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My Biggest Money Blunders

Written by Brett McKay

For the most part, my personal finance history is pretty good. Ever since I started working way back in high school, I’ve always saved a portion of my earnings. I also have done a good job of controlling my spending. However, I have a few skeletons in my personal finance closet. I still get a pit in my stomach thinking how dumb these mistakes were, but you live and you learn, right?

Big Mistake No. 1: Totaling My First Car

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When I turned 16, I bought my first car. I used some money that I inherited from my grandpa to fund the purchase. Before that time, the money was socked away in a high yield CD earning me a nice return.

My dad and I went car shopping and I found an awesome 1998 red Isuzu Hombre pick-up. My dad and I were able to get a good deal and ended up paying $8,000 for it.

Fast forward two weeks. It’s my best friend’s 16th birthday party and he decided to go laser tagging. Instead of carpooling, our entourage thought it would be cool if we each took our own car and re-created the scene in Swingers where the guys drive to the party in the hills (I was a huge Swingers fan back in high school).

On the way back, I rear ended a huge Chevy pickup. The Hombre didn’t stand a chance. Don’t let the name of my pick up fool you. Hombres are dinky things. The entire front end of the Hombre was swallowed underneath the Chevy’s bed. My car was totaled. Thankfully no one was hurt, except for my little Hombre. The Chevy hardly sustained any damage. I think there were some dents on the bumper.

I was so depressed that I didn’t go to school the next day. I think I was more depressed about being relegated to depending on my mom for transportation again than I was about losing the car. However, my depression at the loss of money soon took the lead.

A few months later, I bought a 1992 Smurf Blue Chevy Cavalier for $1,800. I bought a Chevy Cavalier because Jon Favreau’s character in Swingers drove a Cavalier. However, mine was shaped like a box, and Favreau had a later year model with a sleeker design. It was a good little car. It got me through high school and my first year of college. Then I began having problems with it starting. It died a week before I left to live in Mexico for two years.

Lesson Learned

Totaling my car ended up costing me over $10,000. $10,000! I’m getting a pit right now in my stomach thinking about the interest that I could have earned with that. I did learn some lessons, though.

  • Drive carefully!
  • When I have kids, they’re going to drive inexpensive cars. If I would have bought the Cavalier instead of the Hombre, I would have saved myself $8,000. I say this now, but I’m not a parent yet. I’m sure it will be hard to say no to my kids. I need to start practicing saying no now.
  • Make sure to have decent car insurance.
  • Never re-create the car train scene like in Swingers. If I hadn’t been a chump and had car pooled, I would have had that pick-up still. The more you drive, the more you increase your chances of wrecks. This is especially true with young people.

Big Mistake No. 2: Buying Too Much Computer

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The summer I got home from spending two years in Mexico, I started to throw around some serious cash, especially with computers and gadgets. I was starting class in the fall, so I needed a laptop. Instead of going to CompUSA and finding one of those $400 lap top deals, I went on Dell.com and made a custom laptop with all the bells and whistles. I don’t remember half the stuff I had put on it, but I know that it was definitely too much computer for me. I was just going to type papers with it and surf the web, not create Industrial Light and Magic movies. I ended up spending $2,500.

However, I didn’t stop there. I got the bright idea that a Pocket PC would really boost my efficiency, so I threw down another $500 for an HP Pocket PC with Wi-fi. Of course I didn’t remember that I had already tried using a PDA a few years earlier and that I didn’t like it. I guess I was blinded by the idea of having an internet connection in the palm of my hand.

You might be asking where I got all this money to drop. No, mom and dad didn’t pay for it. Before I left for Mexico, I saved like a mad man. I set up a ladder CD system and invested some money. By the time I had gotten home, my money had grown considerably.

Well, I stopped using the Pocket PC after 6 months. I moved to the paper and pen system that I have always been comfortable with. I sold the Pocket PC on eBay for a little more than $150, so I lost $350. My Dell lasted me about two years, but during those two years I had several problems with it. Thankfully, I had the warranty to pay for it, but it was always a big hassle.

Lesson Learned

In a matter of a week I spent over $3,000 on a laptop that had stuff I didn’t need and a gadget I didn’t like using. $3,000! That’s a semester’s worth of tuition. Instead of taking out loans, I could have used that money to pay for school. I was such a chump.

  • Buy the cheapest computer possible. I really don’t have many computing needs. Just something to write papers with and surf the web. Consequently, I can get away with spending $500 on a computer. When my Dell finally bit the dust and my warranty was up, I went out and bought a $500 Compaq Presario. I’ve been really happy with it so far. Despite being $2,000 less than the Dell, I’ve had fewer problems with it. This piece of advice isn’t universal. If you have a need to buy a computer with high computing power, then the investment is well worth it. But if you’re like me, you can get away with spending only $500.
  • Take time to make big purchases. I think my biggest mistake with these purchases is that I made them so quickly. I didn’t take time to shop around for better deals. I bet if I had practiced some tantric shopping, I wouldn’t have bought the Pocket PC. I’m also sure I would have realized that I could have gotten a nice computer without spending a small fortune.

So, my biggest financial mistakes cost me a total of $13,000. Yikes. There’s no point in dwelling on it. I just need to take those lessons I’ve learned from my mistakes and move on. Hopefully, I won’t be repeating them in the future.

What are your biggest financial mistakes? Drop a comment so we can commiserate together.

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[tags]personal finance, Swingers, Dell, Pocket PC[/tags]

> Brett McKay | 10 Jun 07 | Frugality, Saving | Comments (15)

Personal Financial Advice Young People DON’T Want To Hear

Written by Brett McKay

New York Times writer Damon Darlin wrote a great article called “More Advice Graduates Don’t Want to Hear.” It’s a follow up from an article he wrote last year at graduation time in which he suggested to young college graduates different ways to save money. The advice he gave didn’t settle well with many grads and they wrote Mr. Darlin complaining that his advice was impractical.

How impractical was Mr. Darlin’s advice? Let’s take a look at his money savings suggestions:

  • Diverting 10% of your income to savings and ignoring raises and putting them into savings as well. This is a corner stone principle of sound financial security. Verdict: Practical
  • Learn to cook. Eating out is expensive. You can save hundreds of dollars if you prepared your meals instead of eating out all the time. Verdict: Practical.
  • Never borrow money for a depreciating asset. Assets that depreciate are the majority of consumer goods like CDs, DVDs, and computers. I guess cars would go under assets that depreciate in value. Many people use credit to buy cars, but you don’t have to. Be like my grandpa: pay cash for your cars. Verdict: Practical
  • Cut the latte habit. The latte factor was made famous by David Back in The Automatic Millionaire: A Powerful One-Step Plan to Live and Finish Rich. The idea is that small purchases (like $4.00 lattes) if done daily, can add up to a huge chunk of change in a year. Save the money you would use to buy a soda or a latte and sock it away in a high yield savings account. Verdict: Practical

Damon Darlin’s New Advice

Damon Darlin felt that last year’s advice wasn’t sufficient and decided to add some more money savings tips. Let’s see if they’re impractical as well.

  • Find a partner and stay together. Being married rocks. You get to hang out with your best friend all the time. I’ve also found I’ve been able to live much more cheaply than I did when I was alone. If you get married, be in it to win it. Divorce is a very nasty and very expensive affair. Verdict: Practical
  • Start saving while you’re young. Not only will you take advantage of compounding interest, but by getting in the saving habit, you develop a lower rate of consumption. By having a lower rate of consumption, you’ll need less money when you retire. Verdict: Practical
  • Maximize workplace matching mechanisms. If your company has a 401k plan, and they’ll match your contribution by a percentage, then for the love of Pete, take advantage of it. It’s free money! Verdict: Practical

Final Verdict

All of Damon Darlin’s advice seems pretty practical. I don’t understand why anyone would feel it’s impractical. I guess it’s another sign of my generation being extremely whinny and refusing to grow up. All he’s suggesting is to delay your gratification and you’ll reap financial benefits later on in life.

Hat tip to my wonderful wife, Kate, for sending me the article.

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Featured Resources

It’s hard to teach kids about using Credit Cards wisely, and unfortunately most accrue high debts before they learn how to control Credit spending. But having a Visa Card at a relatively young age and using it responsibly can actually help establish good Credit for the future.

[tags]New York Times, personal finance, college, Damon Darlin[/tags]

> Brett McKay | 04 Jun 07 | Saving | Comments (14)

10 Ways to Make Money And Save Money On Facebook

Written by Brett McKay

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Facebook is an amazing social network and it is better than ever with the addition of the market place and the application platform. Start leveraging Facebook’s awesome social network to make and save you money. Here are 10 ideas to get you started.

  1. Sell your old stuff in Facebook Marketplace. Facebook’s Marketplace is much like Craig’s List. Listing items are free, so you don’t lose money in commissions like you do on eBay. What makes Facebook’s Marketplace really cool is that others can see in your profile what you’re selling. So, you get free advertising for your product as well.
  2. Buy stuff on Facebook Marketplace. If you want to save money, buying used is the way to go. In the Marketplace you can find cars, TVs, furniture, ect. You can potentially save hundreds of dollars doing your shopping in Facebook’s Marketplace.
  3. Find a Roommate on Faceboook’s Marketplace. In addition to selling stuff in the Marketplace, you can post roommate wanted bulletins. One of the best ways to save money on rent and utilities is to split them with one or more people. You can decide whether your post shows to the entire Facebook network or just your local network. Your posting in Marketplace will be seen in your profile, so all your friends will see you’re looking for a roommate. So, instead of ending up with a mystery roommate, you have a good chance of finding someone you know.
  4. Get a job in Facebook’s Marketplace. Your next job could come from Facebook! Companies and individuals can post “help wanted ads” in Facebook’s Marketplace. You can also post a “job wanted” posting. I’ve posted one for blog consulting, no one has yet to take me on it, but we’ll see what happens.
  5. Install the Ether application. Ether is a really cool Facebook application that allows you to make money while giving advice to people over the phone. If you’re an expert at Spanish or some other school subject, you can charge people for your tutoring services. You set the rates and Ether provides a number that individuals can call. The call will then be forwarded to your personal telephone number.
  6. Install YouCam, Chatterbox, or the Walkietalkie application. These applications allow voice over protocall on Facebook. Instead of wasting valuable cell phone minutes talking to your friends, do it for free with one of these applications.
  7. Install the Lending Club application. Lending Club is a peer to peer lending service like Prosper. You lend money to others and they pay you back with interest. If used correctly, Lending Club can be a great investment tool.
  8. Install the Books application. The Books application lists the book you’ve been reading in your profile. You can connect with your friends who are also using the Books applications to trade books with each other. You’ll save money by not buying new.
  9. Promote your blog on Facebook. If you have a blog that you monetize, use Facebook as another tool to increase traffic. Add a feed from your blog to your Notes section so others can see what you’re writing. If they like what they read, they’ll come to your blog. You can also create a Facebook group dedicated to your blog to help promote it. Get all your friends to join it and all your friends’ friends to join it. Pretty soon you’ll have a group from which you can get more readers from.
  10. Save money on photos. My favorite feature on Facebook is the ability to share photos with your friends. Instead of printing off expensive rolls of film, just upload your pics from the latest get together on Facebook. If you find a picture you’d like to print, you can order one directly from Facebook at a pretty reasonable price.

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Check out Best Facebook Applications for more information on Facebook applications.

[tags] Facebook, Facebook Marketplace, money, personal finance, Ether[/tags]

 

> Brett McKay | 04 Jun 07 | Frugality, Personal Finance, Saving, Technology | Comment (1)

4 New Ways To Use A Dryer Sheet

Written by Brett McKay

Dryer sheets aren’t just for drying. They can serve double duty in your home in a variety of ways. Instead of using a full dryer sheet to dry you clothes, cut them in half. Use the other half in other parts of your home. It might not save you much money, but every little bit counts. So, for your consideration, I present 4 new ways to use a dryer sheet.

  1. Static Remover. If you put on a piece of clothing and notice you’re having some static cling, just take a dryer sheet and rub the clinging part down a bit.
  2. Air freshener. Throw a dryer sheet in your clothes drawer and closet. It will keep your clothes smelling clean and fresh. You can also keep them by a fan or air conditioner to give your room an odder lift.
  3. Dust cloth. Dryer sheets are dust magnets. I find dryer sheets especially useful for my laptop screen. What’s nice about using a dryer sheet is that the sheet will leave behind a residue that will help prevent future dust build-up.
  4.  Dish rag. If you have some stubborn food build up on your pots and pans, fill them up with water and toss and dryer sheet in. Let the pans soak overnight. In the morning, the baked on junk should come off.

What other ways do you use dryer sheets around the house?

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[tags]fugality, clothing, [/tags]

> Brett McKay | 31 May 07 | Frugality, Saving, This And That | Comments (5)

Ninja Negotiation With Your Cell Phone

Written by Brett McKay

Next time you go shopping for your next big purchase, make sure you have your cell phone with you. Most salespeople will match or beat competitor prices. Before you close a deal, call the store’s competitor and ask if they can offer a better price. Do this right in front of the salesperson. By doing this, either store can give you a better price on the spot. You save yourself time and money. You’ll also have the satisfaction of turning the tables on high pressure salesmen.

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[tags]cell phone, negotiation, money tips[/tags]

> Brett McKay | 30 May 07 | Frugality, Personal Development, Personal Finance, Saving | Comments (3)

Frugal Tips From Ralph Nader

Written by Brett McKay

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You might not agree with his politics, but you have to agree that Ralph Nader is one frugal guy. While Nader has assets in the millions, he still lives like he’s a starving law student. Here are a few tips we can learn from Mr. Nader’s life

  • Don’t own a car. Ralph Nader hasn’t owned a car since 1955. I guess he swore off them after he wrote Unsafe At Any Speed.
  • Live in a boarding house.
  • Don’t upgrade your technology. Mr. Nader still uses a black and white television. I can’t remember the last time I saw a black and white TV.
  • He isn’t married and he doesn’t have kids. I plan on having a family. The money savings don’t outweigh the joy of family life. However, I can see how not having kids would save me a ton of money. Clothes, sports camps, food, and education costs can add up. As my father-in-law says, “Kids are money sucking leaches.”
  • He buys clothes at the Army Surplus Store. Nader wears socks that he bought 20 years ago an Army surplus. Not only are the clothes cheap at surplus stores, they’re made to last.
  • He buys his clothes at thrift stores. Sure, Ralph doesn’t have the latest fashion, but he never looks like a schlump. You always see the guy in a suit and tie. However, instead of spending hundreds of dollars on his wardrobe, he’s only spending a few bucks.

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[tags]Ralph Nader, frugal[/tags]

> Brett McKay | 26 May 07 | Clothing, Frugality, Saving, Simplicity | Comments (5)
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