5 financial mistakes I made this year, and what I learned
There’s something I absolutely love about New Year’s. It’s nice having the opportunity to set new goals with nothing but a clean slate in front of me.
It’s a great feeling to look ahead, but it’s also important to look back. And I’m going to fill you in on a little secret: I’ve made financial mistakes, too. (Gasp!) Some of them major, some of them minor. But what matters most is that I learned from them.
So, in the spirit of the season, I’m putting down the Champagne for a second to reflect on my top financial mistakes of 2016, and shedding some light on what I learned.
1. Not having an emergency fund
Once upon a time (March), I was laid off from my first job out of college. It was devastating in more ways than one, but where I really felt the pain was with my finances.
I had always lived my life in a money-conscious way, careful to not be the one spending lavishly on things I really didn’t need.
Still, I was young and felt somewhat invincible, flinging my money around recklessly on bottomless mimosas without contributing anything to an emergency fund. Emergency? I was 22 living in Brooklyn. The biggest emergency that came to my mind was major subway delays or cracking my iPhone screen.
Then, I experienced my first dose of reality. I was suddenly jobless with only a small severance package and a little bit of unemployment insurance to keep me afloat. During my time of unemployment, not only did I learn how to make Cup O’ Noodles more flavorful, I learned the importance of establishing an emergency fund. It’s recommended to have enough to cover four to seven months of expenses, and now, I make sure to sock away 20 percent of every paycheck.
I learned the hard way how scary it is to have to pinch pennies in a city as ruthless as New York. I also learned that I am not invincible, and that whether it’s employment, health issues or a natural disaster, unexpected things will happen. Don’t let those events derail you. Have an emergency fund.
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2. Setting an overly ambitious budget
I had good intentions. I really did. But when I set my first budget for the year, I was way too ambitious. Cutting out Starbucks entirely? Giving myself a food budget that would likely leave me malnourished and miserable?
Setting the bar super high for how much I would cut back on things that made me happy, like the occasional shopping trip and my weekend brunches, discouraged me. I felt like I knew I was going to fail anyways, so why even bother trying to stick to the budget?
I learned how to budget realistically, and to focus more on moderately spending than not spending at all. Track your expenses for about a month before you set your budget so you have an idea of how much you can spend and how much you can save. That way, you’re more likely to actually stick to your budget instead of just setting yourself up for failure.
3. Buying a pair of really expensive shoes that I really didn’t need
There’s not much to say about this one. I did it. Impulsively. What did I learn? To not do it again.
4. Investing too much in others and not myself
I’m a competitive person, with myself and others. If you cheat at Charades, you better believe I’ll call you out, and I’ll spend hours staring at a Words with Friends screen just to try to get a higher-scoring word.
One area in life I really shouldn’t compete in, though, is with my saving and spending habits. At the beginning of the year, I felt myself constantly comparing and internally competing with the saving and spending habits of others. If one friend was saving more than me, I felt like a failure. If another was spending more than me, I felt jealous. When it came to money, I couldn’t help but compare my financial situation with others’.
I would try to justify their spending and saving patterns to myself, but in reality, it does not matter what your friends are doing. It matters what YOU are doing.
When it comes to your finances, focus on yourself and I promise you, you’ll be so much happier and so much more in control. It might take some adjustments on your end. I realize now I just can’t go shopping with certain friends because I’ll end up overspending, and that when it comes to saving, it’s not a competition.
5. Not celebrating the little victories
I blame it on the fact that I’m an Aries, but one character trait of mine is jumping from task to task without stopping to reflect. I meet one goal, I set another. I finish one assignment, I immediately try to tackle something else.
I made a lot of financial goals this year, like saving more and setting a budget, and I didn’t take the time to recognize (until now) the strides I have made since January.
Whatever your goal might be — whether it’s a financial, health or career goal — take the time to celebrate when you reach it. (When, not if … positive thinking!)
Savings goals are particularly hard. They require self-discipline, sacrifice and patience. It’s a big deal when you meet one of your financial goals, so give yourself a little credit. Treat yourself to something special, and take a moment to recognize how you’re slaying the savings game.
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