The Worst (Money) Mistake of My Early Twenties

Listen…I had it going on in my early, early twenties! I mean, you couldn’t tell me a thing. But wait, wait…this isn’t a vanity post. I’m talking about my finances. They were ON POINT!

Own home? Check! Excellent credit/credit score? Check! Money in my savings and retirement accounts? Check! First car paid for in cash? Check! As a young adult, I was the go-to person for money questions amongst my friends and peers.

My dad, a Chief Financial Officer (CFO) by trade, had been training me and my sisters in financial management since we could walk and talk…and I was making all the right decisions. Sounds like a dream, right? Mmmm-hmmmm…

Well that’s not what I’m here to talk to you about. My mid-twenties is when things went all the way south and took a turn for the absolute worse – to say the least. And it was exactly in those moments of uncertainty and seeming failure that I learned three critical lessons that I must share with you…a little later.

But first… what went wrong? Welllll, I decided it was time to start investing my money. So that was actually a great “idea” because although I was making out okay with my budgeting and saving, I always knew that investing was the real key to building wealth. Here’s where I messed up.

I decided to take the advice of a“friend” who, like in every bad story – immediately became the “smartest person in the room” from my standpoint. I didn’t do any major research on my own, nor did I bother to consult with anyone else about it…not even my dad (*shakes head sadly*).

My so-called friend’s advice? Open up a few credit cards and take out cash advances on them so that he could invest that cash sum for me. You know I’m cringing typing this right now, right? Sigh… But we MUST continue on because the lessons are on the way!

Needless to say, I fell flat on my face with that move. We’re talking “$35K in credit card debt on a teacher’s salary” flat! We’re talking “my business investment partner disappearing with my money and no return phone calls” flat! And there I laid for almost four years…in denial…refusing to accept that I wasn’t getting a dime of that money paid back to me.

When I finally decided that enough was enough and realized that it was up to me to pick myself up to get out of the mess I was in… things got worse. Wasn’t expecting that, huh?

It’s true!

The Great Recession of 2008/2009 hit, and with that went… my job, my remaining savings, my home to foreclosure, my long-time boyfriend, my pride, and almost all of my sanity! At almost 30, I found myself back living under my parent’s roof in my teenage bed with no job. I don’t think anyone (including me) saw a 7-figure net worth before the age of 38 in my future. But through the tears, came some “lightbulb moment” lessons that are important to share. Here’s what I learned.

Getting out of (credit card) debt isn’t magic…it’s a process!

Get “Unstuck”

It took me a loooong time to get out of pitiful/helpless mode about my debt issues… nearly four years. I went through every emotion (which was normal and expected): anger, denial, depression, sadness, you name it! You know what was the most detrimental to my progress – denial.

They say “denial isn’t just a river in Egypt”. It’s true; believe me. Let me just say this as plainly as possible: don’t let that be you! The sooner you can get yourself “unstuck,” the faster you can get started (and finished) clearing your debt.

So do yourself a favor and just make a move: grab a paper and pen, find that stack of bills you’ve been avoiding (over on the dining room table that’s never used), and get going on your debt reduction super strategy.

STOP Digging

The easiest way to make your situation worse is to keep piling on additional credit card debt. If you’re already in a ditch, put the shovel down. Temporarily step away from the credit cards…

I wish I could tell you otherwise, but I can’t. Even if you haven’t figured out all the “why’s,” “how’s,”  and “where’s,” of your money spending problem yet… the very least we know is that when you swipe your credit card, you’re using money that’s not yours – meaning you have to pay it back to someone. Also meaning, more debt owed…

The easiest and clearest positive shift signal you can send to your brain is to make the “out loud” decision to shut all credit card use down… and DO IT!

Figure Out Your Credit Score & DTI (Debt-to-Income) Ratio

One day you’ll likely need to borrow money again. Your debt-to-income ratio aka your DTI, is a calculation that determines how much debt you have vs. your income. It’s super important when you need to borrow money. Most lenders use your DTI as one of the factors to decide if you’re someone they trust to lend money to and then determine the maximum amount you could borrow based upon the other lenders you owe.

Here’s an awesome new (and free!) tool from Intuit called Turbo that will help you monitor both numbers. Combined with your verified IRS-filed income, Turbo will show you how you’re doing compared to others like you and give you personalized tips on how to get where you want to go. Get your free online credit score today!

Snowball Your Debt

Once you have all your debt identified, begin tackling your smallest debt first. The official term for this is the “snowball method”. Why do I l-o-v-e this method of tackling debt? It’s because seeing your debt disappear quickly is great motivation to keep you pumped up about eliminating the next one and the next one… and the next one!

It’s psychological…and who doesn’t love psychology? The brain wants what it wants.

In this case? Quick win satisfaction! Now if the interest rates on your higher balance cards or loans are sky high, you might want to consider one of the following options:

• Call your credit card company(ies) to negotiate lower rates. The better your credit, the more likely companies will be willing to work with you.
• Transfer balances from your higher interest rate credit card(s) onto lower interest rate card(s).
• Use a personal loan with low interest to restructure your credit card debt.
• Refinance your private student loans.

You can learn more about all of these other tricks and treats by using the search feature in the Budgetnista blog. 

Celebrate Everythang

I know we’re used to making a big deal about the “big wins” in our lives… and hey, let’s keep that up! But what about those little things that added up to that big win?

For example, you didn’t just get that huge job promotion out of nowhere. There were little things you did day in and day out to get you there: got to work early or left late, took on an extra project, solved a small work issue… you get the picture!

The same principle applies to your debt wins. Be proud of yourself for all those seemingly small wins that add up in big ways later: those extra dollars you paid above the minimum due, that $200 charge card you paid off, that “thing” you didn’t buy.

It all contributes to re-affirming your new and improved money mindset… and of course, helps turn that debt mountain into a smaller and smaller hill to climb!

Invest in Education Before You Invest Your Money… Anywhere

Do the Work

My advice to you is: don’t just take my (or anyone else’s) advice without also checking things out for yourself. If you’re having a financial issue that you need help with, do some research on it so that you can make educated decisions as you go about solving it.

Take the time and invest in yourself first!

There are plenty of free resources to get you started so that you have a good foundation:

• Internet search – read up on the financial topics that have you stuck
• Library – they’re still around you know; pop in and find the finance or money management section and get your “education on” free of charge
• Free classes/webinars – search the internet for free local classes or for free webinars you can take to help get up to speed on your problem areas

Get Your Info From the Right People/Places

After what happened to me, I would be crazy not to stress the importance of getting your information from reliable/trusted sources.

Make sure that you check the credentials and – if available – any documented track records of success (or not) for anyone that you are considering taking advice from… whether free… or especially… before forking over any money for their service(s). Google (or whatever search engine you prefer) is your friend here.

Take the time to get to know something about the folks feeding you information to improve your money mindset. It will go a long way to help you: avoid generally bad money advice or worse… lose money to an unqualified expert or yikes… scammer.

Your Mistakes Are Just Stepping Stones to the Next Level

Acknowledge Your Mistake

Don’t be so full of yourself. 🙂 You’re not the first person to have ever made a financial mistake… and you certainly won’t be the last. The smartest and healthiest thing you can do to correct your mistake (and prevent yourself from being a repeat offender) is to acknowledge it. Remember that denial river I mentioned? It’s a long one if you keep floating down it.

After You Stress… Assess

So there’s good stress and bad stress. Bad stress is the kind that leaves you stuck and scared and overwhelmed. Good stress may start you out with those unpleasant feelings… but you turn it around by finding a way to channel that energy as motivation to find a solution. Your fight instinct kicks in!

As you begin to remove the emotion out of the situation, you will be able to better assess those critical takeaways:

• What did you learn about yourself?
• What did you learn about your money mindset?
• What new skills did you develop in the process of correcting your mistake?
• What will you do differently going forward?

Don’t be afraid to jot it down/stick it on post-it notes/share it with others… You’ll gain clarity, focus, and if you use your new-found knowledge to help someone else out… lots of good juju. Which brings me to my very last point…

What’s the Blessin’ in the Lesson?

There’s always a bright side. How can you use what you learned to your advantage in the future, or better yet… to help someone else out?! For me, my biggest financial mistake catapulted me to my greatest wins thus far… a platform to serve as your “financial girlfriend” as we navigate our way to living richer lives!

I formed the Budgetnista when I was 30, in the midst of that financial storm swirling around me. I didn’t have all the answers then… and I still don’t. But it was coming up with an effective debt reduction strategy, educating myself with quality information from quality people, and using my big mistake as a footstool to the next level, that has gotten me to where I am today.

I can’t wait to hear YOUR story on how you turned your worst challenges into your best opportunities!

The views and opinions expressed in this content are those of the author and do not necessarily reflect the opinion or view of Intuit Inc, Mint or any affiliated organization. This blog post does not constitute, and should not be considered a substitute for legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.