There she was. Sitting all shiny and looking brand new.
“What do you think of it Aaron?” asked the salesmen.
“Oh – that is sweet.”
“Yeah – it certainly is. We just got ‘er in a few days ago and I'm sure it'll go fast.”
“I'm sure..” I uttered – mesmerized.
“Should we go and look at some other cars in the back? Or should we give this one a test drive?”
“Ah.. yeah, we probably should look at some others. But I really like this one.”
“It sure is a looker. I'll bet you and your friends would look great driving in this… ”
He had me. In fact – the car had me at first glance. And, I was about to make the worst financial decision in my life.
It was the fall of 2001 and my clunker of several years had broken down. I was working full-time at a design firm making about $22k/year, living on my own and ready to take on the world. Or, so I thought.
“What kind of interest rate can I get?” I meekly asked the self-assured loan officer.
“18%,” he said smugly. “…Haha! – Just kidding. We can get you 10% on this.”
“Oh. That's not bad,” I blurted out without even thinking.
I felt like sweat was visibly pouring down my face. The whole loan process didn't sit well with me. I needed a car. But this one? Right now? – for this amount of money?
“So, we got you at 10% for 5 years, with a total price of $13,000. How's that sound?”
“Great,” I said – lying.
[If you've been paying attention this far – I was about to take on a loan for $13k, with a salary of just over $20k. Made sense – right?]
With little financial know-how and more concerned with how I might look with these new wheels, I signed up for five long years of 10% monthly interest payments on a depreciating asset.
It was (and probably still is) the worst financial decision I have ever made.
While I'm not thankful for the decision I made – I am grateful for what that decision accomplished in my life. Disturbed by the choice I made that day, I soon decided to start my own debt-free journey.
I learned two things from my experience at the car dealership. One, listen to yourself. Don't ever make a large financial decision you don't feel good about. Two, don't ever make a financial decision to impress others.
Your turn. Now that I've spilled my guts – what's the worst money mistake you've ever made – AND what did you learn from it?
Yeah, we got the homebuyer credit, which was nice. Though “credit” probably isn’t the most accurate term, since it has to be paid back. It’s more like an interest-free loan, but even that isn’t too bad.
Yeah – it is no credit.. we did it as well, but had to sell before the three years was up :(
My dumbest mistake was my wife and I buying a house in 2008. We didn’t have much money to put down, but we figured we were just throwing our money away on rent at our apartment. But now that we’re some $15k underwater on our house the apartment doesn’t look so bad in hindsight.
Yeah – it’s frustrating – the underwater part. I bought in ’08 too and took advantage of the first-time homebuyer credit. Did you as well?
Enjoyed your story. I hope you kept that car a long time!
I haven’t thought much about my worst financial decision ever, but after some reflection I’d say it was signing a 13-month gym membership contract a few years ago. I used it often the first few months, but after that I didn’t go once. I wasted hundreds of dollars in all. That was back when we were a one-income family, so we really didn’t have a lot of disposable income.
Thanks – had that thing for about 6 years actually – not very long! :(
Oh yeah – the gym memberships will always get you. They must make a killing on folks who forget to cancel when not using. We’ve done the same thing.