Learning From Financial Mistakes

This is a guest post from Wayne at Young Family Finance. He writes to educate young families on the financial challenges of life, like paying your bills on time or retirement planning for young families.

Have you ever made a financial mistake? I guess a more appropriate question would be, when was the last time you made a mistake with your finances? Or maybe, What did you learn from your last mistake?

Whether you would like to admit it or not, everyone makes mistakes when it comes to managing their finances. Even those without debt or responsibly investing for their finances – everyone! The important thing, when it comes to finances, is not to avoid making mistakes, but learning from them.

What financial mistakes have you made?

When I bring up the topic of mistakes with your finances, does something immediately come to mind? Or are you struggling to think of something? Tradition would tell us that the person who is in the latter position would be better off with their finances, right? Less mistakes = better financial management, right? Not necessarily!

I am sure many of you have heard the, “I got out of this much debt in this number of months,” story a million times. I know that I have. When I hear these stories, I immediately wonder what poor financial choices people made that led them to this position. I often put myself above them because I don’t have any debt. Yet, in reality, I was lucky to graduate school without any debt while also marrying someone who did the same. When you really think of it, the other person who had to dig themselves out of a hole is probably more responsible with their finances.

Why financial mistakes can be a good thing

If you are wondering why having financial skeletons in your closet could be a good thing, let me explain. If another person has $20,000 of debt and finally comes to their senses, what do they do? Well, if they are serious about getting out of debt, they lower their expenses and try to increase their income – the basics of Finances 101. What can happen (although not always) is that this person has a new appreciation for being responsible with their money. They understand the value of each and every penny and will probably continue this lifestyle moving forward.

Now, if you compare this to someone like me that has never been in debt, at first glance I am sure you would take my position over the first. Yet, when it comes to people who lack the extreme challenges and stories, they often don’t manage their money all that well.

Appreciating what you have

While I can’t say that most people who stay out of debt are in that position because of pure luck or family wealth, I can say that most people who haven’t had a significant financial challenge don’t appreciate what they have. Yes, that old saying, “You can’t appreciate what you have until you lose it,” applies to finances as well in my opinion.

The simple fact is that if I have extra money each month, there’s good chance that I am going to blow it away on something worthless. The person who has radically turned their finances around in life will probably look at that extra income differently.

Regardless of how many mistakes you have made with your finances, try to make the most of it. Learning from your mistakes is something that can change your life around for the better.

I hope you don’t misunderstand what I am saying here: I am not saying that you should try to create financial mistakes for yourself so that you can appreciate your money better. Instead, take your current situation and use it as motivation for better. If you haven’t had to overcome any major financial challenges, keep that in mind as you are managing your finances.