1 Year, 5 months, and 17 days ago I wrote my very first post here on a personal finance lesson I learned the hard way. It was broken down into two parts: Operation Heloc: The Good, and Operation Heloc: The Bad, and it was all about how I tried to game the system to save a few dollars ;)
I was reminded of this when Tough Money Love cleverly celebrated his 1 year blogiversary by asking us bloggers to share exactly that – a financial lesson we learned the hard way. I’ve done a lot of crazy/stupid stuff in the past, but this one clearly stands out from the rest. You can read about it in depth via the links at the top, but here’s the gist of it all in one paragraph:
When we first bought our house I started throwing all our paychecks AND savings/emergency funds against our maxed out HELOC (our 2nd mortgage) in order to defray a few weeks of interest. At the end of the month I’d take that credit back OUT and use it to pay our bills, mortgages, etc. This worked for 3 months until the housing market went to $hit and froze our credit line. Since it came without warning, I wasn’t able to pull back any of the funds in time and thus denied us almost $10k in straight up cash. We tried to game the system and we lost, and now we keep all savings and emergency funds in a money market account ;)
Ever heard of UFirst Financial or money merge accounts? Well, it was sorta like that except I did it myself without fronting anyone $3,500. And in fact, it was a post of Trent’s on money merge accounts that shed some light on this whole thing to begin with! I wouldn’t be surprised if it’s still one of his top posts, as it continues to get comments every single day. (currently at 2,432)
UFirst agents will still tell you their system works, and it may for some, but I just don’t buy it (literally). Over the past year and a half I’ve come to realize that most things with finance are fairly simple. Anytime you try to cut corners or finagle a genius way to get rich quick, it usually comes back to bite you in the ass (unless you are, in fact, a genius). I’ll still go and try out new ideas from time to time, but unlike the old me, I’ll be sure to put in a lot more research before jumping in again.
In the meantime, I’ll stick with the plain and simple method of personal finance: spending less and saving more. These two friends never steer you wrong ;)
Any of you learn a good financial lesson the hard way?