It hurts to learn a lesson the hard way – especially with financial lessons.

There’s nothing like that sick feeling in your stomach when you realize you’ve screwed up royally and will have to face the consequences.

And yet, we all have those stories about the times we messed up and the lessons we learned, don’t we?

money problems to avoid

The only silver lining is that we can teach other to avoid certain mistakes that we ourselves have made. Hopefully by sharing our experiences, we ensure that others don’t have to learn the hard way. Below, I’ll examine 4 of the most important lessons that we tend to learn the hard way:

Lesson 1: Paying off student loans takes years

When you apply for college, the excitement of the adventures that lie ahead are all that’s in your mind. “Sure, I have to take out some student loans to make it happen,” you think, “but that’s no big deal – everyone does that.”

It’s all too easy to sign the student loan paperwork and put it out of your mind until after graduation. But the thing is, at that age you really don’t understand what takes to pay off $15,00, $25,000, or $40,000 of student loans. After all, you’re expecting to make much more than that per year with your post-college salary, so it should be easy to pay off those loans, right?


For one thing, high-paying entry-level jobs are becoming harder and harder to get.

(However, there are some great jobs that don’t require a degree.)

But more importantly, the big lesson is that only a small fraction of your salary will go toward paying off student loan balances, and in the meantime interest will accumulate. So maybe only $4,000 of your $40,000 salary goes toward your loan every year, and as interest adds up it will take you much more than 10 years to pay off!

In my case, I was lucky that the student loan balances I graduated with were manageable and I was able to pay them off in a few years. But I realize that I easily could have gotten stuck with a lot of student loan debt because I didn’t learn this lesson until long after graduating from college.

If you happen to be someone struggling with student loan payments, check out our article on what happens if you can’t pay your student loans.

Lesson 2: Credit card debt can sneak up on you

Another type of debt that many of us grapple with is the infamous credit card. Most people don’t get a credit card with the intention of going into debt. They think it will be a convenient payment option which will allow them a little flexibility when making purchases. “I’ll be able to put a couple of things on the credit card during the month and pay it all off at the end of the month,” they think to themselves.

Only, that’s not what happens. Instead, the credit card balance creeps up ever so slowly – like a ninja in the night – and before you know it, you’ve got a couple grand of revolving debt that you don’t know what to do with. Despite the best of intentions, the credit card makes it easy to spend money that you don’t have.

It also makes it easy maintain your current level of spending even when your income goes down. That’s what happened to me when I quit my job to pursue a new career. I started putting monthly expenses on my card and in no time I had a revolving credit card balance.

Only when I got focused on this new debt was I able to pay it off (and it took months). If you’re struggling with credit card debt right now, read our article on what happens if you can’t pay your credit card. And remember, don’t get in over your head with a credit card because even one late payment can hurt your credit score.

Lesson 3: There are good times and bad times to buy a house

This lesson happens to be one I haven’t learned the hard way (at least not yet), but it’s certainly one that many people had to learn the hard way over the last five years: the true cost of home ownership. Since 2008, housing prices have dropped dramatically, particularly in certain areas of the country, and only now are starting to increase in value once again.

While certain life factors play a big role in when you decide to buy a home, it’s important to remember that the housing market is just that – a market – and it can have ups and downs like any other market. For that reason, it probably always makes sense to look at some long-term graphs of housing prices before buying in order to make sure you’re not purchasing a house at the peak of a housing bubble.

And it also makes sense to think carefully about what you’d do if the value of your home decreased in the future – so that you’ll be prepared for any circumstance.

Lesson 4: Retirement is expensive

Open Roth IRAOh boy.

When I was younger it never crossed my mind to worry about having enough money saved up for retirement. But once you become an adult and you begin to realize your cost of living, it really hits home that retirement is a big expense.

And that’s why so many people spend their whole lives saving up month-by-month to pay for it.

In a way, it would be easy to not think about retirement until you’re only a few years away. But by that time it’s too late to save enough to cover your costs.

Yes, there is Social Security, but you should look at the numbers and calculate what they expect to receive from Social Security compared to what they expect to pay per month for living costs during retirement.

The difference is what will have to be made up with your retirement funds. This is one of the reasons that Jeff’s Roth IRA movement was such a good idea.

Opening a Roth IRA is easy and you can fund it a little every month. Using every avenue available to increase your retirement savings is quite necessary. It will help you be comfortable in your old age, and that’s something worth saving for!

Hopefully you don’t have to learn any of these lessons the hard way. Or if you already have learned some of them the hard way, hopefully you don’t have to do that for any more lessons. And if we all keep sharing our own experiences, maybe we can help each other avoid those most painful lessons most of the time.


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Comments | 9 Responses

  1. says

    Jeff – great article and seriously I wish this kind of information was MANDATORY reading for kids 18-25 years old! I know I could used this years ago before all the hard lessons!

  2. says

    Retirement is no more expensive than living! The simple answer is save and invest so you do not have to work. If you realize that you have to do something to avoid the consequence, you are more likely to do it.

  3. says

    The earlier people can read about these, the better chance they’ll have to avoid money mistakes. Everyone don’t want to drown in debt and also wants to retire early. One must work hard and smart for that.

  4. says

    It is so so easy to fall into those four traps. Actually I think most of us have fallen into them at one point or another. I think the harder part is NOT repeating the same money mistakes over and over…

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