We all have to eat a slice of humble pie every once in awhile, and today’s my day. I’ve made plenty of mistakes on my road to financial independence so far. Here are the four that hurt the most – the ones that still make me grimace when I think about them.
It’s not fun to relive them, but maybe it’ll prevent me from making dumb mistakes going forward, so without further ado:
1. Using an out of network provider for healthcare
I know you’re probably shaking your head as you read this, and saying, “How dumb can you be?”, and I’ll admit, I was young and ignorant at the time. I had brand new health insurance through the Affordable Healthcare Act, and hadn’t really figured out how it worked. I was in my mid-twenties and hadn’t seen a doctor on any sort of regular basis since I was a child, and I’d never spent much time in hospitals.
Then I got the news that I needed a medical procedure for something I didn’t previously know I had. I had recently moved to a new state, where I had no family and no close friends, and I was overwhelmed. The doctor who had diagnosed it was where I used to live, halfway across the country. Not knowing how to proceed, I found myself cold calling doctors and asking if they performed the procedure I needed.
What I should have done was go on my health insurance company’s website, and find an in-network specialist, but everything’s 20/20 in hindsight, right? Instead, I found a doctor with a kind face on the website of a local hospital. Because he was out-of-network, his fee didn’t count towards my deductible, and I spent an additional $1,600. It was definitely not my best move, and I’m now really careful to only use in-network providers.
2. Spending too much on car repairs
To be honest, this is a mistake I’m afraid I’ll make again, simply because I don’t know enough about cars. I’m hoping it’s something other people can relate to, and maybe offer me some tips on (probably the best of which is to learn more about cars – I know, I know).
It happened three years ago when I was living in a small town out west. I took my car to the only tire shop in town to have the tires rotated. They told me the tires were old, and not only did I need to replace them, I needed new struts. I’d never even heard of struts, but the mechanic assured me mine were about 50,000 miles too old. Frustrated, but knowing that I was about to drive my car across country, and it needed to be in tip-top shape, I paid $2,000 for the tires and struts.
It could be that I needed those things, but recognizing my ignorance, I should have driven the two hours to the nearest city for a second opinion. At the very least, I’m sure I would have saved some money by making the drive because prices are more competitive when there’s actually competition.
3. My car itself
Of everything I’m admitting to today, this hurts the most, because I LOVE MY CAR. I’ve driven it cross country four times with everything I owned in the back. It’s never broken down – never even gotten a flat tire. But, from a financial standpoint, it wasn’t the most economical purchase. It’s a Subaru that was seven years old when I bought it with 125,000 miles. It now has 160,000 miles.
I paid more than $9,000 for it, which, I’ll start by pointing out, wasn’t a bad deal. I got it directly from the owner for the Kelley Blue Book fair value. The issue is that there are plenty of cars that wouldn’t cost nearly as much with the same mileage. For example, I just searched my local Craigslist and found a Volkswagen Jetta for sale. It’s seven years old with 125,000 miles and only costs $4,500 – half of what I paid!
I’ll happily play devil’s advocate (I mentioned I LOVE my car, right?). Maybe it was worth the extra money. In most cases, you get what you pay for. Subarus are known for their reliability, and mine has certainly been reliable so far.
The area where I know for sure that I could have made a better choice is gas mileage. My car gets 20 miles to the gallon. The Volkswagen I mentioned above gets 25. That means I’ve bought 350 more gallons of gas than necessary over the 35,000 miles I’ve owned the car (and Volkswagens aren’t even the most economical cars!).
4. Not investing sooner
As I mentioned in the About section, I spent my twenties working in national parks and resorts. I didn’t make a lot of money, but I also didn’t spend a lot because room and board were typically provided to employees at a very low cost.
I didn’t know the first thing about investing, so my wages sat in my savings account, earning almost nothing. After many years, I got a recommendation on a mutual fund from a family member. Now I have a brokerage account, and any time my checking account goes above a certain level, I transfer the money and invest it. Seeing the returns I’m making makes me wish I started sooner. It really only takes research and a little bit of confidence.
There’s one common theme across all of these mistakes: I didn’t do my research. It wouldn’t have taken long – probably an afternoon to research tire prices, and only a few minutes to find an in-network provider, but it would have saved me thousands. Everyone knows that time is money, but seeing it illustrated by my own stupidity has driven the point home for me. From now on, any time an unexpected or large expense comes my way, I will do my research. It costs far too much when I don’t.
What’s your biggest financial mistake?