Last month I promised a cards-on-the-table truthful recap of my financial problems. Let me preface by saying that I’m not writing this for pity. This is my honest account of how anyone, even the most careful person, can get into the red, but there’s a way to recover.
I’m always careful. I track my expenses, maintain separate checking and savings accounts and pay off my credit card balance at the end of every month. Despite all that, I still have money troubles.
I made three big money mistakes in 2012. They didn’t seem like mistakes at the time, but now I’m a little wiser and I’m taking action to put myself back on the right track. Here’s what happened, what I did, and what I learned.
1. I didn’t think about my taxes.
The mistake: In September I quit my full-time job as a paralegal to pursue my passion of becoming an editor, so I took on a paid internship to get my foot in the door. The thing about paid internships is that they’re not paid very much, and for six months I budgeted, hard, in order to live off exactly $400 a week. I knew that I was being paid as an independent contractor, meaning there were no taxes being deducted from my checks and that I’d have to pay those back. I just didn’t realize at the time how much I’d have to pay back. In January, when I received my W2s, I logged on to Turbotax to calculate my tax return. But my tax return ended up being a negative return; it turned out I owed the government just over $1,500 back on my taxes—waaaaay more than I expected to pay.
The recovery: In hindsight, I’m really glad I tried to calculate my return in January, because it allowed me three months to save up the money I would need to pay back my taxes. So I made myself a deal: Any money that I may have spent on clothes, shoes, jewelry, or accessories in those three months was going to go to the side to pay my taxes. Monday is tax day, and I’m ready to pay off that debt.
2. I didn’t read my health insurance statement of coverage.
The mistake: Back in June I went to the doctor for an annual exam. I got checked out and had some blood work done, handed my insurance card to the receptionist, and thought I was all set. A couple of months ago I got a bill, not just from my doctor, but from the lab that processed my blood work as well. And it was a huge bill: I owed almost $2,600. I called my doctor, I called my insurance provider, and I argued until I was blue in the face about why these things weren’t covered under my plan. I thought they were routine procedures, but it turns out they weren’t.
The recovery: When you go to the doctor, they may ask you if you want this test done, or this preventative measure taken. If you know your body, and you know you’re healthy, don’t let your doctor scare you into something that you may not need right now. When I went to the doctor, I only asked for services that were covered by my insurance. But the thing is, everyone’s insurance plan is different, and your doctor isn’t obligated to know exactly what’s in your individual plan. Read your plan before you go to the doctor so you know what’s covered and what isn’t. I know I certainly will the next time I go to the doctor, but in the mean time, I was stuck with bills from my doctor and the lab. I called each one and told them I didn’t have the money to pay the bills right now. They worked out a reasonable monthly payment plan with me, so the payments are more manageable each month rather than potentially debilitating up front.
3. I didn’t plan on saving for the future.
The mistake: Even though I wasn’t happy there, my paralegal job gave me one thing that my current job (and most startups, really) doesn’t: a 401(k) matching program. In my time there I’d accumulated just over $300 and then, when I quit, I let it sit there. Since leaving that job, I hadn’t thought about saving anything for the future. Now there’s talk about the end of Social Security, and I can’t allow myself to sit and hope for the best.
The recovery: It’s time to take care of myself! Almost all financial institutions have online access these days, so I pulled out my 401(k) paperwork and registered my online account on TIAA CREF. You can’t contribute to a 401(k) at a former workplace, but you can roll it over into an IRA and contribute there, so that’s what I did. I set up a traditional IRA and rolled over my previous contributions, and can now contribute my own money to it, even if my current employer can’t.
The other thing I learned from these mistakes? Always, always, always have a budget! You can make it on a simple Excel spreadsheet and keep track of your income, expenses, and savings, or use sites like LearnVest or Mint and have it all done automatically.
Any tips for planning your financial present and future? I’d love to hear them!