AskAlice: What’s The Worst Financial Decision You’ve Ever Made?

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A few weeks ago, we posted a question on The Smart Wallet’s Instagram, asking our followers: “What’s the worst financial decision you’ve ever made?” because, really, everyone’s got one.

Comments flooded in, so I picked a few that stood out to me that I wanted to give my 2 cents on. I answer the question because learning from others’ mistakes saves you time and money!

Credit Scores

@jas3inrd1 said the worst financial mistake was this:
“After paying off my car loan and not opening up something else like a credit card. Some credit is better than no credit. Having no credit, my credit went from 700s to a 500s score, and now I have to work super hard to get it back up, but I’m hurting money-wise wise so I can’t afford another bill.”

First, congrats on paying off that car loan! Since you said your credit score dropped, your car loan was your only installment account, which means fixed payments for a set period. It’s good for your credit score to have a mix of both revolving accounts (like a credit card) and installment accounts (like a loan). 

Another factor for the drop might involve late or missed car payments. If there are any negative marks against your account, it’ll stay on your credit report for 7 years. Positive marks (on-time payments and accounts in good standing) stay on your credit report for longer at 10 years.  

Since your credit score is pretty low right now, which can affect your ability to rent an apartment or even get a cellphone plan, you can use Experian Boost™ to improve your score for free. This feature by Experian adds your positive payment history from utility and telecom bills to your Experian credit file.

That’s actually a pretty big deal because previously, paying for gas, water, electricity, TV, internet, and phone bills didn’t affect your credit score. I’d definitely recommend using Experian Boost first to increase your score.

@josie42069 said:
“Getting too many credit cards then forgetting about paying them off on time

Ouch! That’s a surefire way to tank a credit score.

There isn’t a magic number of cards that you should have, but having at least one will help build your credit score. I have 3, each with a different purpose – for travel (Chase Sapphire Preferred), Costco (Citibank), and Amazon Rewards Visa.

However, the number of cards you have open isn’t as important as how you use them. Your payment history makes up more than a third of your score a huge chunk of your score and your credit utilization ratio (what you owe) makes up 30%. Those 2 factors alone are 65% of your score! The rest goes to how old your accounts are (the older, the better) and how mixed they are. 

The rule of thumb is to keep your credit utilization ratio to 30% or less. This means if you have a $5,000 credit limit on your card, your balance should be no more than $1,500.

If your credit score is suffering, you should keep your credit utilization ratio at 10% or less and use a free monitoring system like Credit Sesame that helps you improve and maintain your score.

Money Management

@krystalonthemove said:
“Just being immature with money. I used to get lump sums of money at a time about once a year or every few years, and when I was younger, my Mom would make me pay my car payment and stuff up for several months in advance or rent. I stopped doing that, and after she died, my behind got evicted. Keep the principles your Mama taught you!”

There’s a reason why they say, “Mama knows best!” I’m sorry your mom is no longer by your side, but the greatest way to honor her memory is like, you said, keep the principles she taught you.❤️

If you feel a little lost when it comes to managing your finances, it probably stems from not understanding how much money you have coming in and going out. Credit cards will also add to the temptation to spend unwisely and ignore the blindspots of how much money you’re actually spending. Try the 50/30/20 budget rule or the 60/20/20 rule to start managing your income into buckets of how much goes to living expenses, savings and finance stuff, and fun stuff.

If that’s too manual for you, try out Rocket Money, which automatically pulls your historical spending, organizes it, and allows you to clearly see what you’re spending to set a target budget armed with real information. We lovingly call it the budget app for newbies!

Vacation Properties

@computer_wiz01, @amber28360, @purplelioness_81, and @escale_playette each said similar comments regarding:


I thought this was an interesting “worst financial decision” comment because multiple people chimed in with the same sentiment. 

For those unfamiliar with timeshares, it’s basically a vacation property arrangement where your contract lets you share the cost of the property with others to guarantee your time allotment there. If you’ve heard someone say, “I have a week’s timeshare in Hawaii” or something similar, that person is a member of the timeshare club.

Timeshares are a huge commitment as they last almost forever, and people either love them or hate them. If you’ve ever received a mailer that promised a free weekend away just by attending a presentation, that is the first step to getting locked in. 

Sometimes, timeshare salespeople will target you while you’re already at a resort. Since you’re already on a “vacation high,” you’ll feel more susceptible to the highly trained sales reps making you feel like you need a vacation property for life.

While the initial timeshare upfront price will vary based on location, time of year, and share size, annual maintenance fees go up each year, which you must pay whether you use the property. Also, the property could be booked when you have time to go!

If you want to go to the same vacation property every year for the rest of your life, and after doing the homework, you still think it’s a good deal, then lock yourself in. Personally, I prefer the flexibility of choosing a different vacation destination each time as the world is so large!

My Worst Financial Decision

Alright, so we get to the point where I share my worst financial decision. Vulnerability moment incoming!

My mom had warned me about lending money to people, particularly to what you think is your significant other at the time.

And yep, you guessed it, I lent money to a now obviously ex-boyfriend. 

Over the 4 years of being together, the loan totaled around $10,000. I was stupidly “in love,” but when I came to my senses, I had to cut my losses after failed attempts to regain some of the money. Now it’s just one of those annoying memories of “why the f*ck did I do that?” 

That’s not to say I don’t lend money out ever now; I’m just more selective. I hope you don’t ever have to be in a situation like that, but if you do, understand why that person needs that money to give you clues if you’ll ever get it back. 

If you made it this far, thank you for reading! And if you want to ask a question, be sure to reach out to me at [email protected] 🙌