Your Biggest Financial Mistake?

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!

Jaime asks:

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.

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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?


  1. My biggest financial mistake was not getting a part time job while at University. I got a couple of student loans instead and I am still paying them off 8 years after graduation. Well not for long, I am slowly getting rid of my overdraft which is my first priority then I am going to tackle the student loan. Ok I fessed up, whose next.

  2. My biggest mistake has been a weakness for individual stocks. I saw my investment in Worldcom go up in smoke. I’ve also invested in 2 or 3 other companies that even my broker called “lottery tickets”. In recent years I’ve stuck with mutual funds, especially index funds.

  3. Buying a house too soon, with too little cash saved. Did I mention it was built in 1925? Not a fixer-upper, but still a money pit like most old houses. The PITI utilities improvements were quite a stretch, though it’s better now that my income has increased. We’re in the process of refinancing to reduce the payment by about $150-250 per month. That will help too.

    Sometimes I think about all the cash I could have saved up in the last two years to put towards a bigger down payment in a better housing market. Oh well, hindsight is 20/20 and all that! Plus, I’ve learned SO much about personal finance as a homeowner.

  4. One big financial mistake led to another.

    Once upon a time, I only owed $59K on my mortgage and had about $20K in credit card debt. I refinanced my home at the peak of the market. Imagine the nice chunk of change I got!

    I started off smart – long-overdue computer upgrades, home improvement, and paying off those credit cards. I quit my job and started my own business. Then I financed a “nused” car. I finally had airbags, a cupholder, and automatic transmission. And for the first time in my life, a car payment.

    For various reasons, the business didn’t take off. I was left holding the bag. The money ran out. I started living off my credit cards and racked up $60K in balances. I ran from collections agencies, and eventually had 2 civil action lawsuits against me – a foreclosure and one credit card company came after me in court.

    This resulted in a broken relationship and Chapter 7. Right now, I’m still living in Florida while the ex, her son, and my daughter relocated to Tennessee.

    There is a happy ending in the works. I am moving to Tennessee soon and no bad blood remains. I am not interested in getting back together with my ex, but we are still on good terms.

  5. I had a few thousand dollars in a 401(k) plan when I got a new job. It would have been tax-protected had I rolled it over to a plan run by the new employer. Instead, I paid the tax and took the cash and used it to pay for a four-day vacation to Jamaica.

    We spent most of two of the four days in the airport (Air Jamaica is the “No Problem” airline — that’s the phrase used to respond to any complaints about inefficiencies in Jamaica). One day it rained. The fourth day was a blast.

    After I became a big saver, I went back one time and calculated how many dollars I spent per hour of time spent enjoying the sun on that trip. I have since blocked the number out of my consciousness.


  6. Glad to hear you’re human, Frugal Dad.

    I too fell into the lease trap on a new SUV (2002 Nissan Xterra) and am still paying for that mistake, nearly seven years later. Because I chose to roll a trade-in that I was upside down on into the lease (not to mention a Mazda 3 that I purchased in 2005), I’ve effectively been carrying the debt of three cars on my back for the past seven years. Talk about dumb financial mistakes!

    The good news: after becoming a loyal Dave Ramsey listener and avid personal finance blog reader a couple years ago, I’ve attacked my car debt with a vengeance – I’m currently paying $235/week or $940/month on it. By October 1st, I’ll be debt free other than my house AND have a reliable car with only 55,000 miles on it.

    Your writing has played a significant part in my personal success over the last year or so and I sincerely thank you.

  7. My biggest financial mistake was financing a $6,000 wedding ring, when I had absolutely not a penny to my name.

    I love my wife, but neither of us think that thing is worth it!

  8. My biggest mistake was buying a house at 22 with a boyfriend of less than a year. I was too young to truly understand the implications of putting my debt with someone else. I always made sure the bills were paid BUT he didn’t! Needless to say, when the bank called me at work asking if I was out of the house yet, I had no idea he hadn’t been paying the mortgage and I ended up having to declare bankruptcy because I couldn’t dig myself out of the financial hole he dug for us.
    It really sucked and it took a long time to rebuild my credit but it was a great lesson for me. I then took a great interest in money and how credit works. I read a ton and now I work for a financial institution as a loans officer. I never would have imagined I’d be working in the financial industry. I love what I do!
    I still have lots to learn and I’m working on implimenting all the changes that need to happen. With the help of reading blogs like this great one, I’ll get there.

  9. Cosigning my brother’s student loan.

    Just an absolute disaster financially since he is contributing nothing to the payment. (At first the monthly amount was $800 but now it is a more manageable – HA! – $650.)

    And spending $10K on liposuction was also not my best move ever, as well as taking full coverage off my financed vehicle. (I was young. And then, of course, I had a major accident which launched me off the side of a bridge.) But those two mistakes pale in comparison.

  10. I have probably said this before, but definitely the gym membership that ruined my credit history when I moved. It produced a stream of horrible financial options after that because of my ruined credit.

  11. Putting several thousand on credit cards in my early 20’s for “career placement” services that ended up being useless.

    Actually though it ended up being a great investment. Working hard to pay off those credit cards put me on the right financial track early in life. Seeing many people around me who never learned that lesson I realize it was priceless.

  12. My biggest mistake was not understanding fees in 401k and ira investments. Until recently all of our iras were in ‘actively’ managed funds. I have decided that I am moving all of our accounts to low cost index funds, like vanguard and trowe price, that I will manage myself and review with my husband. I hate to think the money I have wasted over the years in fees. It is an expensive lesson to learn.

  13. Frugal Dad – I’ll see your bet and raise.

    I sold a house I didn’t need to. I lost several hundred thousand by doing it.

    I’m convinced that we all do the best we can at the time. I had to forgive myself in order to not repeat those idiotic mistakes.

  14. I’m with DivorcedDadFrugalDad. Marrying the wrong man and trusting him with real estate and other decisions. Like DDFD, I’m still paying for that – though the ex is long gone.

  15. I’ve made a few financial mistakes in the past. My biggest financial mistake happened when the housing market was way overpriced and I cashed out on the equity of my home things got worse. One day my wife and I decided to stop by the car dealership “just to take a look”. To keep the story short we ended up buying a $60,000 SUV. It was my first time to buy a car at a dealership and I had no experience in dealing with car dealers and we bought the car on an impulse and emotions. A year later we sold the car for $17000 less than what we bought it for. I sold the car because I didn’t want to be reminded of such a stupid financial mistake.

  16. Biggest financial mistake?

    Not going to the more “prestigious” college I was accepted at and getting an advanced degree.

    Had I truly known that this is the kind of stuff that really matters to the folks who hire (not your actual abilities, experience and/or skills) over the years, I would have chosen a different school and taken an advanced degree.

    But silly me, I thought that actually DOING the work in the real business world would count for something. Performance, not “pedigree.”

    There are far too many people in business, who, for whatever reasons, ascribe more value to those who went to the top schools. Regardless of how these folks have performed out of school. It’s not bad enough that they get preference in getting interviews. It’s that their resumes are not even fully scrutinized to see if they exceed (or at least compare favorably to) other candidates.

    You just can’t compete in some industries.

    Bill Gates and Steve Jobs aside, in the real world of work, where you went to school and all those degrees are just the basics that are required.

    People say it changes. No. It doesn’t. True story: Was recommended by several people for a position at a private company, some 20 years after college.

    I met and exceeded the stated requirements and then some. The interview, with the owners of the company (who yes, went to Yale and Harvard!) consisted of them spending 30 of our 35 minutes together talking about where I went to college.

    The reason? To quote the woman: Where you went to school tells us who you are.

    Here’s what I wanted to say, but didn’t: Really. I thought all that I had accomplished professionally might be more relevant to the position. The fact that you have spent almost half an hour talking about what happened 20 years ago, versus all that I have done in the last 20 years, makes me question what you value in your business. Actual performance or a degree.

  17. A few years ago my wife and I were running a business on eBay and decided to really expand the business…using credit cards.

    Bad move.

    When things sell for less than you pay for them, you’re left with credit card debt you hadn’t planned on.

    I definitely regret that, but at the same time, I wouldn’t change it because it taught me more about handling money.

  18. My big mistake was to sign up for some shiny new credit cards while in college, because they were giving away t-shirts.

    While my spending didn’t get completely out of control, there were some big expenditures on those cards including a trip to europe, a new tv and some nice stereo equipment.

    Next time I’ll be paying cash – and those credit cards are long gone.

  19. Graduating college with 30k student loans, Selling a home and making 30K. AND NOT PAYING OFF THE STUPID STUDENT LOANS RIGHT THEN AND THERE!!!!!! I have not forgiven ourselves over that yet.

  20. Within the first month of marriage my wife and I funded a living room suite and dining room suite on credit cards. We are still paying them down today.

  21. Big Mistake #1: At age 14, I allowed my parents to have authority over my accounts. I didn’t start a secret account until two years later, and even then most of my savings got stashed in a location controlled by someone besides me. I didn’t realize, at the time, that it would give them an unhealthy amount of leverage over me such that they could use financial pressure to advance their social standing at the expense of my mental and physical health, and at the expense of my long-term financial interests.

    Big mistake #2: In the area of “side hustles”, I should have gone into business for myself ten years earlier instead of trying to find “real” employers. The business I make for myself is far more lucrative.

    Big mistake #3: Buying real estate that had water damage. Most of my profits were eaten up in toxic mold remediation.

  22. A couple come to mind:

    Buying a brand new car even though I always preached to never buy a new car. I had a good reason, but still a silly mistake I would take back if I could.

    Also, I made extra payments against my student loan debt that had a 2.125% interest rate when ING Direct had a 4.5 % interest rate. Now being married, my wife’s student loans are just over 6% and I now wish I had the extra cash to make higher payments on that higher interest debt.

    Stupidly Yours,


  23. Mine is the reverse; two weeks before finding out my wife was pregnant (which would lead to her quitting her job), we bought a cheap used car ($2000) with all the cash we had.

    3 months, 500 miles, and $3000 dollars of repairs later overdrafts at the bank, we wished we’d done something different. I donated the car to charity a little over a year later for a $700 tax writeoff. It was a decent car on paper with only 120k miles, but a total money pit.

    There’s something to be said for driving till the wheels fall off, but not every car will last that long.

  24. My biggest financial mistake was one that I allowed to happen. My stepson wanted us to “co-sign” a mortgage on a house he has been renting. “WE” (DH & I) barely discussed it as DH was determined to “help” his son (age 36 at the time). “Father guilt” got us into this one….I knew his son had a bad financial track record but DH ignored that. So, what ended up happening, the stepson COULDN’T qualify for the mortgage & we promptly became “slumloads” to a home we had never discussed “buying”. Five years, 3 re-fi’s & many last mortgage payments later (we had to pay the loan every month since it was in our name & he NEVER sent the check on time!)…I FINALLY told DH he could NOT retire from his job IF that da@@ house as STILL in our name!! DH gave the step son 90 days to secure a mortgage or sell the house (of course, DH was mad at me the entire time!)….Fast forward to 3 years after the stepson acquired his own mortgage (at a high interest rate, oh well!!)…the step son has NEVER missed a loan payment, is always on time & has completely rennovated the home. And DH & I are much happier & there is less contention in our home. Lesson learned: NEVER loan money to family or a friend that you can’t do without. It FOREVER changes the dynamics of the relationship & is just not healthy…giving $$ is one thing, loaning is a whole different ballgame!!

  25. My biggest mistake was buying a couple of stocks I hadn’t researched thoroughly. One was on the advice of my boss. Another I bought low, sold high and then bought some more until the company went bankrupt. I actually broke even on that trade, but it was still stupid.

    Overall, I think I haven’t made tremendous mistakes. If anything I am too conservative with my money and with savings.

  26. Let’s see, a while ago I decided to buy an SUV like you. I traded in my car that gave my 4,500 in negative equity that I made 220 payments on. I could barely afford that. I decided I could afford a 520 payment a month for 72 months on the fully loaded ford expedition. I never calculated the cost of gas or insurance increases in my budget. I was able to get out of that deal thank goodness! But, I bought a new mattress when I moved out. I had to buy the top one because I need my sleep. Well, it was on a 12 month same as cash, and I never made a payment until after that. I probably ended up paying about half the $2000 mattress in interest when I thought I made a payment, and I didn’t. They raised my interest rate to 30%, and I just finally paid that off. Never again!!

  27. 1) Following the advice from my parents that I shouldn’t work and should concentrate on school for the first few years of college, and believing my father’s promises that he would pay off my student loans. Now stuck with $24,000 in student loans…and I went to a cheap school!

    2) Buying a house with my husband last year. We had no money saved at all, so his parents loaned us a 20% down payment. It may turn out to be a good financial move, but I hate being indebted to family to the tune of $40,000 plus interest. I wish we’d just kept on renting and waited to buy a house until we could afford the down payment with our own money.

  28. Biggest mistake – well, there are several. But the one thing that set it all into motion, getting involved with a guy with whom I was fiscally incompatible with. Sometimes paying for your mistakes is quite literal…

  29. This one is three parts:

    1. For the first two years of college, I had the entire thing paid for through scholarships. Halfway through my sophomore year, I forgot about the deadline to reapply for the scholarships and, subsequently, lost it all for the remaining two years.

    2. Like teaspoon, I thought the work I was doing at college was enough to fill up my time and felt I didn’t have the extra time or energy to work while at school (I would slap my then-self if I could.) Which leads to…

    3. Taking out ~45k in student loans to float me through the final TWO(!) years. And this doesn’t even take into consideration the credit cards to pad my lifestyle.

    I’ve also lease a vehicle (or two). Hahha. Those were the days.

  30. I wrote about my top 5 money mistakes in a post of mine, but I’d have to say that one of the more painful ones had to be not carrying comprehensive and collision coverage on my car, and then getting in an accident. It cost $4500 to rebuild my car, and completely wiped out the emergency fund that I had worked so hard to build. That’s what it was there for, I suppose, but it wasn’t what I wanted to use it for.

  31. More than one in my history but my most regretable was using credit cards to buy loads of stuff that I just did not need. Digging myself out of that debt was miserable but I am freed by not having it.

    The best thing I ever did, getting a part time job a couple of times to get me on the right side of cash flow (always having a few dollars in the bank up front instead of chasing it to make payments a few days late). I would have never gotten out of debt without the effort!

  32. Trent, this may be one of my favorite posts of yours. Not that I want people to make mistakes but I’m so new at all these things and its my biggest fear (well part of my biggest fears). It is good to hear that others who are on top have made some doozies of mistakes and that they come out okay in the end.

  33. Getting sucked into a pump & dump stock scam cost me $45,000 in my IRA. That was the worst, and makes the two expensive German cars I leased sort of pale in comparison. Now I have an old paid-off car, no debt, my savings are in money-markets for now, and I paid a lot of money to learn a hard lesson.

  34. New build Beazer home, soon after purchasing a pizza franchise, back in 2005. Now that we’re in the doldrums, we’re going into foreclosure and bankruptcy – amazingly enough, we’re told bankruptcy will actually HELP our credit rating, how sad is that?

  35. My biggest regret was living in denial about money. I spent more than I made which of course meant that I used credit cards to make up the difference. I wanted to have it all. It all came crashing down when my student loans came up. I had credit card bills, a car loan, and student loans. Bad idea. I learned a hard lesson.

  36. Not listening to my inner voice with Worldcom- losing our entire investment porfolio. Instead I listened to my retiring (who helped us build that portfolio) broker’s son…Still hate the name Jerry. Fortunately, I always listen to my little voice now.
    Letting my brother in law work on my car at his new shop. He ended up replacing everything at a time we had little money. The thing that really needed to be replaced- a 79 cent wire!

  37. My biggest financial mistake was counting on $5,000 our relatives promised to give to us when we moved into our new house. I expected the check when we moved, but a few weeks went by and nothing showed up. I finally asked about it and the relative said “Oh no, you have plenty of money. We can’t give you anything right now becuase we’re buying new carpet” (for their whole house). We ended up liquidating our emergency fund to cover the $5,000 but the lesson learned was to never count on money someone says they’re giving you until the check clears!

  38. You simply have to be able say ‘no, thanks at that price’ at least once to the dealer. This gives them a strong message that you are serious about your research.

    You should also bring a piece of paper to the dealership and make sure you do all the math of the finance calculations yourself. The point is not that they will do the math wrong. The point is you will see exactly how the deal is structured. Do not be afraid to take the time to do this or look like a fool for mapping out your car deal in the dealership.

    My dad swears by this process,

  39. Letting two people who I thought were my best friends live off of me. I would’ve saved a lot of money if I hadn’t paid for all of us every time we went out to eat or did a series of exercise classes.

  40. well I’m still living my mistake.

    I bought 99 trans am a few years ago for 13,000

    I needed a car and the best loan i could get (due to the year of the car) was 18.5% and I agreed to it. I’ve always wanted that car, and I needed a car asap.

    Well a few years later, I still owe 10,000 and the car is worth about $5,000. Ive spent thousands in repairs and it has high mileage.

    I still don’t know what to do. I want to get rid of it and get something newer and more reliable.

    I have done some research and concluded the best idea is probably to sell privately and then just owe $5,000. But then when I get another car, I’ll still owe that get the idea. Not fun to be upside down in cars.

    Only other option is to have it “stolen” but that comes with a whole new set of problems!

    Lesson learned.

  41. Just found this post and felt like sharing. My biggest financial mistake was agreeing to a big wedding that we couldn’t afford. My husband and I had planned and saved for a small $10,000 wedding. Then my father-in-law offered us $20,000 if we had the wedding at his favorite reception hall and invited 120 of his closest friends. The cost of the wedding skyrocketed to $70,000 total and we had to scramble to find the $40,000 difference. I was seven months pregnant with our first child by the time we finished paying it off.

  42. Hmm…where shall I begin?

    I’ll just give the sweet and short of it.

    I was in real estate. I was flipping properties. House #1 was my private residence, which I had to sell in order to move into the house #2 (a banking thing). House #3 I gave me a much needed cash infusion to finish the work on property #2 and spruce up #1 to get it sold. House #3’s original market value started plummeting as the market grew sour. I took less on #1 than I would have if I had sold it just one year earlier (but that was never in the cards). Then in January, 2006, I had $100,000 (commissions and profits) never materialize. Banks were changing the terms of some clients’ loans, which caused a couple to cancel the deal. House #3 was not selling, and not finished. House #1 took longer to sell than hoped. House #2 needed EVERYTHING. I had three houses and three mortgages on my hands at the time, and NO money was coming in. Plus, I had to hire a lawyer to deal with a shady contractor. And I owed Uncle Sam.

    My bad decisions: taking on more than one property at the time; counting my chickens before they hatched, and I knew better; and working with that shady contractor who cost me more money and lost time.

    I got out, took a teaching position, which I never, ever wanted to do. So I may be about to make another financial mistake. I’m planning to quit the teaching gig, ’cause I hate it, yet I have very little savings.

    It’s one thing to not know and make a mistake. It’s another to screw yourself with the lights on and your eyes wide open.

  43. I think one of the biggest mistakes people make is getting into phone and cable contracts that are not that beneficial. Many people pay $60 a month for movie channels and watch one or two movies a month. They could easily get netflix for like $8.99 a month. I see people everyday making the mistake of buying CD’s of music at retailers when they could have millions of songs to choose from on Napster right now for about $6. Another problem are these cell phone contracts which really are deceptive. I see over and over again people paying 89.99 to Verizon when they could be paying at least half that without a contract. I am trying to start a business helping people with all things financial such as these tips. The idea is to be a person to call before you get into a deal like a new car that could be the worst decision of your life. Someone to tell you what interest rate and what cost you should really get before you make a bad decision. My email is if anyone has any questions about my business.