This post originally appeared on methodtoyourmoney.ca and has been republished with permission
I’ve been dumb with my money. I have, and you know what? It feels good to say it. To get it out into the open means that I don’t have to feel guilty about my dirty little secrets. It doesn’t mean I don’t feel stupid for the mistakes I’ve made, I do, but I don’t have to feel ashamed and keep them hidden.
A recent survey of 5,200 people revealed that 47% have money worries that have caused them emotional stress. What’s more, 40% have had worries so severe that they’ve lost sleep over them. And the last troubling revelation; only about half are talking about these money concerns with others. Evidently, I’m not alone in having secret worries and guilt about handling money.
In this day and age, where we’ve been encouraged to talk more openly about topics such as mental health, sexual abuse, etc., I find it troubling that money is still such a taboo topic. From the results of the survey, to the subtle examples in the photos featured in the Globe and Mail’s Financial Facelift personal finance analysis, there is a level of privacy around our finances not seen in many other areas of our lives.
I’m not saying we need to be open books and bare our financial souls to the world, but it will be very difficult to improve our financial situations—be that our bottom line or the feelings of stress and anxiety we experience about money—if we don’t start talking about our money more openly.
So, in the spirit of bringing what was once in darkness into the light, let me reveal to you the top three dumb things I’ve done with money (and the one I narrowly avoided).
1. I bought Iraqi Dinar
This may be the one that I’m most ashamed of. A few years back, before my wife had gently encouraged me to build my financial literacy skills, I heard from a “friend of a friend” about a great “investment opportunity” investing in foreign currency, in this case, Iraqi Dinar. The general idea was that in the wake of the instability after the Iraq War, the Dinar was incredibly cheap because U.S. dollars were the currency being used. The thinking went that once the situation on the ground stabilized, and the Americans pulled out and the Iraqis began to run the country again, the Dinar would be reestablished as the national currency and its price would shoot WAY up! Essentially, the Dinar was “on-sale” and I should buy Dinar with my money and wait for it to explode in value.
It was easy money.
So I did. It was hard to find a bank that would actually let me buy Dinar, but one reputable Canadian bank let me do it. Fortunately, I only invested a few hundred dollars and I didn’t borrow to invest, or it could’ve been a lot worse.
Maybe the thing I regret most? I got my parents to invest in this as well. D.U.M.B. Bad son.
What I learned:
Anytime a “friend of a friend” comes to you with an amazing “investment opportunity,” RUN. Run like you’re Forrest Gump. Don’t look back. And don’t stop until you can’t hear their voices calling to you about “amazing value,” “historical examples of how this works” or “guaranteed returns.” Nothing is guaranteed and there is no such thing as “easy money.” Nothing. If you ever hear me tell you otherwise, please kick me in the butt (figuratively).
What I do differently:
I only invest in things I understand, that don’t promise getting rich quick. If it seems too good to be true, it is. That means I invest in index funds. I’ll talk more about them later, but the basic premise is owning a little bit of every stock on a particular stock market (Canadian, U.S., etc.). These don’t promise you’ll get rich quick. Actually just the opposite, to get rich slowly. There is also an incredible amount of research behind why these are the best options for the average investor, unlike the research behind Iraqi Dinar.
2) I bought a new car
I went into a car dealership looking for new wheels. The car I had, a four-year old Mazda Protege, which I loved, was getting a bit “old” in my mind, and I wanted an upgrade. I had a good job, was in a good place money-wise, and felt I “deserved it.” Plus, when I went in I got a smoking deal. They gave me 0% financing over five years, threw in a set of winter tires and a car starter, and it came with a great warranty, meaning any repairs would be “free” for several years.
And the kicker? The monthly payment was only $559 dollars (that number is seared into my brain), which I could easily afford. I was hooked. I signed on the dotted line and drove off the lot with an asset that was instantly worth around 10% less than I’d just paid. Brilliant.
What I learned:
If I told you I wanted you to invest in a product that would instantly lose 10% of what you paid for it, and then in five years, you could sell your investment for about 40% of what you originally paid, would you invest with me? Of course not. But that’s the math behind the change in value for a new vehicle. For my car, I paid around $30,000, meaning after five years my car was worth $12,000. That’s a loss of $18,000. Ouch.
But wait you might say I didn’t have to pay for any repairs because the car was “under warranty.” True. Sort of. There were some things that were under warranty, but the things that happened as a result of my own stupidity weren’t. Plus, do you really think I had $18,000 worth of repairs on a new car? No.
Car companies aren’t stupid, but they count on us to be. They know if we pay $30,000 for a new car, even with 0% financing (just a gimmick to get us to pony up the cash—they still get their money in the end), they are going to come out the big winners after five years. And now with them extending the term of loans to seven years and beyond, the monthly payments make these “deals” seem even more attractive. Don’t be fooled. These are financial anchors.
Few things have felt as good as when I paid off my car loan and sold that stupid car.
What I do differently:
We now buy cars that are two years old or so with low mileage, that have been taken care of by their owners. These cars have already had the bulk of depreciation happen (cars lose 15-25% of their value for each of the first four years) meaning a car that is three years old may be close to 50% cheaper than the original cost. That is just too good a savings to pass up. Plus many of these cars still have warranty left.
3) I bought a cruise for my parents
This is probably the pinnacle of my financial stupidity, the culmination of my financial ignorance, dim-wittedness, and naïveté.
I was at home one day when I received a phone call. Would I be interested in purchasing a Caribbean cruise at a discounted price? Immediately, being the good son I am, my parents popped into my mind. Their 30th wedding anniversary was coming up and this would be the perfect gift!
As all rational brain function ceased, I began to talk to the “nice” lady on the other end of the phone about the details. Doing my necessary due diligence (note: sarcasm) I asked about the particulars of the deal, what the refund policy was, etc. and was assured that if I changed my mind I could receive a full refund.
Sounded like a good deal to me, risk-free in fact, at least that’s what my prefrontal cortex was telling me (thanks STUPID HEAD!). All I needed to do to seal the deal was give her my credit card information over the phone.
I REPEAT: All I needed to do was give this complete stranger who had cold-called me the digital information to be able to charge my credit card an ungodly sum of money for a trip I had not researched, with a company I knew nothing about and had not investigated at all.
Sounded good to me.
I gave her my credit card information, hung up, and immediately knew I had made a huge mistake. (Thanks medial orbitofrontal cortex. That’s information that would’ve been really helpful FIVE MINUTES AGO.)
To make a long, and actually really interesting story, short, I ended up doing a little research and realizing that this company had scammed a lot of people out of money. Due to the fact that I wasn’t alone, I was able to check out some chat groups and find out what I should do to pursue a refund. After countless early morning phone calls to the Florida Department of Agriculture and Consumer Services in which I pestered, bothered, annoyed and informed them that I would be their worst nightmare and would not leave them alone until I got my money back, I received a refund cheque in the mail. I rushed to the bank, deposited the cheque before they could change their mind and put in the rearview mirror one of my DUMBEST financial mistakes.
What I learned:
I learned several things from this experience. One, don’t give your financial information out to people you don’t know. Even when I pay for legitimate things over the phone (the other day I had to pay a dental bill with my credit card over the phone) it makes me nervous. I am definitely a lot more wary of what information I give out. This goes for over the phone, but also electronically. There are a lot of phishing scams out there where people will try to get your financial info with really legitimate-looking emails. I had one the other day which totally looked like it came from Bell (my cell phone provider). Since I’m now very suspicious, I called Bell and they assured me the email had not come from them. Scam avoided.
The second thing I learned was that persistence coupled with knowledge can get amazing results. After I had been scammed, I did A LOT of research into how to get my money back. The recommendations I found online totally gave me confidence that there were steps I could take to get justice. Armed with this knowledge, I was the most persistent consumer the Florida Department of Agriculture and Consumer Affairs had ever dealt with. After I dealt with someone, I would tell them that I would be following up. When was the best time to call? I would call at that exact time. I was relentless, and they were actually helpful. I just didn’t want my case falling off the radar.
I have used this tactic (knowledge + relentless pursuit = AMAZING RESULTS) in other areas of my life as well, and it has proven to be powerful. Don’t take no for an answer. Just refuse. Be persistent and get results.
What I do differently:
I don’t buy cruises from telemarketers I don’t know over the phone.
4) I almost became house poor
When my wife and I got engaged, we were looking for a home to buy that was “ours.” I had a condo, but we wanted to start our life in a place that was new for both of us. We looked at buying a place that was a few years old that we could do a few minor upgrades to, but I’m not handy at all so we began to look at new homes and even building.
During our search, we came upon a house that really caught my eye. It was on a quiet little cul-de-sac and it was awesome. It was larger than we needed at the time—much larger—but I convinced myself that we could grow into it. It was expensive though and way over our budget. But after crunching the numbers and getting the insanely high mortgage pre-approval from the bank, we thought we could “make it work.” It would be tight. We’d have to cut back on a few things: no holidays, new clothes or dinners out. No gifts, cable or lattes. No furniture, electricity, heat or showers. Okay, I’m exaggerating slightly for effect, but it would’ve been really tight.
Basically, we wouldn’t be able to have any fun. We’d have a huge house, and no life. Ironically, we were both feeling that this wasn’t a good financial decision but neither of us said anything, until one night at dinner we both expressed that we weren’t feeling good about it. We talked about living in a smaller home, maybe just a bit outside of town where we would be able to get more house for our money.
And that’s just what we did. And I’m so glad. It would’ve sucked (and been really cold) in the unheated house!
What I learned:
There is constant pressure to inflate your lifestyle. We are constantly bombarded with messages about how we need more and bigger and faster and nicer things. We all (myself included) need to learn how to be content. This is hard. Really hard. But it’s worth learning, otherwise we’ll never be content and that’s a life I don’t want.
I also learned that a house, while we do spend a lot of time there, is not the be-all end-all. I value the “things” I own, but I value experiences much more. I want to travel with my family, to be able to spend money on gifts and to go out and do fun things. And I don’t want to put myself in a financial stranglehold that makes this impossible.
What I do differently:
Dion and I talk about money much more openly than we did before we were married. This is natural in some ways, but I do know that a lot of couples don’t talk much about their money. This is quite literally the silent killer of your financial future and sometimes your relationship. Communication is so key to financial success. Without it, secret spending habits can take place, resentments can build up and goals go unspoken and therefore not achieved.
For example, right now we are looking at building a new home. We’ve had countless conversations about what this might look like. We’ve talked about what we’d like in a new place, what compromises we’ll have to make, and yes, about how we don’t want to do something stupid to make ourselves house poor. We’re talking a lot, and that’s something that is critical to achieving financial stability and peace.
So those are the most stupid things I’ve done with money. As Dave Ramsey says, I have a Ph.D in D.U.M.B. I know we’ve all done dumb things with money, but like I said earlier, we need to talk about the mistakes we’ve made so that the guilt over these things doesn’t prevent us from moving forward. We can’t navigate to the future we want if we’re stuck looking in the rearview mirror feeling guilty or ashamed about our past mistakes. We’ve all made mistakes. All of us. Let’s talk about them and learn from them so we don’t repeat them or teach them to our kids. That’s one of the features of a person with a growth mindset; they don’t view failures as final, but rather as opportunities to learn and grow. Maybe we can even keep one another from doing dumb things. Let’s find better ways to move forward.
Matt Matheson is a husband, father and assistant principal with a passion for personal finance. He writes at www.methodtoyourmoney.ca where he focuses on methods and mindsets to inspire your finances.