My Financial Choices: the Good, the Bad and the Ugly

Learning through firsthand experience is nearly always a good thing, but learning secondhand can occasionally be even better. Such is the case with this post; if you can learn a little through me you can save yourself money and headache.  Throughout this site I will use my own personal experiences as often as possible, so this post will focus on some of the good and bad choices I have made over the years. Suffice to say I did not set Amy and I up for financial freedom in my earlier years. The time-frame for the examples below is 2003 to early 2010, and during most of that time I was working as an engineer for Caterpillar. To put these examples in perspective my starting salary as an engineer in 2003 was $60k, which is equivalent to $80k today. This is not me trying to brag, but I feel you need to know what I was working with to understand how poor some of the below choices were. First, let’s start with some of the good choices I made.

My Good Financial Choices

• After graduating college in 2003 I had approximately $16,000 in student load debt. I had 10 years to pay it according to my loan term, but I wanted it paid off in about 4 years. I did manage to pay off my student loan in slightly less than 4 years.
• I contributed to my 401k the entire time I worked for Caterpillar. During that time the company offered a match to employees (basically free money), so turning down the match would have been a bad move on my part. I will go into 401k (or TSP) details in a later post, so don’t worry if this bullet doesn’t make sense now.
• In 2006 my wife and I bought our first house; it was a modest house that was affordable and not excessive for our needs. I liked the house because it had a 3 car garage that I could use to modify cars. The important thing was we did not overstretch our finances and become “house poor”. The process of buying and selling a house, as well as our ownership experience in general, is something I will discuss in a separate post soon.
• In my last 2 years working at Caterpillar I received a small bonus at the end of the year. I chose to save and invest this money, which helped us build the emergency fund mentioned next.
• We built up an emergency fund right before I entered the Navy in 2009. This fund actually proved essential for two reasons:

  1. 

     Somehow the Navy made an error in my pay and I was actually not getting paid my first 6 weeks. Of course being in boot camp made it very difficult to figure out what was going on and how to fix it. In the end it was a typo in my bank info, so my paycheck was not getting deposited. Without that emergency fund my wife would have had some serious problems those first 6 weeks.

  2. Second, we struggled to sell our house in 2009. As many of you know the housing market and economy in general crashed in 2007-2008. Selling a house in 2009 was very challenging, but there was not much we could do about it. Once we moved to our first duty station we were suddenly paying rent on that place plus our mortgage on the house that was for sale. Paying for two houses on E-3 salary was basically impossible, so we had to tap into that emergency fund to stay above water.
• Right before I left for boot camp I traded my rather expensive truck in for a cheaper, but newer, car for my wife to drive while I was away. It was not easy for me to do, but it was the smart thing to do. That move started a positive trend of Amy and I buying cars we could realistically afford; up until then we (well me actually) overspent on cars quite often.

My Bad Financial Choices

Now let’s go over some the not so great financial decisions I have made. Some of you may get a laugh out of the unwise money choices I have made, while others may see a little of themselves in the situations. Either way my goal is to help you learn from my mistakes, and I have definitely made my share. Here you go.

• We never had any sort of budget until 2009. Yes, that is correct: we basically “winged it” for more than 5 years. My attitude at the time was if the bills are getting paid and I am investing a tiny amount in my 401k then I am free to spend the rest; which is exactly what I did. It was not a smart way to go, and I absolutely do not recommend that path. I now consider a budget an essential part of basic finance.
• Although I did pay off my student loan early, I could have actually paid it off even sooner had I been more disciplined. It could have been paid off in less than 2 years, and had I done that I would have saved about $1,000 in interest.
• I am a car guy and have been for a long time, so I bought my fast car 3 months out of college.  For many years I wanted either a Corvette or a Pontiac Trans Am. The Corvettes were still out of reach, but the Trans Am was close to affordable. I was a 22 year old guy finally making a good paycheck. I went to the bank looking for a loan, but they declined me stating that I had too little savings and too much debt (student loan).  My thought was screw the bank; what do they know? The bank was 100% correct, but I was not going to let that stop me. I had no savings and a sizable student loan payment each month, but I wanted my car darn it. What did I do? I had the bank give me the biggest loan I could get approved for, and then I went and borrowed money from my sister and Amy both! Amy and I were not even engaged at the time, but she was nice enough to lend me the money. I paid both of them back about 8 months later, but this was a stupid idea on my part.

  

• Amy and I had very little to no emergency fund from 2003 to 2008. As I mentioned I spent most of the money earned; we probably had about $1,000 at most in emergency money (usually a lot less than that).
• In 2007 I took a loan from my 401k to buy something totally unneeded. What did I buy you may ask? I bought a twin turbo kit for my car to the tune of $6,000. That’s correct, I borrowed money from my own retirement fund to buy something I did not need; please don’t do this type of thing. Probably one of the single worst money decisions I have ever made. Not only did I rob from my retirement, but I paid a withdrawal fee of 10% on the money. Ouch!

  

• Overall, Amy and I wasted a large amount of money during those years. I spent thousands, probably 10’s of thousands, on my car, we both went out to eat a lot, and probably shopped too much (not sure because of the lack of a budget).  In addition to the Trans Am I bought a brand new truck in 2006. All told we had a fairly high income (almost $100K a year) but very little to nothing to show for it.

Well, that was a bit embarrassing to write down for all to see, but if it helps out someone it was well worth it. Perhaps some of you can relate to those examples and if so hopefully you can make a positive change going forward. If you read through this post and thought “this sounds like me” don’t beat yourself up too bad. As you can tell it took me a long time to remove my head from my butt and get smart about our money. The larger moral of my story is that if had known more about money and practiced better balance between spending for the present and saving for the future Amy and I would be much better off today.

With that time for a comic: according to Dilbert I used intuition a bit too much for making decisions.

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