There are two areas of my life where I screwed up more than I would’ve liked to:
- My eating habits
- Personal finance
I am 28 now and have improved on both. However, when I was 24 and just out of university with my first job — I was carefree. Or so I believed. I was in fact careless.
In this post, I will share some of my personal finance mistakes. (I will keep the bad eating habits for another day.)
1. Abusing my credit card.
Credit cards have stigma attached to them, however, I don’t find them all that bad. They provide a welcome cushion to your personal finances and benefits like points and rewards if you’re into that. In fact correct usage of credit cards will help you improve your credit score, but there are still caveats to watch out for.
When I got my first credit cards, I used them incorrectly. I would buy things on my card and then pay the minimum amount requested by the credit card company. In this manner, I ended up paying way more than I should’ve.
Credit card interest rates are high. If you’re only paying the minimum balance, you likely end up paying more in interest than on the principle balance. Here’s an example (using this calculator):
Imagine you have an outstanding balance of $1,250 (about £1000) at 19 percent interest in November 2016.
If you make the minimum payment of $31 (about £25). The balance will be paid off in March 2035!
But if you pay twice the minimum payment, you will pay off the balance in November 2018.
A simple difference of $31 (£25) per month will have reduced your time by 16 years and 4 months.
I kept to making the minimum payment and it probably took me 2 years to realize how careless I was with my credit card payments. Eventually I made larger payments and a lump sum amount to clear the outstanding balance.
I still use a credit card, but I spread the cost but also make sure I pay it off quickly. And if I cannot pay off something within six months, it’s a sign that I cannot afford it. You should be wary of buying things you cannot afford!
Editor’s note: I personally recommend not using a credit card if you do not have the cash to pay off whatever you are charging right now. Credit cards are useful tools in many ways, but they can be damaging if you do not use them correctly.
2. Buying lunch every day.
When I started my first job out of university, I would buy lunch every day. Every freaking day. It wasn’t even a healthy choice to hide behind. I would go for either a sandwich and crisps or some pasta and a soft drink. This would set me back by approximately $4 (£3) per lunch. That, folks, amounts to $19 (£15) per week or $975 (£780) per year.
Not to mention the food was bad for my health. So, I was literally paying to screw up my health. In my eyes, it was the dumbest personal finance mistake I’ve made. Because, for five bucks (£3) you can buy a loaf of bread, cheese, and pickles to make your own sandwiches for a week!
Packed lunches don’t have to be boring. Just be brave and make something for yourself. I repurpose dinner frequently. For example, the other day I took the leftover roast chicken and roast vegetables in a sandwich for lunch. It wasn’t a clever lunch, but it wasn’t killing me with sugars, salt, and fat. I was eating something which was homemade and healthier than a sandwich from a restaurant.
So, go ahead and cut out buying lunch. Once a week I can understand–more than that and you will look back and reflect on what a bad idea this is.
P.S. If you have some clever lunch ideas, please do tweet me @career_geek, I can always do with more lunch ideas!
3. Not budgeting.
A simple rule they teach in MBA coursework: to improve on something you have to measure it. And this was something I failed to do early on.
Budgeting has a boring image attached to it. It still feels like something you have to do on excel (and there is nothing wrong with doing it on excel). But there are so many more apps and websites that you can use to budget better. My personal favorite at the time was toshl.
For the first time in my life I was measuring how much I was spending on bills, food, eating out, traveling, etc. And with that in-front of my eyes, I could then work out where I was being careless with my personal finances, and therefore which aspects to focus on for improvement.
Budgeting helped me become more sensible in life. So please, do budget or at least spend some time measuring how much you’ve spent on what in the past three months. It’s good to understand your spending habits.
I still budget. It still hurts to see how irrational I can be with some of my spending habits, but by knowing it’s a problem I can at least work towards resolving it.
4. Not saving money.
There are tons of ideas on how much and how you can save up.
Firstly, I couldn’t save properly. Because I wasn’t budgeting, I didn’t measure my spending and I didn’t know how much could I realistically save. Because of this, I would randomly put some money aside and then constantly dip into my savings to pay for things. But I was breaking rule number one of saving: the money cannot be touched. It isn’t business-as-usual account.
Now, I budget how much is required to pay my bills + socializing + enjoy a leisurely life, and then the remainder goes into a savings account.
I pay my car insurance annually, so I know one month I won’t be able to save as much as other months. That month I save less. Other months I save more. But do save. It doesn’t matter if it’s $10 a week, or $100 a month. The act of saving is what is important. A combination of budgeting + saving will help you identify more savings and it will slowly grow.
5. Shopping in-store.
I love technology, yet I was stupid enough to constantly buy things in shops and physical locations simply because I couldn’t wait three days for delivery. Almost everything, in fact let me rephrase that, everything is cheaper to buy online.
If you see a watch for $250 in a store, more likely than not, the same watch will be available for roughly $150 online.
It’s simple, really When you sell in a store you have to pay for electricity, rent, furniture, and staff. When you sell online you pay for electricity and staff. The savings are then passed onto customers.
Cash back sites are quite useful. They are basically work like affiliate marketing; Companies give a discount of say 10 percent to these sites and when you buy from cash back sites, they pass on a discount of 7 percent or so onto you and keep the remaining 3 percent that you pay. In the U.K. Quidco and TopCashBack are crowd favorites (if one can call my friends a crowd). My friends have even received £200 off on a £1200 trip abroad. Coupons are dwindling but they are still there — use them when you can!
An extra tip: If you find something online, add it to your cart but then don’t check out. Some online stores have abandoned cart recovery software, meaning that if you have an account with store, the software can see you’ve added something to your shopping cart but didn’t checkout, and it will send you a small discount code to tempt you to buy it. Using that technique, you’ll usually get a 10 – 20 percent off code to use.
So, there you go, folks. Simple mistakes that seem like common sense now ended up costing me at least thousands of dollars over the years.
Have you got a great personal finance trick or mistake you’d like to share? Let me know in the comments section. I think I’ve still got lots to learn!
Faizan is the founder of Career Geek. A fancy tagline for a blogger. He is also a fan of GenTwenty and loves writing disruptive careers advice. He tweets from @career_geek. You can catch him personally on .