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5 money mistakes you can learn from

Key takeaways

  • Before co-signing a loan or a lease with someone, make a plan for covering payments and consider putting it in writing.
  • Compound interest works against you with credit card debt. Try not to charge more than you can afford and always pay on time—more than the minimum when you can.
  • Before taking out a student loan or withdrawing from your retirement savings, do your research to understand how doing so could affect your future plans.

Have you ever made a money decision you regretted? If the answer is no, congrats—bet you floss every day too, you rock star. On the other hand, if you still cringe over a past money move, you’re not alone. In 2022, 76% of Americans reported making at least one financial mistake, according to a Credit Karma survey.1

We asked 5 real people to share their past financial problems, so you can learn their lessons without feeling the pain yourself.

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1. Co-signing for a friend who didn’t repay the loan

When Molly Watters was a 25-year-old graduate student, a close friend came to her with a question: Would she co-sign a $10,000 student loan? Watters, now 40 and living in Hollywood, MD, says she thought about it carefully. “I’m someone who says I would do anything for a friend, and here she was asking me to do something for her. So I figured, ‘I’m going to do it,’” says Watters. They discussed that payments, which would start immediately, had to be paid on time. Watters says her friend paid $10 each month faithfully until she graduated in 2010. Then, when the monthly payments went up to $125, she simply stopped paying.

Not only did this money mistake cause an irreparable rift in the friendship, Watters found herself dealing with it for more than a decade. Watters protected her credit by making on-time payments until the loan was paid off in 2022—and walked away with an important lesson: “If you co-sign for someone, you’re stuck paying it off if they don’t,” she says. “So be very careful before making that kind of commitment.”

2. Racking up credit card debt

Mark Margarit, a 41-year-old team leader at Fidelity, says he ran up $20,000 worth of credit card debt in his 20s. He got his first credit card when he was in college and used it for school-related purchases. His intent was to pay off any charges at the end of each month when he was reimbursed by his parents—but that didn’t always happen. Instead, he used the new card for day-to-day living expenses, such as health insurance, food, parking, gas, and nights out. He also took cash advances, not realizing that those came with a much steeper interest rate. The worst part, he says, was that he didn’t  understand you need to pay off your balance each month to avoid racking up interest charges. 

Once he graduated, Margarit took over paying the credit card bill with his own money. He never missed a payment, but he often only paid the minimum each month based on what he thought he could afford, and the card’s interest rate was well over 20% by then. This ballooned the total amount he owed as the interest compounded. Margarit says it seemed as though he would never pay it off. It wasn’t until he educated himself that he turned the tide on his debt, but it took years. He finally made his last debt payment only a few years ago.

“I read about the importance of always paying more than the minimum and always paying on time,” Margarit says. “So I started trying to pay a little bit more each month, even if it was only $5 more than the minimum. That kept me going from a mindset perspective not to break the chain. I also started to limit my use of the card whenever I could.”

3. Borrowing from future you for a wedding

Bethany Marlatt, 36, wishes she had more financial education, too, before she and her husband made their own money mistake. The couple, who live in Sugar Grove, IL, were planning their wedding and finding it difficult to pay for everything with cash. They had already run up high-interest credit card debt and were paying off a car loan at 26% interest, due to a low credit score.

“We had intended to save up for our wedding, but the budget was just spiraling out of control,” she says. So the couple took a 2-year, $10,000 loan against her husband’s 401(k) to pay wedding bills. Though opting for a loan rather than withdrawing the money outright saved them from penalties and fees, it still impacted their retirement planning, as they missed out on several years of potential tax-free investment growth. The wedding was beautiful, but Marlatt says she wouldn’t recommend doing what she did. “I don't think we understood how important it was to save for retirement until we were older.”

Read more about the tradeoffs and other considerations before taking out a 401(k) loan.

4. Moving in with a partner without a written agreement

Ten years ago, Misti Nippert, 40, and her fiancé decided to rent a house together in Hendersonville, TN. But when the couple experienced problems, Nippert asked her fiancé to move out. Although he was listed on the lease, her fiancé immediately stopped paying rent and refused to pay thousands of dollars in damages his dog caused.

Between window replacements, carpet cleaning, and 4 months of rent, Nippert owed $17,000. She emptied her savings account but still couldn’t pay everything, so she took a high-interest loan and borrowed money from her father. “It took me 2 years to recover from that,” she says. “Now I wouldn’t go into any type of rental or home purchase with someone unless I could afford 100% of the rent or mortgage on my own salary. And that includes all the utilities.”

Among other tips when moving in with a partner, it’s important to discuss how expenses will be covered including what happens if you split up. Consider putting that agreement in writing—beyond co-signing a lease—just in case. This could give you a stronger position should you have to take legal action to recoup your money.

5. Taking on too much student debt compared to future income

Katie Munizza, 35, a part-time occupational therapist from Abington, PA, attended school on and off for 10 years—in part because she switched majors along the way. She borrowed both federal and private student loans to finance her education, and by 2016—after earning 2 associate degrees and being one class away from a bachelor’s degree—she owed more than $100,000. Today, she still owes about $78,000.

Munizza has hustled to pay down her loans by working 2 jobs, but she says she wishes she had done more research before spending so much time and money on degrees that didn’t set her up to earn a lot.

Student loans can be an important tool for gaining access to higher education, and nearly 1 in 4 adults with a bachelor’s degree or higher have at least some student debt.2 But prospective students should understand how much their potential salary could be—or could increase to—and how that compares to their loan amount and future payments. Just like any investment, it’s important to calculate the ROI (return on investment) of taking out a student loan.

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1. “Breaking Bad Financial Habits in the New Year,” Credit Karma, December 19, 2022. 2. “COVID-19 Adds to Economic Hardship of Those Most Likely to Have Student Loans,” US Census Bureau, August, 18, 2021. The views expressed are as of the date indicated and may change depending on market or other conditions. Unless otherwise noted, the opinions provided are those of the speaker or author, as applicable, and not necessarily those of Fidelity Investments. The third party contributors Molly Watters, Bethany Marlatt, Misti Nippert, and Katie Munizza are not employed by Fidelity and have not received compensation for their services. Mark Margarit is employed by Fidelity and was not compensated for his services.

Fidelity does not provide legal or tax advice. The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact investment results. Fidelity cannot guarantee that the information herein is accurate, complete, or timely. Fidelity makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Consult an attorney or tax professional regarding your specific situation.

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