When I was 20 years old, I bought my first new car – a 2002 Mitsubishi Gallant. I have to admit, the creamy pearl paint job and leather seats lured me in. Once a salesman started convincing me that I could afford it, I realized that I had to have it.
The problem was that I didn’t have a job…
I had just gotten my real estate license but was undeniably unemployed.
“Well, you should be able to make at least $30K a year selling real estate, right?” the salesman assured me.
Well, sure! If a salesperson makes that statement, then it should be true, right? I certainly fell for it.
Unfortunately, it gets worse.
At the time, the current dealership promotion was “No Payments For a Year.” That sounded great to me since I wasn’t actually making money. In theory, I should’ve been able to get my real estate career up and running within a year, right? Then I could start making payments immediately.
“I totally got this.”
Table of Contents
Shortly after buying my brand new ball and chain, I found out that I’m a terrible salesperson. Not interested? “Oops, sorry to bug you!” Can’t afford it? “Don’t worry, I totally understand.”
Now, don’t get me wrong: I’m definitely money motivated. You don’t turn a side hustle into a $200K per year gig without chasing the cheddar. But selling? Yeah, it’s not my strong suit.
See Also: How I Make $200K/Year on the Internet
To top it off, real estate sales is very competitive in my area. Realtors are everywhere, and I didn’t like competing with them. Plus, I enjoy helping people more than I enjoy trying to get them to buy something.
Reality Sets In
My first “real” adult job was at a group home for the mentally handicapped. The job was fine, but I made a miserable $9 per hour. By this time, my car was no longer shiny and new. Worse, the $550 monthly payment was due for the first time.
What was I going to do? I brought home less than $300 per week, and the payment on this monster was nearly half of my take home pay! Add in the cost of gas, insurance, and maintenance, and this car was costing me well over half of what I earned.
It was then that I began to realize what a huge mistake I had made.
One of the Many Reasons I Love My Parents
Luckily, I was living at home at the time. Having that safety net, a backstop that many don’t have, really saved me. With the bill now due, I started paying as much as possible. Some months, I would pay my entire income on that stupid car. Other months, I could barely come up with the minimum payment.
Fortunately, things changed quickly for me a few years later when I got a higher paying job. I was able to pay between $1000 and $1500 per month. I made the last payment in early 2006, just a few short months after marrying my husband.
Mistakes Made, Lessons Learned
My Mitsubishi Gallant was a big mistake and a total waste of money, but it taught me some incredible lessons. First, I learned not to buy things that I couldn’t afford. Spending half one’s income on transportation is just plain silly… and irresponsible… and dumb. I should have bought an older used car or kept the perfectly good car that I already had.
I also learned that taking on debt is self-imposed enslavement. I had to plan my life around that car. It stifled my creativity, robbed me of flexibility, and controlled my financial future. After all, how could I save money for my future while having such an enormous expense? I couldn’t.
Additionally, I learned that looking like you have money and actually having money were two totally different things. Sure, my car was shiny and new, but I lived at home with my parents into my mid-twenties because of it. I didn’t have any money to speak of, and every extra penny I made was paid toward my debt on that car. Unfortunately, looking fancy came at the cost of being broke.
A Lightbulb Moment
I sold that car in 2008, and I got about $2,500 for it. My prized Mitsubishi Gallant – the car I paid for with pure determination, sweat, and tears – sold for less than 10% of what I bought it for. Depressingly, I finally realized the true cost of that automobile.
See Also: My Biggest Money Mistakes
All the time that I worked to pay it off meant absolutely nothing. If I had kept the car I previously had, I could have saved tons of money, worked less, and probably changed my life in numerous ways. Had I not bought that car, my financial life could have turned out completely different.
But, I may not have learned all of these lessons either. Sometimes, learning the hard way is truly a gift.
Recovering from Financial Mistakes
If you’ve made a big financial mistake like I did, don’t panic. There’s hope. You can recover! Here are a few quick tips to help get you back on your feet:
- Get on a Budget – A budget is your most powerful tool for avoiding and correcting financial mistakes. It tells your money what to do and where to go, helping you make the most of what you already have. My favorite type of budget is a zero-sum budget, but any style is better than none.
- Track Your Spending – Tracking your expenses is a great way to find holes in your budget and keep you moving toward your goals. It forces you to be accurate, and keeps you from using estimations and guesses that could cause you to overspend.
- Create an Emergency Fund – Emergency funds are essential so that you don’t fall behind due to surprise expenses. When something pops up, just dip into your eFund to take care of it. Start by saving $1,000. Then, build your emergency fund large enough to cover 3 to 6 months’ worth of expenses.
- Learn to Say “No” – When it comes to my car, the biggest problem I had was telling myself “no.” I wanted that car, and I wanted it now. Unfortunately, I couldn’t afford it. Learn to live within your means, avoid using credit, and start telling yourself “no.” Your wallet will thank you.
- Learn from Your Mistake – Most of all, learn from your mistake and avoid doing the same thing in the future. Use this as motivation to get out of debt, then stay out of it forever! In our new book, Zero Down Your Debt (in stores January 10th, 2016), we show you the exact steps to do this by using a zero-sum budget, tracking your spending, and more.
Now that it is all over, I’m actually glad I bought that car. I think that the lessons I learned were worth the money spent. Now, 12 years later, I would never put myself in that position. I drive an older model minivan that’s perfectly fine for putting around town. My husband also drives a used car, and we’ve learned to stop spending on things that we can’t afford. Most importantly, as I have become older and wiser, I have realized that I would rather have money than just look like I do.
We all make financial mistakes. How you react after you’ve made them makes all the difference. Will you keep digging yourself a bigger hole, or will you recognize the error of your ways?
Your financial mistakes don’t have to define your future. There is hope. Apply what you’ve learned, and vow to move forward with a new attitude toward money, debt, and life. You can do it… and I’ll be here to cheer you on!
What money mistakes have you made? What did you do to recover? Let us know in the comments!