Four Fat Financial Failures

Mistakes are part of life, might as well accept that.  I’m learning to accept that concept more as I get older.  When it comes to personal finance in particular hopefully our money management mishaps are smaller and infrequent over time.  For today’s post, here are four fat financial failures and some personal commentary on them that have the potential to derail any retirement plan.

Overspending

The simple fact is, unless you can control your spending you won’t have anything left over to save or invest.  So, when it comes to a healthy financial future here is the most basic financial truth:  spend less than you make.  In my 20s I didn’t follow this rule as well as I should have  – I spent a ton of cash.  Throughout my 30s I feel I’ve made up for some lost time.  A good budget that works for you is an enabler.

Too much house

Most big fat houses often come with big fat mortgages.  Beyond the debt repayment, you’ve got to consider utility costs for your home, maintenance and upkeep expenses for your home to retain its value.  A home can be a good investment after all; an appreciating asset.  The bigger the house the bigger the obligations, so consider what you really need in a home versus what you really want.   This might help you avoid buying too much house.  Admittedly, we owe a considerable mortgage on our house but we’re trying to kill this debt in 8 years or less.

Time fallacy

You do not have all the time in the world to save for retirement.  The earlier you start saving for retirement the less money you need to save when compared to saving later in life.  Consider an 18-hole round of golf as a loose analogy:  the front nine holes are your asset accumulation years and the back nine holes are your spending years.  You only have so much time to save for retirement before drawing upon the assets.  Our financial plan includes saving early and often while enjoying our health today and the great things life has to offer.  With some practice, patience and following some good financial fundamentals – just like your golf game – that work should add up to a respectable scorecard.

Your attitude sucks

Having money is not my goal in life.  I simply want to have some money to make more choices in my life.   My attitude regarding money is rather simple:  it’s a tool that provides choice.  Every week on this blog, I’m trying to keep the good habits that are driving us forward while learning valuable lessons from our financial screw-ups.  I think having an honest, open and positive attitude about money is healthy and and it’s one of the main reasons why I will continue to blog about it.  If your attitude about money sucks don’t be surprised if your financial future follows suit.

Overspending, too much house, believing too much time is on your side and having a poor attitude about money can have crippling effects on your financial future.  These are just four big fat financial failures I’ve shared today and I know there are more.

What big fat financial failures would you add to my list?

Mark Seed is the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I've grown our portfolio to over $500,000 - but there's more work to do! Our next big goal is to own a $1 million investment portfolio for an early retirement. Subscribe and join the journey!

21 Responses to "Four Fat Financial Failures"

  1. You’ve hit the nail on the head with all these points!

    My biggest frustration at this point is the time fallacy, as I find myself in the middle of the financial time paradox…20 years too late to take really good advantage of past market performance, but with 25 years left to take advantage of what may come.

    Better late than never I guess. 🙂

    Reply
    1. Better late than never for sure. I wrote before on my site that about age 50 is too late for retirement. I still feel that way, unless folks have considerable cash to invest. We don’t.

      Thanks for the comment!

      Reply
  2. One of our biggest failings was to simply invest rsp savings in big bank gics and funds. My wife worked for a bank and it was so easy to just pick an investment from their pile of -middle of the road, high fee investments.

    It is only in the past ten years that I have forced myself to make time to look after our pot of gold. To think that if I had put rsp savings into bank shares rather than bank products, the value has increased six fold since the late nineties.

    We haven’t had a mortgage for perhaps fifteen years, we just did not fancy a modern monstrosity that overhangs all sides of the lot.

    The mortgage was small but the minute that mortgage was paid off, we started saving all of the monthly money rather than changing our lifestyles. Looking back, that was a wise choice.

    Reply
    1. Been there, done that Richard, picking the big bank mutual funds thinking they were decent investments. I recall I wrote about that. Bank shares have been on fire for the last 15 years, I wish I invested in all our big banks in my 20s. *sigh*

      No mortgage, that’s great and no doubt being debt-free you’re in a good financial shape because of it.

      Reply
  3. I have a lot of anger towards my spending. Because looking at myself now, I am not overspending or doing any of the other points, but I am still always broke (at least it feels that way).

    Reply
    1. I think the key is to get into a good habit, just like anything else in life. Start small and keep at it. Big changes are the sum of very small changes over time.

      Reply
  4. Mark,
    My biggest failure was not buying a home soon enough. I rented for several years while I saved for a large down payment. I would have been much farther ahead with a smaller down payment and purchasing earlier. I would have been several years closer to my goals if I wasn’t afraid of debt.
    My suggestion to young people would be to buy as soon as you can and not worry about debt on your home. Pay it off as soon as possible, but buy as soon as possible!

    Reply
    1. Interesting comment John. Does that depend on the market though? Vancouver, Calgary and Toronto have seen huge increases in home prices. I’m not sure the spike is as large across the rest of the country. I don’t see anything wrong with renting while saving for down payment.

      No problem with your suggestion, as long as you’re buying a home you can afford.

      Reply
  5. Biggest mistake I made: let other people managing my money. Having manage my investments from the age of 25 to 50 will have make me retired many years before my targeted date – in five years from now.

    Other important mistake is: not optimizing my expenses. Buying cheap thing that always broke cost much more than buying something better. If you need to spend, spend it wisely and remember that the cheapest choice is sometime the more expensive. Too much money spent on too high mortgage rate, insurance too high. Spend wisely.

    I think that I did not made mistake with house: right size, right location, close to work to minimize transport and car usage. Paid in 11 years – first years were at 12% per year !

    Reply
    1. That’s a good one Hemgi.

      As for optimizing expenses, I agree that quality is not an expense!

      Having a mortgage paid off in 11 years, that’s impressive. Thanks for sharing those points.

      Reply
  6. “Time Fallacy”
    This part pretty much sums it up! Its why I started investing at 24 (only last year 😛 ) and already i am seeing some good results; helps to be in a nice bull market though. Although I do wish i could have had the cash around 2010….. ooooh the bargains that could have been with hindsight and capital!

    Reply
    1. You’re young, you have time. If you get into good habits in your 20s, your 60s are set for retirement. If you don’t have much in your 20s and 30s, you’ll have a hard time saving enough for retirement at any age. Time in the market is our friend 🙂

      Thanks for the comment.

      Reply
  7. These things are not too difficult to figure out, yet many people fail to manage their finances properly. We have to be disciplined in managing our money — I think that is the key to financial freedom — but it might take time for us to master it.

    Reply
  8. Mark,
    Here are ways that I look at the 4 financial failures, I’ll put a twist on them and try to make them appeal to a younger crowd seeing as how we are the ones who should be saving the most.

    Overspending: Rather than buy material processions to “Keep up with the Jones” save and invest your money so you can surpass them. A brand new sports car means nothing when you compare it to financial freedom. strive to be the wealthiest you can be.

    Too much house: what the hell happened to mobility? Don’t you want something that you can pay off in a short amount of time so that if you are given an amazing opportunity picking up and moving wouldn’t seem like an impossible feat to perform? Plus bigger house = more rooms to furnish, more furnish = less moo lah for you.

    Time Fallacy: you think you are going to be young forever? Trust me you will be old too and your going to regret not saving earlier.

    Attitude sucks: Why are you so scared to talk about money, you sure as hell like to spend it? talking about money has become so taboo to you that feel the need to escape when the subject is brought up. If you don’t learn your only going to pay for it later.

    Funny thing is, as I wrote this I was picturing me lecturing myself 3 years ago when i was 20, and about to buy my second sports care. HaHa

    Reply
    1. Hey Digger,

      Great comments. Couldn’t agree more about the overspending. More house = more spending, so that’s definitely aligned to problem #1. Everyone needs a financial lecture now and again, I’m not 23 like you, so I wish I had your focus back then!

      Reply
  9. Luckily, we don’t spend frivolously and we learned how to watch our money quite closely when we were younger. We didn’t have much, so we had to watch it so as to not slip into debt, but the habit has transferred over to the point where we are making MUCH more than we were and are still the types of people who are not frivolous spenders.

    Our house is big but not too big; we optimize the space and didn’t think a starter home was worth it, since selling is so expensive.

    Reply

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