Money Lessons Learned the Hard Way

However, you reside and also you learn, right? It happens to the best of us. And sometimes, the lessons you learn the exhausting way are the ones that basically stick. We asked numerous writers and bloggers in the personal finance community to recall some money lessons they learned through the faculty of exhausting knocks — here’s what they said:

Lesson 1: Treat student loans with respect – and keep in mind that it all needs to be paid back.

Lance Cothern (Money Manifesto): After accumulating over $80,000 in student loan debt over my wife’s time in college, we learned the exhausting way that you must only take out the minimal amount of student loan debt that you’re going to have to graduate. When you think you want some luxuries when you’re in college, we quickly realized we needed to pay all of that money back, plus interest, after she graduated. Fortunately, we were capable of hustle exhausting and repay the greater than $80,000 in student loan debt in lower than three years. Unfortunately, we needed to live a really frugal lifestyle — identical to we should always have in college — to make it occur.

Chenell Tull ( The monetary mistake I learned the exhausting way was not planning ahead when it got here to taking out student loans. I took the most every semester and told myself I might figure it out later, once I had graduated and had a great job with my degree – in geography, may I add. It was quite obvious that I knew nothing about personal finance or the job market throughout that point (post-recession, 2009). I left college with $72,000 in student loans, and I’m still paying for that mistake years later. However, I’ve learned to have a technique and put a plan in place BEFORE taking over that type of burden – though I doubt I might even tackle a car loan after this expertise.

Kirsten Whittingham ( Throughout my last year in college, my mother passed away. I inherited enough money to repay my student loan debt and that of my future husband’s. We were so assured that we might earn enough money to cover our payments that we used the money to purchase a new car (my car wasn’t running anymore) and for a house down payment. Those appeared like good investments at the time. In any case, a mortgage is “good debt.” Now, we try to sell our house (for a loss) and do not have that “new” vehicle anymore. However we still have $70,000 in student loan debt. Lesson learned: Repay debt first.

Natalie Bacon (The Finance Woman): The most important monetary mistake I made was financing personal undergraduate schooling along with law faculty. This landed me $206,000 of student loan debt. While my debt is right down to $130,000 now, it is a exhausting battle. I do not travel much and I do not own a home. I’ve learned a ton from this expertise, however unfortunately, it is a lesson that may take years to recuperate from. My recommendation to anybody considering law faculty: Don’t do it if you need to finance it! The pay isn’t worth the debt in today’s economy (see several New York Times articles for more on this). The positive from this expertise is now I do know more about money than I ever would have known otherwise – and that’s turning out to be priceless!

Lesson 2: Obey the power of compound interest, and all the time arm yourself with info before you invest.

Kate Dore ( I ended investing for a whole year throughout the monetary crisis! I used to be young, had a really restricted understanding of market cycles, and freaked out when my investments lost a piece of their value. While I used to be squirreling money right into a savings account, I missed out on some seriously good deals. Even worse, I bypassed the chance to earn compounding returns on recent capital for an entire year! Now, I think long-term and plan to ride out future market corrections by all the time continuing to invest.

Andrew Schrage (Money Crashers): I learned that waiting even just some years longer to begin saving for retirement can put an enormous dent in your final savings numbers because of the power of compound interest. Begin early and save as much as potential to really get your monetary future on target. Don’t wait and do not cater to your short-term wants as an alternative, as tempting as that’s.

Gary Weiner ( At age 23, I heard a radio program that includes my former brother-in-law, whom I idolized, looking for investors for his latest venture. I met with him wanting to invest, and he tried to talk me out of it before reluctantly selling me half a share (nearly $10,000, decades ago). I went to his workplace in New York with my check, which he made me re-write as payable to cash before giving me my stock certificate, numbered #0001. He told me I might receive info in the mail shortly, however when the mailing never arrived, I attempted unsuccessfully to get him on the phone. Finally, I went to his workplace which had mysteriously closed. The subsequent time I saw him was on the evening news being led off to jail for fraud.

Lesson 3: Whenever you make a loan, get all terms and conditions in writing (if you wish to be paid back).

Valerie Rind ( My husband asked for a loan to cover a cash-flow crunch at his begin-up architectural firm. Blindly, I gave him the money despite the fact that I did not: (a) know much about his monetary past; (b) ask about his business plan; (c) get a correct IOU; or (d) follow as much as see how the money was spent. One loan became several, and in the finish I lost my entire life savings, plus the marriage imploded. On the positive aspect, I cast new careers in personal finance and writing. A new life, a new life savings!

Lesson 4: Do not get on the new-car hamster wheel – or buy more can than you’ll be able to afford.

Kimberly Parr ( I think certainly one of my worst monetary mistakes was buying a new car shortly after getting my first job, despite the fact that my paid-off Honda Accord still ran simply fine. After that, my husband and I traded our cars for new models each few years for the next decade, primarily chaining ourselves to two car loans for 10+ years. There is a good chance that Accord would still be running, and I might have about $100,000 more in internet worth as an alternative of the thrill of new car smell and heated leather seats.

Steven Donovan ( Certainly one of the biggest mistakes I made right out of school was buying a car that I could not really afford. I purchased a pleasant Mercedes Benz and I financed 100% of the car; add coverage, gas, and maintenance to the combine and I discovered myself very broke with a pleasant car. I learned the exhausting way that purchasing a pleasant car that you simply think you deserve and may afford is the reason most people stay in debt today. My money would have been higher off paying off student loans or investing in my 401(okay), not making payments to a bank for a car I could not afford. I have never owned a car since I sold my Mercedes virtually 5 years ago and I could not be financially happier.

Lesson 5: Do not forget to shop around… for everything!

David Rubenstein ( I got an excellent quote for car coverage right after graduation, so I stayed with that company for over 10 years. Afterward I came upon that after the third year, they were charging me amongst the highest rates going. Only after a friend told me to shop around did I understand how much money I wasted over the years. In fact, they tried to win my business back. However it was too late.

Donna Freedman ( After fleeing an abusive marriage I used to be so dazed that I signed up with my sister’s car coverage agent. Life got more hectic by the hour so I let “coverage worth quote” fall off the radar. 5 years later I used an coverage tool to locate a better deal and learned I might been overpaying by virtually $700. Did I mention “5 years”? What really made me shake my head, though, was that I assumed I “did not have time” to comparison shop – however I had time to do stuff like walk places to save $1.75 on bus fare, babysit, do online surveys, etc. What number of surveys would I’ve needed to do to make $3,500? Pick the lowest-hanging fruit first. Worth quotes for coverage, cellphones and cable/Web provide the most bang for the budget.

Lesson 6: Don’t fall into the straightforward financing lure.

Grayson Bell ( I learned to not get sucked into low financing promotional rates, particularly when listening to the radio. On a whim (seriously, a whim), after hearing an ad for a Jetski, I purchased one. Well, I financed it. They were offering $69/month payments, however what I did not catch is it goes up after a year and the finance charges were retroactive to the original loan amount. I did not pay it off, ended up breaking down, and I sold it for $800. I lost a ton of money and far of my pride. Certainly one of the worst monetary mistakes I’ve made so far.

Lesson 7: Do not buy a house without doing all of your analysis.

Daniel Zajac ( I purchased a house in my early 20s because I assumed it was cool. I totally underestimated other factors similar to location independence (particularly as a 20-something), maintenance, and transaction costs of a sale. Renting, in lots of situations, could be the best bet.

John Schmoll ( The most important monetary mistake I’ve made was buying our first, and current, house with no money down. We bought it a bit over eight years ago at the height of the bubble. We were about able to have a toddler and had the preconceived notion that we needed to be in a house. The lesson I learned out of it’s to wait and see financially and take your time in making a serious purchase. I allowed emotion to guide what we did as an alternative of taking a tough look at the numbers to see that it simply did not make sense for us at the time – quite that we should always have waited one to two years to build up a large down payment.

J. Money (Budgets are Attractive): My biggest monetary mistake was buying our house at the peak of the market with no money down, no budget, and within 48 hours of which means to look for an apartment to rent. I literally took one incorrect flip down a street and have become a home owner on a whim (!). Everybody told me it was “the American Dream” so I pulled the trigger without really asking myself if it were *my* dream. A helluva get up call to have, however one I’m very thankful for because it utterly rotated my funds in addition to my career :) Cannot say I regret it (though I still hate the thing).

Lesson 8: A life and not using a budget is a life and not using a plan.

Zina Kumok ( I interned in New York City before my senior year in college. I used to be truly making good money and hoped to save about $4,000 by the finish of the summer. However I ate out all the time (sometimes 3 times a day), used cabs as an alternative of the subway, and shopped regularly. I knew about budgeting, however did not try and limit my spending. The subsequent summer I had an unpaid internship – so having that $4,000 cushion would have been very nice. I’m still kicking myself for wasting a lot money, particularly once I knew I might graduate with $28,000 in student loans.

Michelle Schroeder-Gardner ( A monetary mistake I learned the exhausting way was that I worked full-time all throughout college, however spent my money on everything and something apart from my student loans and tuition bills. This led to me racking up far more in student loan debt than I needed to, which I needed to pay back later down the line (I’m fortunately out of student loan debt now!). I’ve since learned the way to manage my money higher, budget more realistically, and I do know where my true priorities are. Buying all of those clothes and meals out was an enormous waste of money!

Joseph Hogue (Peer Finance 101): I got in on the starting of the real estate boom in 2002 and made some really good money, an enormous begin for a 26 year old. Unfortunately, I made the same mistake so many others make when suddenly coming into money. I never had material wealth before and thought happiness might be bought. I paid cash for a new Porsche Boxster, a Rolex, designer clothes, and a house way greater than I needed. It was fun for a short while however I ultimately wasted lots of money. I still have a pleasant nest egg and do well however I wish I had learned the real value of things earlier.

Jacob Wade (IHeartBudgets.internet): I learned that giving an adolescent $100,000 to spend nevertheless they’d like is NOT a great monetary move. I received an inheritance of $25,000 once I turned 18, and at the same time received $70,000 after breaking my neck in a horrific car accident. I (fortunately) recovered quickly, however now had about $100,000, no budget, no plans, and lived WAY too near the mall. I blew through ALL the money in two years. I now know the way to handle ANY windfall in the future, and it involves mutual funds, not mall food.

Marissa Anwar ( I used to be young and naive, and really superficial when it got here to my spending. I spent $1,200 on three pairs of jeans (they were really, very nice ones with holes and rips everywhere) and took the tags off to sneak them in the house. My mom, bless her heart, determined that they looked too worn and included them in her Salvation Army roundup a couple of days later. I still have not told her how much those cost.

Lesson 9: Debt can have an effect on your life in additional ways than you understand.

Rebecca Stapler (Stapler Confessions): I used to think of student loans as “good debt.” Though I graduated from college without any student loans, I amassed over $100,000 in student loans throughout law faculty. Then I married one other lawyer and we combined our funds to discover that we were drowning in over $200,000 of student loans. I did not understand that being so heavily leveraged would require us to pay $1,300 a month in debt service alone, and impact our decisions about what areas of law to apply, what number of youngsters we might have, and where we might live. Now that we live that reality, we now have learned to love the frugal life. So, I assume that’s two monetary lessons learned the exhausting way!

John Rampton ( Once I was younger, I might pay the minimum on my bank card each month. I did this for nearly two years before I noticed that I wasn’t paying off a dime of my debt, I used to be simply paying that $200/month in interest. I then sold my fancy car to repay the debt. I literally paid of my debt twice over. Since that day I have never let something get past one month on my statement without paying it off. Sometimes you simply need to pay it to learn.

Lesson 10: Cash flow trumps assets (and everybody wants an emergency fund).

Kurt Chisholm ( I used to be a great saver in college. Because it was in the late 1990s, all my savings went directly into the stock market. How might I lose? The reply got here in 2001-2002. I needed to dip into my savings to pay for a big purchase. I needed to sell my stocks to make this purchase. This was painful, and it taught me that it is very important have an emergency fund or about six to 12 months of my earnings in cash. Don’t “invest” your emergency savings. Cash is king.

Amanda Abella ( I wasn’t being diligent with saving up an emergency fund and as luck would have it I had an unexpected dental procedure done at the finish of last year. It wasn’t covered by coverage (naturally), so I got myself into some debt by putting it on the bank card. It sucked. Now I’m super aggressive about putting money in my emergency fund.

Todd Tressider ( My biggest monetary mistake was selling a profitable, stable business for a comparatively small multiple of cash flow. By the time I paid taxes on the profit there was no way I might replace the revenue stream by investing what was left. Quite than enjoy the sweet milk of this cash cow business I foolishly slaughtered it for a couple of pounds of hamburger. The lesson learned was how a perpetual stream of cash flow can truly be much more exciting and valuable than a big, lump sum of cash after paying taxes on the gains.