70: My Money Mistakes - Part One

In this candid episode of Elevate Your Paycheck, host Carolyn gets personal as she opens up about her own financial missteps in a relatable and insightful way. 

From living beyond her means to battling impulse spending and the pitfalls of avoiding a budget, Carolyn dives into the lessons learned along her journey toward financial independence. 

Whether you’re struggling with lifestyle creep, making impulsive purchases, or fearing the word “budget,” this episode is packed with honest advice, actionable strategies, and encouragement. 

Tune in to learn how to break free from these common money traps and start making smarter financial decisions. Plus, stay tuned for part two, where Carolyn tackles emergency planning and more!

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Transcript

Carolyn: You're listening to Elevate Your Paycheck, the podcast that is dedicated to transforming your financial journey. I'm Carolyn, your host and money coach that will guide you out of that paycheck to paycheck cycle and onto a path towards financial independence. Are you ready? Let's do this. Well, your girl is back. So excited to be back into the sound booth, recording this podcast for you guys. It's been a minute since I last was on here. So I am super excited. But for this episode, I'm going to do something a little bit different and just share some real life happenings in my life. Have you ever had that person who always finds your failures or something that you've done, just super amusing.

 If I trip or I [00:01:00] fall or something like that, my daughter gets a super kick out of it and kills herself laughing. So I think in some ways it's just our way of kind of relating because we know, either we're just as clumsy or, we can relate. So I thought that I would share some of the mistakes that I've made.

I have made with money in the past. Now, unfortunately, I don't think I can get through it all in one episode. So this will be a two part series, all about my own money mistakes. And I hope that you take something away from this, or maybe it resonates with you and you could totally get where I was coming from.

But the best part about mistakes is that we learn from them. and we get better at it as we go along. So the first category that I'm going to kind of dig into is living beyond our means. So what does that saying really mean? Well, technically it means that you're spending more money than you earn or can even afford, right?

So often [00:02:00] that means that you're using a credit card or you're going into debt to maintain a certain lifestyle that's really not supported by your income. Now, this can include, regularly purchasing items that you don't need, maybe upgrading something, whether it's your home, your car. It could be consistently dining out or traveling and then doing all these things, not considering how it's going to impact your long term financial health.

So that's the definition of living beyond your means. Now, not one of these things are bad. So for example, traveling or purchasing, non essentials or upgrading things, none of these things are bad. It's just that Weighing them against your income and making sure that you have a balanced budget is really the key to determine whether or not you're actually living beyond your means.

Because it's funny, in this day and age, you can actually live beyond your means and not even know it. Right? Because we have so many vehicles [00:03:00] where we can access money from, whether that's credit cards or line of credits or, lots of different areas where we can access those funds.

We pay our bills on a monthly basis and we don't even realize that what we're spending is more than what we're making until there's a significant problem. Now, one of the courses that I took in my graduate financial planning certificate program was cash management.

And there were some tools that we learned how to determine if you're a cashflow positive or cashflow negative, and it probably wasn't until this point. And that wasn't that long ago where I finally understood how to determine whether or not I was living beyond my means. So you know, as the teacher, provides you with examples and he makes you do these exercises of how you kind of determine it.

I thought, well, Good time to do that on myself, right? And so sure enough, I work through the exercise and I'm seeing things that are like, wait a [00:04:00] minute, that's not correct. Why am I in this type of position? We were doing all the right things, right? We have a plan for our retirement. We've had a plan for our children's education.

We have investments and so forth, but when it comes to cash management, that is something different. And this is where that slippery road comes from, because your liabilities can creep up on you if you don't get a grip on them or plan for the purchases that you're making. And. Before you know it, you're going to be in a cashflow negative position.

And some of the ways that this can occur is with lifestyle creep. Now, if you don't know what that is, sometimes when people perhaps get a raise or more money is coming in, they'll think to themselves, well, now I make more money, so therefore I deserve a little bit nicer things. So, an example of this is your vehicle, right?

We were driving a Honda [00:05:00] Civic and Toyota Matrix for a very long time. We tend to buy vehicles and then just drive them to the ground. I think when we finally got rid of our Toyota Matrix, it had probably 400, 000 kilometers on it. And the car was actually still running. We just didn't want to put any more money into it.

And my son inherited both those vehicles after we were finished using them. So they were well used. But when it came time to think about another vehicle, did we go back and purchase the Honda Civic? We were just like, well, perhaps we need , a little bit nicer vehicle. And this is where that lifestyle creep comes in, because of course, we weren't even paying for car payments at the time because those cars were paid off many, many years ago.

And so now you're getting into a car payment, which didn't have before. And. On top of that you're paying a little bit more because it's, , maybe a little bit nicer car. And so that's where that lifestyle creep comes in. And if you are [00:06:00] not, diligent about looking at your finances before you go into these big purchases, the dealers and the sales representatives can

get numbers that look amazing to you. And so an example with that vehicle, you could say, Oh, I'll just, put it over five years. They'll put the term over five years instead of three, or don't worry, you don't need to put any money down, keep, hold onto your money. And no, the payment will be a little bit higher, but it's not, you can manage that, throughout the course of the five years.

So they'll do different things to try and get you to purchase that vehicle where the numbers look really good to you. But you got to be aware because like, how much interest are you paying? Do you really want to be paying for a vehicle for over five years? Because at the, usually at three or four year mark is when cars start to kind of break down and give you a little bit of problems.

So do you want to be paying those big payments for that long period of time? So you got to ask yourself these questions. You got to plug the numbers into your budget. You got to make sure that it is the right purchase for you and you're not A [00:07:00] victim of this lifestyle creep.

Now the second category is impulse spending. If you've been listening to this podcast for a while, thank you OGs, you will know that my money personality is that I am a spender and if you don't know what your money personality is that I have some episodes that you can go back and listen to and kind of determine what that is for you.

But for me, yes, I am a spender. I do save and I do have all those other things. But my weakness is spending. My husband, I guess, will 100 percent agree with that. So yes, Amazon packages will end up at our front door. The doorbell will ring and my husband will say, package for Carolyn. And so I have really had to learn how to discipline myself to live within a certain amount or range.

Now, during the pandemic, we had a lot more time on our hands and I decided that It was a perfect time to clean out my closet. [00:08:00] I wanted, you know, the beautiful closet with all the organization things. , because I was using, , those plastic Tupperware stuff to put stuff in. And, I wanted it to be all nicely organized and beautiful, but that would also required me going through everything that was in there, taking it out, sorting it and figuring out what I actually needed and what I didn't need.

So, needless to say, if you've ever done this exercise, you end up with a pile of what you don't need that is far greater than the pile that you actually do. What does that mean? You likely purchased things that you didn't need. And so the most interesting thing that I found when I pulled out everything out of the closet Was a box of hair caps, you know the plastic kind, , you go to the hairdresser and they'll put some conditioner in your hair and they put this plastic thing on and maybe you sit under the dryer, I don't know, to get a treatment, something like that.

Anyway, I had a whole box, [00:09:00] probably a hundred caps in there. And then I also found, , a steamer. So, not the steamer that, you, iron your clothes with. This is a steamer for your hair. I think you put it on, you plug it in, and it's supposed to, , moisturize your hair. Which, you know, in and of itself, I must have thought at the time that I was going to use this.

Like, every week, I do these treatments to my hair and, , It was going to be great. Well, needless to say, it ended up in the back of my closet. And so, , I took out the box. I took out one of the caps. I had not opened it, just so you know. I had not opened this box. I took out one of the caps and I put it on my head.

And it didn't even fit, like, literally there's a hundred plastic caps in there and it didn't fit my head. Oh my goodness. I don't remember how much I spent on it. , but needless to say, what do I do with all of this? Right? Purchases that are just so unnecessary. And I guess I had good intentions, but [00:10:00]really I probably should have given it some thought as to if I was really going to do this and you know what, maybe order a smaller amount to see if they actually fit my head.

So needless to say, this is a perfect example of an impulse purchase. Now I don't remember the exact details behind all this, but I probably was influenced into purchasing this. on the internet, , showed me that, yes, , you could do your own hair treatments at home and you can steam it and it's going to, you know, make your hair look so much better and healthier.

And I'm sure all of those things are true, but I went out and I purchased these things on an impulse and perhaps I should have, , taken some time to consider whether or not this was really something that I was going to use. and need. 

 So the next category is lack of a budget. Now the word budget sometimes becomes a little bit scary or overwhelming or just like you roll your eyes kind of moment because people [00:11:00] hate to be restricted, including myself. Right? Budgets are not fun because you feel like they are holding you back from doing what it is you really want to do.

And that's the bad rap that budgets have had. But in fact, that is not the case. And I again, had to learn this the hard way. In the past, I would have like lots of spreadsheets and things showing, all the bills that I had to pay when they were due to make sure, , I was organized and things were done in a proper manner.

So I really didn't have a problem with that, but it's the leftovers, right? And it's the things that come up. We're going to talk about, planning for emergencies in the part two episodes. So stay tuned for that. But budgets really help you structure the money that's left over after you've paid all of your normal bills.

And so I always kind of thought that that was like, okay, well, that's just free money. I buy groceries, I buy some of the things that we need. And then what's ever left [00:12:00] over, I'm going to spend on however we choose. Go out to restaurants, buy clothing, whatever. To be honest, that is really not the best method because you're not considering what your long term goals are when you do that. After learning through my training and through trial and error and so many things that I've learned that you need to have funds set aside for specific purposes, because things that are going to come up, like if you look at a calendar year, and now we're in October when this episode is releasing, and we have a few months left for the end of the year, but there's some significant things that are going to come up within the next couple months.

So first up, in Canada, we have our Thanksgiving. In November, the Americans have their Thanksgiving. We have Black Friday, which is one of the biggest shopping days of the year. We also have Christmas, which if you celebrate, that involves spending money as [00:13:00] well. So if we're in October, And we know that all those events are coming up, do we have the money saved or put aside for those events?

Or are you just operating from the same amount of money that you operate every two weeks or whenever your paycheck comes in? So if that's the case, and you're operating from your current pay, you're going to go Over your your spend is going to go over because you normally don't have those big occasions on a day to day basis or on a week to week basis So we have to plan as much as it , irks us to do so and you want to be a free spirit Planning will actually alleviate stress so In the past, you know, I would have my Christmas list.

I have a list. I guess I'm a spreadsheet girl. So, you know, all the people that I'm going to buy for, the food that I'm going to make, all the different things that I need. And I cut, I kind of total up how much money I would need or to,, to allocate towards Christmas. [00:14:00] And, It would be too late for the most part and most of the time I'd be like thinking about this in November because most of us do when it's Black Friday, you're thinking, Oh, maybe I'll do some of my Christmas shopping now because it's cheaper. But if you don't have the money for that and end up on credit, if you don't have the money to pay the credit card off in December, what's going to happen?

You're going to pay interest on it and all the savings you would have had are now disappeared. And like I said, learn the hard way, there's many times that I purchased things over Black Fridays and I didn't have the money to pay it off. So really what was the purpose of that?

So I want you to learn from my mistakes, to create a plan and attacking that plan from the beginning of the year. So we are going to be heading into January. January is the perfect time to create these plans for all the events that are going to come up throughout the year and start putting that money aside because it feels so good when you're able to draw money from that fund when you need it.

 Lessons [00:15:00] learned but having a budget is honestly the best way to get to the goals that you want. And everybody's goals are different, right? We want to travel, you may want to pay for your children's education, you want to retire shortly. You know, there's so many things that we can determine what our goals are and they kind of seem far off because it's not something that you have to deal with on a day to day basis.

But if you don't put something in place that those days are going to pass so quickly and that money won't be there when you actually need it. So one more comment about budgeting is that it's not a one size fits all type thing. It is super custom to the way that your personality is. Again, if you don't know your personality, go take a look at some other episodes and you'll see how to determine what your money personality is.

And there is a budget that matches that particular style. [00:16:00] There are so many different variations I've worked through with my clients and I show them, the variations of like, Oh, I didn't know you could do it this way. Or, Oh, I didn't know it provided this freedom. You know, people have such a bad rap about budgets.

And I really want to highly stress that it is custom to how it is you operate your life. So don't be afraid to create a budget for yourself and stick with it because you're going to see the difference it makes. So just to recap, what were my lessons learned from the three categories that we talked about?

So again, first thing was living beyond your means. So the lesson that I took away and that I've implemented in my new life, I should say, is to realize how important budgeting, according to your particular income. is. So not according to your lifestyle, but according to your income. [00:17:00] So making sure that when you're making those big purchases, it falls within the money that you're actually bringing in.

Okay, second lesson learned on impulse spending. So how, how I've been able to kind of control, , what my personality wants to do. me to do, which is make those impulse purchases. Well, I developed some strategies that helped me to delay purchases and to keep my emotions in check when it comes to spending, right?

Cause a lot of it is emotionally based. You know, you're happy. You want to spend some money. You're sad. You want to spend some money, right? It really is tied to how we're feeling. So having those strategies or doing something different when those kind of feelings come up, that's really helpful. can definitely make a difference and help to curb that emotional impulse spent.

And then the final category was not having a budget. So lesson learned is that budgets don't restrict you. They give you the freedom [00:18:00] to be able to plan and prioritize and reach your financial goals. I hope these lessons have resonated with you. The mistakes I've made were hard. , but they taught me invaluable lessons that I'm passing on to all of you today.

So if you struggled with any of these issues, just remember, right, that you're not alone. We've all been there and it is never too late to get back on track. You've got this. I believe in you. So thank you so much for tuning in. And if you found this episode helpful, don't forget to share it with someone who might need a little bit of money motivation today.

All right. So we'll see you guys next week for part two.

Thanks for listening to the elevate your paycheck podcast. If you love this episode and need deeper support, head to thefinancialmoment. com to see how we can support you no matter where you are at today. We help our clients organize their finances, [00:19:00] create savings, eliminate debt and create a roadmap to their financial goals, which makes them more in control than they ever dreamed possible.

So head to thefinancialmoment. com and make this the next step in your financial journey.