Like so many other people, I have a love-hate relationship with money. I love what money can do and accomplish, and I hate how money is so fleeting. It seems like every dollar is hard-earned and easily-spent. Every dollar can be used in a million different ways and so much of life’s anxiety comes from determining how to use too little money to address too many possibilities.
When Aileen and I got married we were just twenty-one (me) and twenty-two (she) years old and earning less than $30,000 between the two of us—and this in one of the most expensive cities in North America. Since then, like most families, we have seen slow but steady increases to our income. Of course, our expenses have increased at just about the same pace as we have gone from renting a home to buying, from driving compact sedans to minivans, and from having no kids to three kids. As I look back on my life and financial history, I see a long list of mistakes Aileen and I made and a list of mistakes we managed to avoid. Here are a few of each.
Mistake Avoided: Credit Cards
There is always someone willing to extend credit to the young and foolish. Thankfully Aileen and I avoided using credit cards when we were young, and for many years either paid cash or debit for all of our purchases. Recently we have taken the opposite approach: We now buy everything on credit cards in order to maximize our points and cash-back. However, we are careful to always pay off the full balance every month. What we did well was migrating to using credit cards only when we had the finances and the self-discipline to avoid high-interest debt. We’ve never once carried a balance on our cards. Impact: Major. Advice: Avoid credit card debt at all costs.
Mistake Made: Learned Too Late
I was never formally taught how to budget or how to manage money. No school I attended offered courses or even classes on financial management. No one ever sat down with me and showed me how to draw up a budget. I had to learn it on my own. Eventually I read books by Dave Ramsey and Randy Alcorn and developed both a theology and theory of finances. Unfortunately, we had already been married for several years and had made more than a few sloppy and ignorant mistakes. Impact: Moderate. Advice: Develop that theory and theology of money as early in life as you can.
Mistake Avoided: Small House
When we were first married we spent several years renting houses while waiting for my career to advance and my salary to reach a level that would allow us to think about a mortgage (Canada has more stringent borrowing and lending standards than in the USA). Eventually we got to the point where we could think about buying a house of our own. We bought the cheapest starter home we could find in a good neighborhood in a great town—a 1,000 square-foot townhouse. At the time the location was ideal because I was working just down the road and we attended a neighborhood church. However, shortly after we bought that house I was laid off and began working much farther afield; around that same time we found a church almost a half hour away. But we have decided to stay put, even though it means a longer commute to work and church. We have owned only this one house and at this point have no plans to leave, even though it is quite crowded at times (and we haven’t yet dealt with the drama of three teenagers and only one shower). Our mortgage payments are low and we should have the house paid off years early. Impact: Major. Advice: Do not buy more house than you need, and once you buy, stay there as long as possible.
Mistake Made: Budgeted Late
While we always knew the value of drawing up a budget, and while we believed in their theoretical value, we always found reasons to put off making one of our own. At times this was simple panic: I could not make the numbers work, even though we somehow always had enough in the end. It wasn’t until too many years into our marriage that we got consistent in budgeting and in attempting to stick to that budget. This, in turn, kept us from being disciplined in our giving to the church and in faithfully stewarding our money. Impact: Moderate. Advice: Budget early and with the help of someone experienced.
Mistake Avoided: Student Debt
We entered marriage with a moderate amount of student debt. I do not recall exactly how much, but it may have been around $10,000. Aileen and I determined that we would rid ourselves of that debt as soon as we could, even though the interest was extremely low. In just a few years, and even with low income, we were able to pay it all off. Impact: Moderate. Advice: Get out of debt as soon as you can.
Mistake Made: Leased Cars
When we were just starting out in marriage we had very little money. Sometimes we had almost no money. And then someone smashed into my truck. The only options we could see were to buy a very cheap and very used car or to lease a newer and better car. We opted to lease, which is almost always a poor financial option. That said, we leased two-year-old off-lease Toyota Corolla’s and ensured there were no mileage restrictions or other ridiculous bits of small print. Even though it was not a great option, we had no horror story at the end of it. As soon as we could we stopped leasing and have been buying ever since. Impact: Minor. Advice: Understand that cars are always a bad but necessary expense and do your best to alleviate the pain.
Mistake Avoided: Retirement Saving
I began moving very small amounts of money into an RRSP (the Canadian equivalent to a 401(k)) when I was only twenty, and did so on the advice of a friend of my parents. Just a few dollars a month and a portion of each year’s tax rebate has added up over the years, and it has been slowly growing in a mutual fund. As income has increased, we have slowly nudged up our contributions and have learned to live without those amounts. While we are still far, far away from a reasonable retirement goal, we are farther ahead than we would otherwise be, and that money has another thirty years to gain interest before we can even touch it. Impact: Moderate. Advice: It’s never too early to start.
And how about you? What are some of the mistakes you made and avoided that may be helpful for others to hear about?
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