If there's anything I've learned from my mother, it's that regardless of what money mistakes you make, no matter how foolish they are, life goes on. The direction you go after the realization is entirely up to you.
The biggest mistake I ever made took place in 2010, when I was in my late-20s. After maxing out my retirement accounts, working a full-time job and picking up multiple side hustles, I had accumulated well over $100,000 in savings. I convinced myself that in return for being so responsible with my money, I could afford to spend $2,850 on a Chanel handbag.
Plus, it was a collectible investment. The value of a classic, medium-sized Chanel flap bag had only increased since its release in 1955, so I knew that a well-timed purchase and resale could bring in a sizable profit.
Around the same time, however, I was just starting to invest in stocks. Amazon seemed like a smart, long-term investment. The company's growth was strong and it was moving into every imaginable type of product, media and service.
"Why not spend that $2,850 on Amazon stock instead?" a financial mentor suggested. I gave it a lot of thought, but was ultimately unable to resist the appeal of owning something I could enjoy immediately.
A slippery slope
Looking back, I regret my decision for many reasons. To start, if I had followed my mentor's advice and trusted Amazon CEO Jeff Bezos' relentless will to dominate the market, I could have been nearly $40,000 richer today.
(According to CNBC calculations, a $2,850 investment in Amazon stock in 2010 would be worth $39,846.50 as of March 9, 2020, for a total return of around 1,298%.)
Second, I slowly developed a severely bad spending habit. It wasn't enough for me to have just one handbag, so a few months later, I bought another. Then more months went by, and I decided that I absolutely needed a third.
Just like that, my journey down the slippery slope of expensive handbags began.
It was no longer a 'financial investment'
Instead of putting my money into places where it'd have the opportunity to compound, grow and create more wealth for me over time, I was reducing how much I put into my savings each month — just to fund another handbag in another fabulous color.
The more I bought, the less I used them. I battled with the guilt of excessiveness. I would go back and forth in my mind about why I deserved them, why I needed them, and how I had a good amount of savings anyway.
...studies have found that buying luxury items can open floodgates to purchasing even more stuff, which is the perfect recipe for credit card debt.
It wasn't until a couple of years later that I finally saw the reality of my financial situation: My savings had decreased significantly and I now had tens of thousands of dollars' worth of handbags in my closet for no good reason.
I started refocusing my attention on my early retirement plan and, with great difficulty, sold all my handbags through eBay and various consignment stores. Luckily, I was able to sell a few for close to what I paid for — and even more for some. Thanks to Chanel's crazy price increases, I sold that very first handbag for $5,700 (double the amount I originally paid).
Still, it took way too much time and effort. And when you factor in reseller fees, the return doesn't even come close to $39,846.50.
Turn your mistakes into lessons
When it comes to money mistakes, this one takes the cake for me. I'm not suggesting that buying luxury items are always a bad idea. But it should never be done at the expense of your financial goals.
Additionally, studies have found that buying luxury items can open the floodgates to purchasing even more stuff, which is the perfect recipe for credit card debt.
But I'm done crying over spilled milk. Now, instead of letting my money just sit in the closet, I'm putting it back to work by continuously saving and investing — for the sake of my current and future self.
Bola Sokunbi is a certified financial planner and author of "Clever Girl Finance." Follow her on Twitter @CleverGirlCGF.
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