My Dumbest Financial Decision

I’ll be honest, I’ve made some poor money decisions in my life.  I’ve found myself drowning in credit card debt, financed a depreciating asset, and have even had to resort to paying my rent with the “help” of payday lenders.  Obviously I’ve made some stupid choices regarding my money.  Despite all of these mistakes, none of them compare (in my mind) to the dumbest financial decision I’ve ever made.

My dumbest financial decision may not have been the most costly choice I’ve made regarding money.  No doubt I’ve wasted more money with my credit cards through my inflated spending, interest charges, late fees and penalties.  What was my dumbest financial decision ever?

The dumbest financial choice I have made is cashing out my 401(k) after leaving a former employer and purchasing a touchscreen DVD player for the dash of my car.  Why do I feel that this is my worst financial decision? 

By cashing in my account I sacrificed 3 1/2 years of saving.  Now that I am beginning to understand more about finances and compounding interest I realize that my decision has robbed me of any potential future growth on my money through the loss of that time.

Not only do I regret a missed opportunity, saving money is hard and takes effort.  I sacrificed all of my efforts throughout the years by cashing out the account.  Making up for that lost money is impossible.  I can save more money, but I can never replace that lost cash.

I gave a lot of money away by cashing out.  I had to pay taxes on my withdrawal as well as a 10% penalty for cashing out early.  That adds up to a significant portion of the entire account balance.  This is money that could have been earning interest.  Instead I gave it away to Uncle Sam.

Not only was cashing out the account dumb because of the financial implications but also because I bought a touchscreen DVD player for my car.  There was a point in time when I concerned myself with material possessions, and this is one of the things I purchased. 

To make matters worse, I have not used the DVD capabilities because it is illegal to use while driving.  In order for the player to operate I have to be parked with the emergency brake engaged.  How often do you find yourself sitting in your car long enough to watch a movie?  Me either.  This wasn’t something that was disclosed to me at the time of purchase by the salesman, nor something I would have even considered.  I was blinded by the bells and whistles of the new gadget.  I would have been better off sticking with the factory installed CD player since I am completely unable to utilize the options available on my fancy DVD player. 

Now that I am once again faced with the decision of where to put my 401(k) account, I know exactly what not to do, and won’t make the same dumb decision twice.

***

Please visit the ”Carnival of Everything Money” which features links to numerous personal finance blogs about frugal living, money management, debt & investing, including this site!!!