Everyone Makes Mistakes

by Kevin on January 21, 2008

The original title of this post was going to be “The Story of the Gas Bill and the Bounced Check.” That seemed a bit long, but we’ll get to those details shortly.

Everyone Does It

Everyone makes finance mistakes. Seriously! Every person out there at one point in time has done something boneheaded, something stupid that affects their finances. All of the bloggers, celebrities, and pundits you read from have done it. Dave Ramsey? Lost millions in his twenties and filed for bankruptcy:

(Source: Wikipedia) At the age of 26, through his brokerage firm, Ramsey Investments, Inc., he had built a rental real estate portfolio worth more than $4 million. He became one of Tennessee’s youngest brokers to be admitted to the Graduate Realtors Institute.

Ramsey’s debt-fueled success soon came to an end as the Tax Reform Act of 1986 began to negatively impact the real estate business. One of Ramsey’s largest investors was sold to a larger bank, who began to take a harder look at Ramsey’s borrowing habits. The bank demanded he pay $1.2 million worth of short-term notes within 90 days, forcing him to file bankruptcy.

Ramsey made an enormous mistake that cost him millions of dollars. The fact that you made a mistake is not what ruins you. The real kicker is how you react to the mistake. Do you learn from it or ignore it? Dave Ramsey filed bankruptcy, rebuilt his life, started talking to couples in his church about finance, and now has millions of dollars. There was a lot of hard work in between, but you can tell he learned from his mistake.

Our Mistakes

I want anyone to read this blog to understand I am not an untouchable, perfect person. I make mistakes just like you do. In fact, I made two large mistakes in the last week.

We moved into our new house the last weekend of September. We got a bill from our gas utility company for service through October 22. We paid the bill and went on our way. With all of the chaos going on in our lives — new house, wife with her first teaching job, me starting my MBA — I failed to notice that we had not received a gas bill since then.

I called the gas company at the beginning of January. I was assured my account was in good standing. There were no flags on my account, and we were current. Yet we hadn’t received a bill in three months. The customer service representative assured me a new bill would be coming out in the next few weeks.

This weekend we received the e-bill notification from the gas company. The bill is a whopping $340+! Ouch. Note that is spread over 2.5 months, but that still comes out to $130+ per month. That seems high to us, but since we didn’t know what our usage was costing us we could not change our habits. Needless to say, we’ve turned the thermostat down to try and cut back on the cost.

The second mistake I made angered me more than the first. As I mentioned previously, we use our paper checking account only for checks to church or other places that we cannot use a credit card. We keep a $250 buffer in the account to cover those small checks. If I have an expense coming up such as a power bill, I transfer the money from our ING account and then write the check.

Our homeowner’s association sent us the annual bill (which we had saved monthly to cover) for $440. During a busy morning I decided to write the check just to get the bill into the shredder and off of our office desk. I would transfer the money later — it would take a couple of days for the check to be deposited regardless.

You can see where this is going, right? I never transferred the money. I neglected to check our account online. Again, this weekend, I received a notice in the mail that we were in the red on our checking account. We don’t have overdraft protection, either. I figured we were in for a hurting. Yet, the notice said they had waived the fees to keep our business. When I login to the online account management, it says we are over $100 into the negative. The transfer from ING should come in on Tuesday. I’m skeptical that they won’t take out additional fees, but I guess we’ll see.

So what have we learned?

  • Awareness is key. If we had realized our gas bill hadn’t been coming before we did, it is likely we would have received a bill in between. We could then react by lowering our thermostat.
  • Discipline is needed. We had more than enough money to pay the homeowners association fee. A simple mistake could have cost of a lot of money in needless fees. I should have transferred the money immediately. On the positive side, this is the first time we have “bounced” a check. Our discipline in the past has paid off up to this point.
  • Our emergency fund can help. We have an emergency fund saved up that should only be dipped into for actual emergencies. However, a “surprise” bill like our gas bill might put you over the edge for the month. We don’t need to go this far, but if we did, we could pull from the emergency fund.
  • Is isn’t the end of the world. I have a temper, and stupid mistakes like these really get under my skin. A mistake isn’t the end of the world unless you make it so. Instead, learn from it and move forward. I’m going to be extra careful in the future with writing paper checks. I still won’t get overdraft protection; I’d rather save on the charge.
  • Learn from your mistakes. Again, take your lumps and move on. Don’t forget the mistake, but don’t dwell on it. Fund managers of Selected American Funds (disclosure: I am invested with Selected American Funds – SLASX) Christopher Davis and Kenneth Feinberg frame and hang their worst investment decisions on a “wall of shame”. This reminds them of the past and to not repeat it. You’ll notice this post is filed in a new category titled Mistakes. I plan to do the same thing here.

So, what mistakes have you made?

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