Mrs YFG: my financial mistakes

The ChooseFI podcast is my morning commute jam. One of their questions at the end is always: what’s your worst financial mistake?

It made me think. I’ve made a few cock-ups in my time. Luckily nothing huge. Most of my mistakes are just big, useless purchases. I’ve put down what I think my mistakes are, and it would be great to hear what people in the community have also done.

Not investing in the stock market until my mid-twenties

I saved from a young age, encouraged by my parents. Up until the age of 16 I had just a normal savings account, and once I was older I got cash ISAs. This was in 2006-2008 and so the bonus rates weren’t great but they aren’t as rubbish as they are now. I held my savings in cash ISAs until I was 23 years old. Sensible you say, but not, when I let the bonus rate lapse and didn’t transfer into a new ISA for the next year: shame on old me. This meant that for at least 3 or 4 years I had 0-1% interest on my savings.

My experience of Icesave (see below) made me scared to lose my money again, and so I avoided the stock market and didn’t want to think about my savings going up and down.

When Mr YFG and I started a relationship he quickly introduced me to the world of stocks and shares. He helped me set up a TD Direct account, and I put a bit of money in to see how it went. Sure enough, it returned nigh on 10% for a year. Seeing my money increase in value for zero work made me want to put in more. When I was 25 I tipped the rest of my cash ISAs into a Vanguard fund and watched it grow.

Had I realised the benefits of investing in an S&S ISA early on I would have had those extra 5-6 years of growth. There are so many of my friends who have their life savings in shitty Cash ISAs and have done for the best part of a decade, and I try to convince them to dip their toe in the market. But, understandably, they are cautious and I’m not about to force them into something they don’t want to do. I realise that Mr YFG and I are in a place where we can afford to lose money, and that isn’t the case for others if they are dependent on having a certain amount of cash to buy a home.

Investing in IceSave

When I was about 16, I found a good savings account with 5% interest at Icesave. It was online and this was relatively novel at the time.

MoneySavingExpert had it done as a top account. But I think most people were oblivious to how fragile Icelandic banking was (in retrospect that should be a giveaway statement for problems ahead: a bit like Soviet automobiles or British politicians).

Come the global financial crisis Iceland blew up (financially, not physically). A lot of people “lost” their money for a while [edit by Mr YFG: all retail savers eventually got “their money back”]. It was pretty bad in the end. It was my first (and hopefully last) experience of losing my life savings in one go.

I applied to the Financial Services Compensation Scheme (FSCS) and received all of my money back (I think….), but it hit my confidence. As mentioned before, it made me incredibly risk averse (as it would!) and meant that I didn’t touch the stock market.

Buying NS&I premium bonds

NS&I premium bonds are essentially government savings bonds. You buy them in set amounts (£100, £200) and you don’t receive interest on them. Instead what you get is the chance to win a large sum of money (up to £1m I think). The more bonds you have, the bigger your chances. The draw runs every month for as long as you hold the bonds.

I was bought these when I was quite young (about 20 years ago). I never had enough to have any realistic chance of winning a bonus. Indeed I never won anything over the entirety of my holding the bond.

So they just sat there.

I was sorting out my paperwork and realised I had these bonds, applied to log in and check them out, and realised I could cash them out. Instead of investing the money and getting compound returns, a few hundred quid sat locked away for 20 years without interest. I almost lost access to them as I forgot they existed. Great if you win, but the money devalues over time if you don’t (which is much more likely).

Mind you, it was nothing to sniff at: I cashed the bonds out and chucked them into my S&S ISA.

Spending more than I earned

When Mr YFG and I first got together, my spending outstripped my income. At that point, I was a student. But by 2013 I was pulling in a £40,000 income as a lawyer and spending the lot.

I had an overdraft on my account which I could dip into without charges. I ran a credit card facility (i.e. spend on your credit card and pay it off with your income, but then you have no cash left so you rack up spending on your card again).

I shopped at Hobbs, The Fold, Karen Millen, LK Bennett and all those fancy work clothes places. Ate £10 lunches. I once spent £700 in one shopping spree in Covent Garden, regularly spending £300 on a dress. I got manicured within an inch of my life. All because I thought that’s what being a professional was about.

I am infinite more accomplished and professional today in my fabulous eBay purchases and Matalan’s finest.

But ultimately it meant I didn’t save for about 5 years, and even if I did sometimes I had to dip in and withdraw it to pay off my credit card. I dread to think how much I’ve spent in the last 6 years of my working life, and would love to have it back. Don’t get me wrong I still spend money now and treat myself, but I have tripled my income in the meantime and saved the excess.

Poorly thought out purchases

Elliptical machine: a few hundred quid wasted on a poor quality machine stuffed into our tiny one bedroom flat in Lambeth. My dad took it away and sold it on eBay.

Patio heater: bought an electric heater to keep my guinea pigs warm outside. Forgetting that their hutches are made of wood…

Photobooth for iPhone photography: in an effort to take better pictures of aforementioned guinea pigs and eBay second-hand items, I bought what can only be described as a white tent. Shite.

Juicer: made nice juice (with a boat-ton of fruit and veg a time). It was horrible to clean and sounded like a wood chipper going off at 6AM. Ended up in the bin.

Coffee bean grinder: Nice idea in theory, but does a loud, shit job. Might as well just buy the coffee already ground.

Could be worse

Luckily, my best financial decision was letting Mr YFG be my boyfriend and then permitting him to marry me. Had I been on my own I would have burned through my income, and I wouldn’t have anywhere near the financial security we have today.

In the last 3 years our joint net worth has doubled, and I save 60% of my income. In a few short years, we should never have to worry about money again.

I’d like to hear about your financial mistakes and what you learnt from them.

[Edited for the pedants out there r.e. Icesave – see above]

[Edited to make clear we’re talking NS&I premium bonds – not the super-dooper index-linked bonds that are sadly no longer available]

13 thoughts on “Mrs YFG: my financial mistakes

  1. Not borrowing more money at fixed interest when the 70s inflation was obviously about to run up and up. Still, I did borrow some so there is that.

    Should we have bought a more expensive house with a bigger mortgage loan in the early eighties? Unknowable without hindsight: I had a two-year contract of employment; its expiry would have led to us having to move across the country – or the world – in pursuit of another job. So we didn’t want to take too much of a risk on a property.

    Was I wrong not to buy lots of equities in 2009? Perhaps, as long as I would have had the backbone to sell again in early 2018 (or whenever …).
    We did hold some gilts which did pretty well. We are old, with effectively no earning power, so avoiding loss matters far more than gain. I’m rather keen that my widow shouldn’t die in penury.

  2. I had £50k in Icesave, a sizeable chunk of my savings at the time, drawn in by being in the top account listings and member of the UK compensation scheme. When they went belly up and the Iceland government were threatening to not honour the terms of the compensation scheme, well I should of been annoyed and angry with the situation but I was surprisingly calm and relaxed, a sort of o’well I did what I could and couldn’t of done anything else, I’ll just have to start again if I don’t get my money back. Well I got my money back and also unexpectedly the interim interest at the great rates offered before the crash. The situation seeded that since I had a sort of out of sight, out of mind thought on the situation that I needed to put it the work and take a punt on being risky (I’m not recommending this !!!). It took sometime to decide what to go for which kicked me off recycling this cash into a S&S ISA….

    My financial mistake was my cash ISA, I was getting a good rate of interest up to the 2008 crash and at that point I knew I wanted to transfer it into my first S&S ISA but it took me 4 years to take the plunge and in the interim wasn’t getting a good rate of interest.

    I don’t know if my risky strategy will be my next financial mistake, it’s going in the right direction on the dividend income front but more slowly on the value side in these brexit/trump market times, though I’m taking it as opportunities for reinvesting my dividends.

  3. Getting started investing in your mid 20s isn’t too bad though. I’m early 30s and still haven’t got cracking on investing in stocks and shares as my goal has been putting everything towards a housing deposit and the general wisdom with that is to keep it in cash. Even though I’ve just bought a place I might not even get started now as the next thing I (think) I want is to convert the loft and that’s another short term goal. In fact, I’m thinking of opening a (whisper it) cash ISA to save the money. That way, if I decide not to go ahead with the extension I can transfer it to a S&S ISA and won’t have lost previous year’s allowances, even if I’ve lost a couple of years of compounding.

    As far as silly purchases go, I have a very recent one. The sofas for my new place were ridiculously expensive. God knows why I wasn’t content with second hand ones for my first sofas like everyone else. I’m actually thinking of cancelling the order as the delivery team is ignoring me anyway.

    1. Hi FF, yes I think my mistakes are mild in the grand scheme of things, but I’ve definitely made my fair share of silly purchases. I started investing a lot earlier than some of my peers and I suppose in comparison we’re in a better position- I just can’t help feel like I scuppered myself a bit early on!

  4. You’ve not done badly, MrsYFG – and there is still plenty of time to make more. As for mine…I guess I consider each one of mine money well spent to learn the lesson.

    Time will tell whether not selling out at the last top for Bitcoin was a mistake. But it probably was.

    Saving in cash for a very long time. Thankfully, my pension didn’t do this (especially post 2008).

    Using heart not head when investing in a film which turned out to be a mixture of a box office turkey and an ego junket for those involved in its production.

    Had I known where I’d end up living now – I could have bought earlier, still with cash and rather cheaper.

    Giving the missus some money to save/invest. It was spent within 3 months.

    Wasting too much cash on DVDs and gadgets in my younger days. Both now worthless. I should have spent the money on holidays and other experiences.

    Also had plenty of near misses – most recently in peer to peer and despite it all still somehow managed to get to FI.

    1. Hi greencat I definitely have time to make more mistakes and I’m sure I will! I’m grateful I haven’t done anything too horrific, and of course I’m in a better place now with Mr YFG as the gatekeeper….

  5. Hi Mrs YFG

    You haven’t done too badly – how about not investing until my early 40s!?

    One reason for this was my biggest financial mistake of being up to my eyeballs in credit card debt, accumulated during my 20s and 30s – I couldn’t invest properly until I’d cleared all the debt. This was my version of spending more than I earned but instead of buying fancy clothes, I spent it on new cars, holidays, expensive hobbies and just…stuff.

    You’re still young and like you say, you have time to make more mistakes but with Mr YFG around, I reckon it’s unlikely! 🙂

  6. I made all the same mistakes as you, except I kept going with the 300 quid dress buying, manicures, and tenner lunches for 15 years! Oddly though if you asked me that question on Choose FI I’m not sure what I would answer….. I think thats because its all been a journey, and I think in the end I benefit from learning from my mistakes. I’m also really lucky because I’ve discovered the concept of FI now (which I might never have done!) and I am fortunate enough to have no debt and a decent income, so I have time to change course. So I guess wish I had unplugged from the Matrix waaaay before I did, but I am just not sure how I could have achieved that because I fould out about FI by chance. This is what drives me to talk to others about the concept of FI – even if one other person stops with the juicer buying a bit earlier than they might have done otherwise, that will be my greatest financial victory 🙂

  7. I don’t think it’s turned out too badly, but I was myopically focused on saving for a house deposit for all of my twenties so didn’t consider other investments.

    Luckily have always been fairly debt averse and not inclined to consumer spending, but I’ve definitely spent a fair share on wine, women and song (with no regrets!). Though should have put more effort into switching accounts, energy suppliers and the like. Just laziness really..

    Sorry to be that guy, but to note that those NS&I bonds are “premium bonds”. NS&I also do growth bonds that are more like fixed term savings account. I got a 2.2% interest 3-year bond a couple of years ago that was market leading at the time.

  8. It may be buying a large house. We can afford it and I love where we live so I don’t want to move, but I am working on how to use the house to generate income. If I had discovered FI before buying the house I may have thought twice about it. Fortunately we have a fairly small mortgage – one of the benefits of not having kids – but there is a lot of money tied up in the house which we could have invested.

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