Money Mistakes to Avoid from a Financial Advisor
Ever made a financial choice that you wish you could take back? If you haven’t, congratulations—you probably have a spotless record with your flossing too! But if you still cringe when thinking about a past money mistake, you’re in good company. A recent survey from Credit Karma found that 76% of Americans admit to making at least one financial misstep.
We talked to four people who shared their money mistakes. You can learn from their experiences and avoid the same problems.
1. Co-signing a Loan for a Friend Who Didn’t Repay
At 25, Molly Watters was a graduate student when a close friend asked her for a favor: to co-sign a $10,000 student loan. Now 40 and living in Hollywood, MD, Watters recalls giving it serious thought. “I’m the type of person who would do anything for a friend, and when she asked, I felt like I should help,” she says.
They agreed that payments, which started right away, had to be made on time. Her friend initially stuck to the agreement, paying $10 per month consistently until graduating in 2010. But when the payments increased to $125, her friend stopped paying altogether.
The fallout from this decision was tough. The damage to their friendship was beyond repair. Watters also had to handle the financial burden for over ten years. To protect her credit, she took on the payments until the loan was fully settled in 2022.
Her takeaway: “If you co-sign a loan, be prepared to pay it off yourself if things go wrong,” she advises. “Think carefully before making that kind of commitment.”
2. Borrowing from Your Future Self to Pay for a Wedding
Bethany Marlatt, 36, wishes she had a better financial education. She regrets a big money decision she made with her husband.
Living in Sugar Grove, IL, the couple faced challenges while planning their wedding, struggling to cover costs with cash. They were already facing high-interest credit card debt. They also had a car loan with a steep 26% interest rate because of a low credit score.
“We planned to save up for the wedding, but the expenses just kept getting out of hand,” Marlatt recalls. To cover the wedding costs, they decided to take out a $10,000, 2-year loan from her husband's 401(k). This strategy helped them avoid penalties and fees from withdrawing money.
However, it still hurt their long-term finances. They sacrificed several years of potential tax-free investment growth.
The wedding was beautiful, but in hindsight, Marlatt wouldn’t recommend the same choice. “We didn’t realize how crucial saving for retirement was until we got older,” she admits.
3. Moving in With a Partner Without a Clear Agreement
A decade ago, Misti Nippert, now 40, and her fiancé decided to share a rental home in Hendersonville, TN. But when their relationship hit a rough patch, Nippert asked her fiancé to move out. Although his name was on the lease, he stopped contributing to rent and refused to cover the damage his dog caused.
Nippert found herself facing $17,000 in costs, including four months of unpaid rent, window replacements, and carpet cleaning. She drained her savings, but it wasn’t enough, so she had to take out a high-interest loan and borrow money from her father.
“It took me two years to recover financially,” she says. "I learned my lesson. Now, I won’t sign any rental or mortgage unless I know I can pay the full amount myself, including utilities."
When you move in with a partner, it's important to agree on financial responsibilities. You should also discuss what will happen if the relationship ends. Writing down these terms, instead of just relying on a lease, can help protect you. This may give you a better case if you need to take legal action to recover costs.
4. Taking on Excessive Student Debt Without Considering Future Earnings
Katie Munizza, 35, is a part-time occupational therapist from Abington, PA. She spent ten years working on her education and changed her majors during that time. To cover costs, she took out both federal and private student loans.
By 2016, she had earned two associate degrees. She was just one class away from a bachelor’s degree. However, her student loan debt had grown to over $100,000. Today, she still has about $78,000 to pay off.
To manage her debt, Munizza has been working two jobs. She regrets not researching more before spending time and money on degrees that did not help her earn more.
Student loans can help you pay for higher education. However, it’s important to consider the cost of education and your future earnings. Over 40% of adults who continue their education after high school have student loans.
It is important to know your expected salary after graduation. You should also compare it to the debt you will have. Just like any investment, it’s essential to calculate the return on investment (ROI) to ensure it’s worthwhile.
Bottom Line
Money mistakes are a part of life, and even the most careful planners can slip up. The good news is that every financial mistake offers a chance to learn. You can also share these lessons with others. Whether you are starting out or changing your financial habits, use these real-life stories to help you make better choices for your future.
Sources:
https://www.fidelity.com/learning-center/smart-money/financial-problems
Disclosures:
This information is an overview and should not be considered as specific guidance or recommendations for any individual or business.
This material is provided as a courtesy and for educational purposes only.
These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information
