Bad Spending: How a Single Purchase can Ruin Everything

One of the very foremost tenets of personal finance is having an “emergency fund”.  Ranging anywhere from perhaps a thousand dollars to a year’s worth of earnings, this is money set aside for life’s little surprises.  The idea is that if you have an even relatively small amount of cash available for things like car repairs, medical bills or unexpected trips like a wedding or funeral, you’ll be less likely to fall into credit card or payday loan debt.  Or if you have no access to credit or ability to borrow, this fund will help you keep the lights on when storms brew.  Missing even a few minor bills due to an unexpected expense can lead to long term consequences, as this family shows.

So if an emergency fund is such a good idea, what would be the opposite?  That would spending all of one’s savings on something that wasn’t an emergency and in doing so putting oneself on a financial precipice.  This is bad spending. Sometimes just one purchase can send your financial life, and maybe everything, off the rails.

Stereo Cabinet
Before Beats by Dre

For me this was a stereo I bought in college.  For those younger readers a stereo is a device that plays music outside of just your ears.  Unfortunately, we often don’t see these terrible purchases for what they are at the time.  Did I have the money to pay for it in cash?  Yes I did.   Did it leave me with any money for much else?  Not really.

What happened next is pretty much what always happens.  I ended up getting some credit cards and relying on them to cover some immediate needs.   I promised myself that I would somehow find the money in short order to pay them off, but I didn’t.  Instead I spent about 3 years amassing a ton of debt which took many more years to finally pay off.

While not obvious to me at the time, it is now very easy to look back and see this one purchase as my single biggest money mistake.

Do you have a single purchase that you regret?

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