I have given up on my personal facebook account (you can find me on twitter, though @physphilosopher). I am sick of it. The biggest reason is that I was tired of people pretending to have these “put together” lives on facebook. Life can be ugly, messy, and altogether broken. So, I decided to stop propagating the facebook “all is well” machine.
I think that the same problem exists in the personal finance blogging community sometimes. Post after post of people knowing how to “do it right.” While I love the advice I get from each and every post (and I love the personal finance blogging community, too), it can get old seeing people who seem to have it all together. We can’t all be experts…so I’ll settle for the fellow-man-on-the-journey role.
Well, this post is going to be exactly the opposite of all that put together nonsense. We are going to discuss five financial mistakes that I have made in my life and the consequences of each mistake. I want you to read this in a certain light, though.
The light is this: You, too, can make it to financial independence despite making stupid mistakes like me.
1) How the GI Bill should NOT be used
My dad was a Navy guy. Unfortunately, while he was in the Navy, he was shot during a hunting accident and has been disabled since then. The bullet hit his spine, amongst other things. Miraculously, he can still walk, but has atrophied legs below the knees.
He also has the most legit chronic regional pain syndrome (CRPS) I’ve ever seen: atrophied shiny/atrophic skin, hairless legs, hyperalgesia, paresthesias, burning sensations. He has it all. Never heard the man complain, though. He was my idol growing up.
There were a lot terrible things that came out of my dad being shot, but one good thing that came out of it was the GI Bill. As his dependent, I was allowed to take part in the GI Bill. I also had a full academic scholarship in undergrad. So, this meant that every month I was given a check to spend or save however I wanted. It was cash in my pocket.
If my memory serves me correctly, the check was for more than $800 each month.
Naturally, I put every dime into an investment account via the Vanguard Total Stock Market Index. At this point in time, that original $38,400 is now worth about $80,600. It’ll be worth over $500,000 by the time I hand it to my kids when I die.
Oh, wait. I was stupid. And that never happened.
Every single dollar, quarter, nickle, and dime was spent on stuff. I spent it on late night runs to taco bell (cheesy gordito crunch for the win!). It was spent on poker nights (that I usually lost). I spent it on gas for my car, going to the movies, buying video games, and my friends.
Now, not all of these things are bad (except taco bell; that probably is bad). That said, I could have been a lot further along my financial independence path if I had saved that money. But, guess what, I can’t turn back the clock. Opportunity lost.
The really sad part is that I have now learned that I could have used the GI Bill for medical school. I basically would have come out with zero medical school debt, if anyone had told me that the GI Bill could be used after college. Oops. I’ll probably write a stand-alone post on this topic at some point.
2) I used to suck at pretend budgeting
When I was a fourth year medical student (and still knew nothing about personal finance) I had a rough idea about how much money we spent each month. My wife was a teacher earning $30,000 per year. I was a poor medical student. Did I mention we sucked at personal finance decisions?
Anyway, interviews cost a lot of money, and I thought, “Hey, its just a drop in the bucket!” So, I bought flights, stayed in nice hotels, and went along my merry way. Well, that was until the last month of my fourth year when I realized I screwed the math up. My wife had stopped working because we had our first kid at the beginning of fourth year.
And guess what? We wouldn’t get paid in my intern year until the very end of my first month in July.
Wait, you mean you don’t get paid on July 1st? Well, shit. I didn’t know that. So, my wife and I were short about $5,000 for the month and a half before I got paid. We hadn’t saved enough (or I had spent too much of it on the interview trail).
With this mistake, my grandmother fortunately stepped in and saved the day. She had a CD maturing for exactly $5,000 and said she would give us the money interest free. All we had to do was pay her back at $50 per month during residency and the rest when I finished. Thankfully, I didn’t have to put this on a credit card.
Still, this was another stupid financial mistake I made. And I am still going to make it. You can make it, too.
3) Not sure if you’ve noticed, but I currently finance a car.
Yep. You heard that right. Someone who owns and runs a website that discusses personal finances…finances a car. As I often say, “You can’t fix stupid (although with anesthesia you can sedate it!)” In this case, I am the stupid one. Or am I?
I’ve written about my intentional spending philosophy multiple times. I’ve even mentioned the car I am financing. I try to be transparent, and one of the biggest reasons why is that I want people to see that you can live your life and achieve your financial goals.
Even if you are making some less than optimal decisions, such as financing a car. My car brings me great happiness despite being a “thing.” It was the one bump I took in lifestyle.
Now, don’t go buy the house, and the car, and put the kids in private school, and live in a high cost of living area….you won’t achieve your financial goals early in your career. Or maybe ever.
It’s just not going to happen. But you can make one or two (lesser) mistakes called “living life.”
4) What do you mean investing while you are going into debt at 7% interest is bad?
When I was in my first and second year of medical school I stayed a couple of times with some friends who were “good with money.” They encouraged me to get into the stock market and to invest.
Only problem was that I was accruing 6.8% interest on all of my loans, which would end up totaling more than $100,000 at the end of medical school and balloon to $140,000 by the end of fellowship five years later. My wife had an extra $40,000 from grad school that we combined later.
Investing while you have that kind of debt is just not smart. What I should have been doing is limiting my debt and preventing the pain that was to come. Man, that was stupid. And it doesn’t even require a lot of intelligence to realize that. Just some common sense and time spent doing basic arithmetic.
Apparently, I lacked both common sense and time. Or maybe I lacked the math skills.
I ended up selling all of this via short term capital gains taxes (i.e. regular income tax). If I had held it for a year I could have sold the gains at the long-term capital gains tax. It really wouldn’t have mattered. Oh, and when I did sell it, I am pretty sure I used it to take a vacation…. instead of limiting debt.
You, too, can succeed despite making dumb decisions. You just have to “wise-up” at some point! Hopefully, this post helps turn on the lights!
5) I didn’t save a dime in residency.
You read that right. I didn’t save a dime in residency. Unfortunately, no one taught me why that it was important or that it could be done. (I have a post coming up soon to show you why it IS important).
It’s one of the biggest reasons I created this website: To teach wealth and wellness topics to medical trainees (medical students, residents, fellows, PA students, SRNA students, dental students, etc). In fact, I have an upcoming “Resident Series” on some things that I think are vital for trainees to know.
That said, I didn’t save a lick in residency, and I am still going to be just fine. If I stick to the plan, I’ll be able to retire in my early to mid 40s despite not saving anything before the age of 31.
This doesn’t excuse residents from not saving! Saving is important. This is one of those “do what I say, not what I did” posts.
Learn from my mistakes, and not only will you make it…you’ll make it well ahead of me!
Take Home Point!
The point of all of this is to simply say that despite all of my mistakes (and these are just five of them, I have many more), I am well on my way to achieving all of my financial goals.
Thank God I woke up before I took the huge pay check bump. Lifestyle creep after you “make it” is a big mistake. As DocG would say, “Don’t confuse your goal post with your post goal plan.” Otherwise, I would have let lifestyle inflation destroy any chances I had of achieving financial independence quickly.
I hope that this post makes you wise up, but also helps you realize that if you have made some financial mistakes, it is not the end of the world! You’re likely gonna make it.
Share some funny (or not so funny) financial mistakes you have made along the way. Are you still going to make your goals? How much did it cost you? What would you tell yourself if you could go back in time?