plan to invest and your overall goals, you should always maintain a diverse portfolio to protect against losses and changes in the market.

Trend investing is one of the most common, and smartest, ways to make investment decisions and maximize your money. Do not let misconceptions and myths take you off the path toward success.