4 Money Mistakes My Parents Made That I Won’t Repeat

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As I was growing up, I watched my parents struggle with money. Keep reading to learn how I’ve avoided their errors to give myself a firmer financial footing. 

As I was growing up, I was able to watch how my parents dealt with their finances. While they always provided me with everything I needed, which I was grateful for, I also watched them make some money mistakes that were a point of stress.

As I observed some of the issues that arose because of their money management decisions, I vowed there were four mistakes I would never make with my own finances. Here’s what they are.

1. Not having enough insurance

One of the biggest mistakes my parents made was not having enough auto insurance. When I was about 13, my dad got into a car accident. He was rear-ended, which pushed his vehicle into the person in front of him.

Since he technically rear-ended the person in front, he ended up being held responsible for her losses. And the person who had hit him and started the whole chain of events did not have enough insurance coverage, so the driver of that front car went after my dad’s insurance to pay the bills.

The problem was, my dad did not have a ton of insurance either. But, he did have more personal assets than the driver who had put the chain of events in motion. There was a big risk that he would have ended up being held personally liable for some of the lead driver’s damages, which were pretty substantial.

In the end, the insurance company settled the claim for the policy limits and no further claims were made against my dad. But, it was a stressful period of time when he wasn’t sure if he was going to be personally sued and required to pay damages. To make sure this never happens to me, I have well above the required amount of liability insurance coverage so it’s very unlikely my assets would ever be at risk.

2. Refinancing their house multiple times to pay off debt

Another big mistake my parents made had to do with their mortgage loan. They ended up refinancing the house several times to pay off credit cards and other debts they had incurred. Because of this, they never really made much progress in paying off their home loan since they kept tapping into their equity.

When my dad went to sell his house after he retired, he was not even sure if he would get enough to pay off his current mortgage balance. Ultimately, he did, but he didn’t walk away with much extra cash for a home down payment on a new place.

To make sure I avoid this, I’ve committed not to take equity out of my home to fund a lifestyle I can’t really afford. I’m working on paying my mortgage down on schedule and I won’t borrow against my house for any reason.

3. Borrowing for things that don’t go up in value

My parents also tended to use their credit cards and take out loans for expenses like vacations. This meant they had monthly payments on different loans all the time, which in turn meant that they ended up having to borrow to fund other expenses.

This wasn’t something I wanted to do after I saw them stress about those credit card bills — especially when my dad lost his job and there were several months he didn’t work until he found a new one. I absolutely refuse to ever borrow for anything other than a house, starting a business, or other things that help me grow my net worth.

4. Always having a car payment

Finally, my parents always had car payments. My dad likes fancy, expensive cars and he still borrows to drive them. Once he’s paid off one loan, he ends up getting a new car shortly after.

I wasn’t interested in being stuck with car payments forever, so I keep my cars for as long as possible and save up to pay cash for new ones.

Ultimately, there are many ways to learn money lessons from parents — including observing what not to do. By learning from the mistakes my mom and dad made, I’ve been able to live a much more stable financial life.

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