Jaime wrote in this week to ask a long question about patching things up with a friend who has failed to pay her back for a loan. But it was her closing question that had an impact on me – so much so that I decided to share the question, and my answer, here for all the world to see. Feel free to share your answer as well. Maybe we’ll all feel better after this online confessional!
Please tell me you’ve done something equally stupid in the past. I know we all have financial skeletons in the closet, but sometimes I feel like I’m the only one in my circle who screws up. What was your biggest financial mistake?
Well Jaime, lots to choose from here! I’ve made just about every dumb move with money you could make. A few had more zeroes on the end of them than others. But I don’t regret making them because they got me to where I am today.
Still, there is one very big mistake I made at 20 years old that still haunts me today, nearly twelve years later. I leased a car. It was an SUV to be exact.
Photo by Edmunds.com
I’d been eying the new Isuzu Rodeo for a several weeks, but never dared to step foot on the car lot (at least not during business hours) to get a closer look. One morning, in a moment of weakness, I moved in for a closer look. I had no money to put down, no trade in, and no business being on a car lot. But, I was young and dumb and suffering from car fever. It didn’t take long for the salesman to find me – in fact, he must have seen me coming from a long way off!
I started off perusing the used Rodeos, but none of them really struck my fancy. The salesman effectively guided me towards the “new car” inventory on the lot, and that’s when I saw her. She was sleek, yet rugged. Roomy, yet compact. It was a brand new Isuzu Rodeo. This is the part of the story where I should have ran as far and as fast as my 1985 Buick Century (the reason I was on the car lot) would take me. Instead, I ran to the salesman’s office to “work out a deal.”
Of course I was sold on the leasing option since I had nothing down and no trade-in to speak of. I was told I would need nothing down, but would need to come up with the first payment and a few fees. I scrambled together the cash and eventually drove off the lot with my new, shiny toy.
Fast forward a couple years. The “newness” of the Rodeo had dwindled nearly as fast as the value of the thing. I was rough on the interior, and exceeded the mileage limits thanks to several trips to visit the new in-laws a couple hundred miles away. It would have cost me money just to turn the Rodeo in at the end of the lease. So, I financed the remainder in the form of a 36-month used car loan, extending the effective length of my car debt to nearly six years.
Fast forward another few years. In a similar moment of “I work hard so I deserve it,” I ventured back to a used car lot (at least I stayed on the used lot this time) and drove away with a new-t0-me Chevy Silverado. My trade in? That same Isuzu Rodeo with about $1,500 left on the loan. The dealership was nice enough to pay off my loan in exchange for me “taking the truck off their hands.”
Just a few months later, I realized I could not afford the Silverado payments and decided to put my new-to-me truck up for sale. I took the first offer and received about $1,000 less than what it cost me to drive it off the lot just a few months earlier, finally ending the spiral of debt that old Rodeo put me in many years before.
Looking back, I realize I should have driven that old Buick until the wheels fell off. I should have saved and paid cash for a used car. I should have never leased the SUV under terms I wouldn’t be able to live up to so I could turn it back in without penalty. But like I said, all of those decisions got me to where I am today – for better or worse.
OK, I confessed. So what was your biggest financial mistake?