Whatever your personal finance journey, there are going to be times in your life when you make a mistake. You chose one path and it doesn’t turn out the way you hoped. Below are some of my positive and negative financial experiences in the hope that you’ll imitate the good behaviors and avoid the bad ones on your wealth-building journey.

 

Financial Successes

1.     Budget Queen

Nathan Dungan of Share Save Spend says we each have an inherent money personality from a young age.  We are naturally inclined to share, save, or spend.  I’ve always been a saver, and this has served me well.  I put money into savings first and then allocate the rest for living expenses.

There was a defining Money magazine article in the late 1990s that shaped my outlook on budgets forever.  Of your earnings, a maximum of 50% should be spent on fixed expenses and 30% on discretionary expenses.  That leaves 20% or more that should be saved.  With a couple of exceptions, I’ve followed this rule religiously for over 20 years.   

2.     Career Choice

I wasn’t sure what to study in college but thought it would be something in the business realm.  Summer jobs as a secretary were much more enjoyable for me than waitressing.  I ultimately majored in accounting and worked as a tax associate at Deloitte after college.  Moving into personal financial planning has been so rewarding; I help families reach their financial goals and also earn a decent living.

3.     Wiggle Room

A budget is great, but life doesn’t always fit into a perfectly defined spreadsheet.  Having an emergency fund is crucial when unexpected events arise. It’s even better to go above and beyond. Consider creating an opportunity fund as well.

 

Financial Mistakes

Two common threads of my financial success are consistency and discipline.  Now, let’s shift gears and focus instead on my three biggest personal finance missteps:

1.     Home Ownership Too Early

One year out of college, I delved into home ownership.  I thought it would be a good idea to tie up my emergency fund savings into an illiquid asset, a home.  In fact, I only had enough to put 10% down in a rising real estate market (2005) and, in retrospect, should have saved at least 20% for the down-payment. The 10% shortfall was funded through an extra monthly expense called private mortgage insurance, or PMI.

My husband Bryan and I poured over $20,000 of improvements into the home but sold it in 2009 for the original purchase price. Factoring in real estate transaction costs and home improvements, selling our original home when we upgraded to a larger home locked in a substantial financial loss. This by far was my biggest financial mistake.

2.     Buying Low, Selling High

In high school, my Economics teacher challenged the class to create a test portfolio of five individual stocks and track performance.  It was spring 2000, and tech was big.  I choose Cisco, Hewlett Packard, and a few others.  Given my perfectionism and interest in the subject, I didn’t stop at the "fake" portfolio.  I invested $2,000 of my hard-earned dollars from part-time high school jobs into these companies.  My $2,000 investment declined to $1,000 within a few months.  To add fuel to the fire, my emotions couldn’t handle the decline.  The positions were sold at a 50% haircut.

Lesson learned? Buy low and sell high. Don’t buy into market frenzy. Take a long-term, methodical approach to investment management.

3.     Saving Too Much

This seems counterintuitive, right?  “Saving too much” isn’t referring to a definitive test that predicts excess funds during retirement.  It means taking advantage of the opportunities right in front of you.  For frugal savers like me, it can be hard to spend.  We work so hard but don’t always take time to enjoy life with the ones we love.

Additionally, we are called as Christians to be generous. Organizations like Generous Giving explore Jesus-like generosity beyond a traditional tithe.

 

The Art of Financial Planning

It’s easy to generically tell you the steps to build long-term financial wealth.  But REAL financial planning is an art.  And it’s messy.  It requires you to be vulnerable and share stories of your financial mistakes and successes.  Not everyone is ready.    

At WorthyNest®, we guide parents through important financial decisions using a values-based approach. Contact us to explore a one-on-one relationship.