November 19th, 2012

My Best and Worst Financial Decisions Ever

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My Best and Worst Financial Decisions Ever

**Today’s guest post is contributed by Benjamin.**

It’s not always good to think in extremes, but today I wanted to look at the two extremes of my financial behavior in order to describe my best and worst financial decisions ever. Hopefully by reading this, you can learn from my personal experiences and get even better results in your own life.

My Best Financial Decision Ever

About 5 years ago, in 2010, my trusty old car was starting to show signs of wearing down. What kind of car was it? I’m glad you asked: it was a 1994 Toyota Camry, and I had been driving it since I graduated from college.

Boy, did I love that car! It was reliable and relatively comfortable, despite lacking some of the luxuries that would be expected in a newer vehicle. It had taken me on many trips throughout California, including to San Diego and back to Northern California (and a few trips to Tahoe). But it had over 200,000 miles on it and there were some indications that it was losing steam. So I had to part with it. Knowing that I needed to buy another car, I momentarily considered the possibility of buying a new car and taking out a car loan to pay for it.

I knew that most car loans were 3-6 years, though, and I didn’t like the idea of having that kind of payment staring me in the face every month. So I started looking on Craigslist to see what kind of used cars were available.

Fortunately, I found a used Nissan Murano that I was able to purchase for less than half of what I would have spent on a new car. I was lucky that I had enough money saved up so that I could combine it with the cash from selling my old car to purchase the Nissan (which was 7-years old).

Why was this such a good decision? Well, for one thing, the Nissan has been reliable and hasn’t caused me any major headaches. But more importantly, it turned out to be a crucial decision because a year later I decided to quit my job and pursue a different career – and that would probably not have been possible if I’d been tied to a monthly car payment!

What about you? Do you have a car payment that you’d like to get rid of? If so, then it’s worth saving up some money to purchase a used car. And even if you owe more than your car is worth, there are actions you can take to get out of your car loan. On the other hand, if you are in a tight spot financially, you may need to research what happens if you don’t pay your car payment and then take proactive steps to get rid of the car loan or to avoid falling behind on your payments.

My Worst Financial Decision Ever

Ironically, my worst financial decision happened right after that moment when I quit my job to pursue a new career. At that time, I decided to focus full time on my job search rather than get a part-time job or find some freelance work that I could do in the meantime. As I wrote about during Self Improvement Month, my savings was enough to get me through the first couple months, but when I didn’t find my dream job in that time, I started relying on my credit card.

And once I started doing that, it lead me down the path of ever increasing debt and a credit card balance that was getting bigger and bigger each month. I knew I would have to pay off that debt eventually, and the thought of it began stressing me out. Fortunately, a few months later I found my dream job and everything worked out well. I was able to pay off my debt entirely earlier this year. But in retrospect, I believe that I should have taken steps to make sure I had some income to at least partially cover my expenses during that time.

If you are in the same boat as me, with credit card debt (or any type of debt), you can take steps to start becoming debt free today. Unlike me, you could find some freelancing opportunities to generate more income until your debt is gone. Or you can do some serious budgeting and find ways to save more money each month. Either way, you’ll need to write down all your debt amounts in one place and make a plan for how you will start paying them off (For those with multiple cards, you’ll need to decide which credit card to pay off first). And then use all the great tips here on the Credit Karma blog to inspire and inform you on your journey to being debt free!

Benjamin Feldman is a writer and personal finance expert at ReadyForZero, a site dedicated to helping Americans manage and pay off their debt – for free.

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  1. I too have discovered the beauty of buying used rather than new cars. We all know new cars depreciate a lot the minute you drive them off the lot. It is relatively easy to find good used cars that are a few years old and don’t have too many miles on them. In our family, we now know that we will never buy another new car again. The money we have saved already by buying used is amazing. I echo your sentiments about buying used and about not racking up a lot of credit card debt. Plan plan plan, and you won’t be sorry.

    Mary Kaplan at 4:36 pm on November 20, 2012
  2. In 2005, at the height of the housing bubble, I used almost every cent of my late husband’s life insurance to pay cash for a house for myself and our 3 children. A very modest home in the school district we needed… Being self-employed, the only medical insurance we had was his COBRA, and after it expired, I had a terrible accident (early 2008) and mortgaged the house to pay medical bills. Now the house isn’t worth what I paid for it and I have a mortgage. How many ways can we spell “foolish?”

    Deb at 6:37 am on November 22, 2012
  3. Five years ago it was not 2010. . .

    Jim mccorkell at 5:22 pm on November 22, 2012
  4. Wow – I’m so sorry you went through all of that. What a tough lesson to learn, Deb. But really appreciate your willingness to share.

    bethy at 7:52 pm on November 26, 2012
  5. So sorry you had to go through all that. I hope that things will get better.

    James Craig at 3:37 pm on December 16, 2012
  6. I identify with what you explain, the truth is that I’ve found in a similar situation, but eventually I moved on. Cheer up!

    Marina Lejos at 12:14 pm on January 26, 2013

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