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I recently gave a quote in a post What 25 UK Money Bloggers Wish They Knew In Their 20s by Thrifty Londoner and it got me to thinking about other money lessons I learned during my 20s. Of course, hindsight is a wonderful thing and I’m sure we all have things we wish we could do differently, but I also acknowledge that I had some lucky escapes too and that’s what inspired today’s post – financial near misses.
Growing up on a low income has meant that I have always been pretty sensible with money. Obviously, I have made some mistakes (as we all do) and of course, I’ve had debt over the years but in general I like to think I’m not stupid when it comes to finances.
However, there have been occasions when I let things slip and could have potentially found myself in a big mess. Luckily, these were financial near misses and I got out of the situations relatively unscathed but I definitely learnt some hard lessons along the way.
A number of years ago when I was in a long-term relationship with an ex, we reserved a new build property. It was far more expensive and showy than we could ever need – a waterfront apartment on a marina, and like many things in that relationship it was very materialistic.
The mortgage on that property, had we gone through with the purchase would’ve been over £1200 a month, plus there was ground rent of £150 a month to contend with before you even get to your basic bills.
Fortunately, that relationship ended before the builds were complete and I only lost £250 of the reservation fee – a small price to pay I think.
That I in no way needed nor wanted a flashy waterside apartment in a big city – I wanted a family home with a garden and space to park the car, in a small town. I did not want 70% of my monthly pay going straight to a mortgage. I wanted money to live rather than just paying for a ridiculous apartment. A small mortgage that I could pay off quickly, and a monthly repayment that wouldn’t cripple me if I had a decrease in income.
I now own a lovely 2/3 bed house with a garden, parking for both cars and enough space to entertain family and friends. My mortgage repayment is less than a third of what it would have been and all my bills are much cheaper too.
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A couple of years ago I managed to write my car off. It was on finance and I had no gap insurance.
Luckily, for me the financial damage wasn’t as bad as it could’ve been. The insurance company paid out almost all of what I owed as I was coming to the end of my 5-year term. I ended up owing the finance company £500, which wasn’t the end of the world.
However, it did mean that I had no car and no money to buy a new one. Oh, and my work was an 80 mile round trip at the time. I took out a 2 year loan and bought a second hand car. In hindsight, it would be sensible to use my little savings to buy a cheaper car but my rationale was, ‘you need something reliable to travel all that distance’. Hindsight is a wonderful thing.
No more car finance. My intention for my car is to drive it until it’s undriveable and when it needs replacing it will be replaced with another second hand car and paid in cash. Our family car is currently on finance (which isn’t ideal, but one step at a time) but I never want to go back to both cars being on finance. The aim is finance free!
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The relationship I referred to in near miss number 1 saw me leave with several thousand pounds of credit card debt. My ex had a terrible credit record with a default so creditors wouldn’t touch him with a barge pole. Stupid, naïve me took out credit in my name to fund all the things we couldn’t afford to keep up the materialistic lifestyle he was accustomed to.
When we split up, he agreed to do the decent thing and pay me back for the debt in monthly installments. Do you think he did? Nope, of course not – result of my own stupidity I suppose.
Don’t take on credit for anyone else – no matter who it is or what it’s for. You’re not helping them, you’re allowing them to continue burying their head in the sand and not dealing with their problems head on. There are other ways to help someone without bailing them out and risking lumbering yourself with the problems instead.
Have you had any financial near misses? How did you get out of the situation and what did you learn? I’d love to know.
I started Katie Saves while on Maternity Leave to document our adjustment to living on less. Now back in work - I blog about all things money with a little life organisation thrown in for good measure. Join me!