Kimberly Palmer, Neldwallet
On Reddit, users recently asked how to recover from money mistakes.
They got a high profit loan for the car and got a good payment, but regretted the extra cost of interest added over time.
They now ask if they should use their savings to pay off the remaining loans in a lump sum and put all the experience behind them.
While some Reddit users have suggested that they continue to pay, many have agreed that repayment of the loan would be a wise move. They said they would learn the lessons and not stick to regrets and not move on to a better experience.
Recovering from a big money mistake is a common challenge, whether it’s a disappointing purchase, accumulating substantial debt or blowing away your savings.
We asked financial experts for their own ideas on how to recover. Here’s what they said:
Do not pin it to an error
Being enthralled with money mistakes is appealing, but there is little benefit to doing so, says Brenton D. Harrison, a certified financial planner and podcast host, “New Money, New Issues.”
Instead, he says he is focusing on what you are trying to do differently in the future.
Harrison experienced his own money regrets when he and his wife mostly bought rental properties in Nashville over a decade ago. They ultimately decided not to buy the property. Now they feel like they missed the opportunity as their assets have risen significantly.
Today, he avoids actively driving near that property. “It’s not productive for me,” he says.
Similarly, he urges those who regret expensive purchases to hide items in their closets or otherwise not see them, and not constantly think about mistakes.
You can’t hide your car, but you can pay off your loan and stop recalling past interest payments.
If possible, please undo the mistake
Mykail James, a Washington, DC-based financial educator, says if you buy something you currently have doubts, try returning it.
“Most things are returnable. Just send them back and don’t be embarrassed to return things,” she says. “They have a return policy for reasons.”
Even if you purchase something like a concert ticket, you may be able to sell it.
“You can always find a way to reverse it. Without a way to reverse it, you’ll be happy with what you got and you can do better next time,” James suggests.
As a Reddit user, it may be possible to sell the car more than it is left on the loan.
Create a recovery plan
Some mistakes, such as acquiring high-profit automobile debt, may require a focused recovery plan.
“We create a realistic repayment schedule and timeline for our budget,” says Harrison.
You might choose the debt snowball method, which first pays off the smallest debt to build momentum, or the debt avalanche method, which first tackles debt at the highest interest rate.
There are no right choices or wrong choices. The best way is to work for you.
Harrison cautions that it remains important to keep in mind other money goals, while focusing on debt repayments.
“One of the most common mistakes I encounter is that people are really willing to pay off their debts and they spend more money than they should,” he says.
Then, when another emergency occurs, they lack the savings to handle it. Harrison suggests paying off the debt in a way that allows him to leave the room on budget due to an emergency.
He adds that recovery may take patience. “We’ll come in with realistic expectations,” he says. If it took years to destroy your trust, it might take years to improve it.
Next time I’ll make a different choice
After making a money mistake, Harrison says it’s worth thinking about how you’re different next time. Think about the thought process you experienced before making a mistake. Did you act on impulse? Was your desire to “catch up with Jones” motivated?
“If there are lessons to learn, make changes so that you don’t mislead yourself in the future,” he says.
Otherwise, admit that sometimes you can do everything right and still make mistakes.
“Dut out the dust and move on. There’s no point in focusing on the past,” he says.
Reddit is an online forum where users share their thoughts in “threads” on a variety of topics. Popular sites contain a lot of discussion about financial subjects such as money mistakes and success, so I sifted through the Reddit forum to get a pulse check. People post anonymously, so they cannot check their individual experiences or circumstances.
Kimberly Palmer writes for Nald Wallet. Email: kpalmer@nerdwallet.com. Twitter: @kimberlypalmer.
Article asked on Reddit: How can I recover from a big money mistake? It originally appeared in Nerdwallet.
