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Biggest Financial Mistake

Since Daniel at Sweating the Big Stuff started his interview series of other bloggers, my favorite question he asks every time is “

If you could tell your 20-year old self one thing, what would it be?

Every time I see that question, I think of the biggest financial mistake Mr. BFS and I made when we were 24 years old. I would tell my 20-year old self to fully check out any business venture before jumping in head first. This mistake ultimately led to us losing $12,000.

The Start of Our Biggest Financial Mistake

It all started with befriending the owners of the local board game store. They were nice people and the game store was our favorite hang-out.   After a couple of months of playing at the store on a regular basis and even volunteering to help out, they brought up that their line of credit was running low and they needed a little help just to make it until the summer – they “would be good from there”.

Yes, at this point we should have questioned why they were so behind on their line of credit, but we didn’t.

When we asked how much they would need to get everything straight, they immediately said that $6,000 would fix it all. With dreams of passive income from a game store on our minds, we cashed in the savings bonds from our grandparents and threw in $3,000 from our own savings. That had to be the quickest $6,000 we ever threw away.

After we invested that first $6,000, we slowly figured out that both of the owners treated cash like water and had no idea what they were doing. They had a maxed out line of credit at around $130,000, a $3,000 loan from Dell that was behind by several months, and $5,000 of other bank loans they had never paid anything towards. The incoming money was barely covering the cost of merchandise and utilities. I immediately was handed the check book and asked to set things right.

This is where Mr. BFS and I should have said goodbye and just thanked our lucky stars that we only lost $6000…

but we didn’t.

The End of Our Biggest Financial Mistake

Over the next week, I figured out the numbers and made a payment plan that would technically work if absolutely everything went by the book. You see where this is going, right?

I paid that Dell loan off from our own savings (talked them down from $3,000 to $1,800). We also sunk in another $7,000 over 3 months for merchandise and owed sales taxes. That brought our grand total out of pocket to about $15,000 in 4 months.

The store was indeed recovering and my payment plan was even leading to the bank reopening the line of credit, but then one of the owners over purchased a week’s worth of product despite my reminder, which caused an overdraft on the line of credit. That overdraft was the last straw for the bank and they called the full line of credit due at once. That was a sad end for a good store.

The two owners had to declare bankruptcy since all the loans were due and they didn’t have the cash to cover it. Hubby and I hadn’t touched our home fund, but our emergency fund was hit really hard. After the closing costs and 20% down payment, we only had about $5000 left in all of our savings combined. It was a rough first year and we just crossed our fingers that our house wouldn’t have any major issues. I didn’t want to touch my 401(k). We got very lucky. 🙂

The Wake Up Call to Avoid Financial Mistakes in the Future

That whole situation was a wake up call for Mr. BFS and me. We are two very smart people who can successfully run a business, but we were way too arrogant and rushed into a very bad situation. We were just too stubborn to back away. Arrogance and stubbornness led to an 

overall loss of $12,000

 since we were able to recover about $3,000 in tax breaks over the following 3 years. I am thankful we didn’t go into debt, but it was definitely the most expensive lesson in humility that I hope to ever have.

We prefer other types of investments now such as our own property of crowdfund investing in other property types. In fact we recently added a Realtyshares vs Fundrise section to another article we continue to build upon as we learn more in this niche. Then there are the other more traditional investments we’re in. Bottom line is we learned our lesson above from an investment we truly weren’t prepared for but now we take the lessons learned and invest better.

What would you tell your 20-year old self? Have you learned any expensive lessons along the way?

33 thoughts on “Biggest Financial Mistake”

  1. Bogey

    I can’t think of anything major to go back and correct. If anything, I would have started purchasing real estate even sooner than I did, but I purchased my first house at age 23, already own rental property at age 26. Real estate has become a huge party of strategy to build wealth, so I wish I could have found a way to start sooner.

    Oh wait, here’s something. My wife and I had the great idea to purchase a boat a couple of years ago. We enjoyed using it, but compared to what we were spending on it each month, it just wasn’t worth it. It would have made much more sense to simply rent a boat a few times each summer, just to get that desire out of our system. In the end, I think we ended up losing about $1,000 when we sold it 18 months later. Not a huge deal, but we also spend maybe $3,000 just owning the boat for 18 months. Nothing too huge, but also nothing to sneeze at.

  2. Finanzas Personales

    Well, first of all Crystal, we all carry some kind of financial mistake that we regret, but that’s life… and probably that’s one of the things that shaped us into talking openly about our finances and sharing information with the world about personal finance.
    I’ve seen this question before, but never stopped to think about it. However, I’ve always had a bitter feeling about how I handled my finances earlier in life. I took more than one bad decision: investing in the “hot stock” that would later crash, investing in a business venture without even understanding where the profits would come from, failing to pay in full my credit cards (and having to pay much more dollars than I’d like to remember just for interests)… the usual, I guess.
    However, once I understood I should do something about my money, built my financial plan and started taking my decisions based on it, this kind of mistakes are under control and, no matter how many times I’ve felt the “need” to withdraw from my emergency fund and invest in some new stock, I’ve had the strenght not to do so.

  3. Crystal @ BFS

    @Bogey, my husband wants to buy a boat when we retire but I get seasick way too easily to be his first mate, lol.

    @Finanzas, thank you for sharing! All of those earlier mistakes really did shape your current thinking, so I bet it will be worth it in the end. Good luck!

  4. Melissa

    I started an ebay business 5 years ago. Dumb, dumb, dumb. Trying to keep track of the inventory and sacrificing the biggest room in our 6 room apartment was bad enough, but I thought I needed to buy as much stock as possible to be successful. I am still paying off the debt, and now I want nothing more than to quit the business because with 3 kids, we really need the extra space. Yet I can’t quit yet because I need to make a reasonable profit to pay off the debt. Stupid, stupid, stupid. 🙂

  5. Mercedes

    Mine would be to not loan out money to Family, Friends, and Boyfriends (who are now all ex-boyfriends) All told I think I’ve loaned out about 12,000 dollars and I’ve seen MAYBE 500 of it come back. But boy would that have been some nice money to apply towards my down payment on my house….

    Now, if someone wont let me help them try to help themselves get out of debt, they get no money from me!

  6. krantcents

    No regrets! My advice is assemble a team of professionals you can rely on. They would include a CPA, lawyer and business person. Most money decisions to go into business or making a large purchase (home)can be emotional because you are involved in the decision. When you lose your objectivity, you need to consult a professional to provide an objective viewpoint.

  7. JT McGee

    I’m with Mercedes on the whole loaning thing. While none of these loans were particularly large amounts, they put unnecessary stress on a relationship, and frankly, I don’t like playing bill collector.

    I’ve resolved to never do that again.

    (Weird, my 21 year old self is telling my 20-year old self something. LOL, I sense age bias in this post! :P)

  8. DoNotWait

    Wow! What a story! No experience compares to this, but if I had one advice to give my 20-year-old self, it would be to not trust my “lover” too fast. We moved in together quite young, I was still in college, and it eventually ended up. I didn’t have the energy to fight over our belongings so I had to literally start over with nothing but the debt we contracted for our appliances (and that I paid alone)…

  9. Jeff @ Sustainable Life Blog

    I would probably tell myself that taking control of my spending wasnt as hard as I originally thought and that I should do it rather then wallow in despair while continually digging the hole deeper. I’m still in my 20s so I hope that I wont have anything happen like this in the future.

  10. MoneyCone

    That is a scary situation (and quite painful I’m sure)! But that’s the price we pay due to financial illiteracy!

    I applaud you on the way you handled the situation and came out without losing everything!

  11. Evan

    I would tell my 20 year old self, that it is not necessary to buy drinks for the entire bar! and that just because the bank was willing to give you a line of credit doesn’t mean you have to use it!

  12. DoNotWait

    @Evan, hahaha I’m with you for the drinks!! Gosh, a waste of money I made for sure!

  13. IPA @ investmentpropertyasset.com

    When I was 20 I financed the purchase of items that we sold at a New Years rave party. I spent roughly $2,000 on product and we sold only about $350 worth before a riot broke out and the police department made everyone evacuate the building. There went my money and the start of credit card debt that took me several years to dig out of. I was able to negotiate with the company I purchased the product from to return the unused product, minus a restocking fee.

  14. 20 and Engaged

    My 20 year old self is thanking everybody for their advice

  15. Wellspeak

    Thinking about this question, I would have to say ours was piling on credit card debt after we graduated from college. It’s really bad when you consider the fact that I KNEW BETTER! Thankfully, we woke up before things got too much out of hand. It took us about ten years to totally pay off everything. But, since paying everything off, we have not carried a credit card balance.

  16. First Gen American

    My biggest was having almost all my savings in 1 stock (my company 401K stock that tanked like the bank stocks did). I don’t want to think about what our retirement fund would be now if it were all in an index fund during the crash, and I wasn’t 20, so don’t feel bad. It’s small in comparison.

  17. Amanda

    My husband would probably say the 40k in student loan debt he ended up with… 18-year olds don’t have any idea what they are signing up for when they go into debt for college.

  18. Crystal @ BFS

    @Melissa, ouch, that sucks. Maybe you’ll get lucky and find a buyer who wants to take it all off your hands. 🙂

    @Mercedes, ohhhh…that’s so sad! I can’t believe almost all of them stiffed you!!! Maybe you can start a blog about deadbeats and get some revenue out of it, lol. Anyway, great advice, thanks!

    @krantcents, it must be nice to have no big money regrets! Awesome! Thanks for the advice!

    @JT, hahaha, it’s not age bias – it’s good advice to people your age, lol. 🙂

    @DoNotWait, that is such good advice! I rushed in with Mr. BFS and am just lucky how it turned out so far…

    @Jeff, yeah, everything seemed harder to deal with when I was just starting out…I’d give my younger self the same advice…

    @MoneyCone, thank you!

    @Evan, I remember you left that comment over at SBS too. Great advice for the party animals out there and anyone getting a bank loan!

    @IPA, ooh, that hurts. $1650 of glow sticks would suck. I’m glad it worked out okay!

    @20 and Engaged, LOL. Enjoy!

    @Wellspeak, congrats!

    @First Gen, I am truly sorry. That really does take the cake. I hope it rebounds!

    @Amanda, most teens really have no idea…

  19. Jenny Dee

    As odd as it sounds, I’d choose to go to a different college. I took the “easy” school instead of a “harder” one for me (social anxiety, I picked a smaller school with partial scholarship instead of a full ride to a very large school). The opportunities may have been the same, but maybe not.

    I lost the partial scholarship after the first year, and the major I declared wasn’t accredited at the time, so, yeah, a mistake that I consider a financial one.

  20. Buck Inspire

    Incredible story! I’m glad you came out of it relatively ok. Way to self-analyze and learn from your mistake. What I would tell my 20 year old self? Don’t sweat the small stuff. Don’t beat yourself up. Live a little and in the end, everything will turn out alright. 🙂

  21. ODWO

    I’m not sure it would be just one thing.

    For me, the most expensive “Financial Lesson” is that time is not unlimited. Yes, it’s never too late to change or fix something, but to dwell on past mistakes usually defeats the purpose of that lesson. My biggest financial mistake, especially around 20 yrs old (my biggest, right?) … is wasting time not doing what I wanted/needed to do to move more towards my goals.

    Loaning money (with no $return), or losing money from failed biz’ness ventures is one thing. But did the lesson get learned? Might be better to consider it expensive education then. Consider that a mental write-off. Like a tax writeoff, to lessen the blow. That’s the way I look at it. Best not to be a full time student at “that” school. Better to graduate and move up.

    Maybe some of the best advise I could have given to my 20 yr. Old self is ….”You have the potential to be anything you want. That is unlimited potential if you want it bad enough. The time to learn and do whatever “it” is .. is not unlimited. It would do you good, for you, to one day, hopefully soon, to start looking into what it is you want to do with yourself. Your body may be an adult, but your mind is still growing. You don’t “know it all kid!” Don’t waste it away trying to prove to others that you are something else (a money blower? debt accumulator? etc?). Instead, Learn and Prove to YourSelf what you need to know and do … and I’ll (your inner self) support you the whole way, no matter how long it takes. Your path may take you across many different boundaries and roads, or it may be as simple as just making one right decision for you at this moment – to start being an adult about the decisions you make that affect you now. You’ll be all the better for it when you need it the most.”

    I’m not 20 anymore. 🙂 But I still have a chat with that person, every now and then.

  22. Debt Free Divas

    I shudder to think of the financial mistakes we have made….there are oooh so many to choose from :). I like this idea though. We’ll have to include this in the near future. Great post!

  23. Great question. I would say getting completely out of car debt and then having 2 car payments again within probably in under 5 years. I’ve learned my lesson in driving them until the wheels fall off. Cars are just too expensive and take too long to pay off. That’s a lot of money you can do so many other great things with to advance your journey to financial freedom.

  24. MoneyIsTheRoot

    Wow very interesting story! I would probably say that I wouldnt invest with sentiment, but more with my mind. I put more and more money into GM in the year leading to bankruptcy. Being in the Metro Detroit area I truly hoped and believed in their turnaround. Obviously I should have gone with Ford lol, but I had always been GM loyal when it came to purchasing their cars. Well that turned out to be a big mistake!

  25. The Dividend Pig

    I’m not out of my 20’s yet, so I don’t yet know what it is, but I’m sure I’ll find out one day! I just lent some money to a family member. I already have most of it back, but not all, so maybe this will be it???

  26. Sunil from The Extra Money Blog

    as early as i started i’d likely tell myself to start sooner

  27. Crystal @ BFS

    @Jenny Dee, the trick is not to think about it too hard. Or think of something you really love about your current life and tell yourself you wouldn’t have it if it wasn’t for all of your past choices. I beat myself up for a couple of years before realizing that my life is awesome and that part of it might have had something to do with it. 🙂

    @Buck Inspire, your younger self would get all spoiled, lol. 😉

    @ODWO, I love how positive you always are!

    @Debt Free Divas, let me know when your post goes up. 🙂

    @Olivia, as I ride around in my crappy Aveo, I keep repeating to myself “at least this POS is paid off”, LOL. 🙂

    @MoneyIsTheRoot, good advice for the young and old! I personally hate my Chevy Aveo so much that I didn’t invest a red cent with GM…I guess everyone should have owned an Aveo… 😉

    @The Dividend Pig, just don’t beat yourself up if you ever do have a “D’oh” moment. 🙂

    @Sunil, I had thought about that too…

  28. Jason

    I would’ve listened to my uncle and not gotten a car right out of college. I also see a lot of my friends now making this mistake. It seems to be ingrained in peoples heads that they NEED a new car once they start getting a paycheck. My biggest financial freedom came when I finally paid my car loan off and I’m trying to pass that knowledge on.

    So if I could go back and start over, buying used, or borrowing my parents car longer is the way I would go.

  29. J. Money

    Man, what a whopper! So awesome that you can tell the world about it and even say that you’re LUCKY too throughout it! Def. true that it could have been a lot worse, but jeez – talk about having a positive outlook from it all. That’s great 🙂 And you know what *else* is great? That you’ve now gotten a failure out of the way that all entrepreneurs must face at some point or another 🙂 Woohoo!

  30. Crystal @ BFS

    @Jason, ah yes, the post-college car…I got one too. It was a brand new Aveo, so we paid off that $11,700 quickly but I should have bought used…

    @J Money, lol, hadn’t thought I sounded positive. 🙂 But thanks! I was pretty bitter about it for about 2-3 years, now I just think it makes a great post and life lesson, hahaha.

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