Living With Financial Regret
Regret can be a funny thing. The difference between regretting an action and being happy about it is related solely to the result. We make decisions with the information we have at the time; regret pops in when that information changes or we find out it is wrong. Financial regret is no different. When I spend money on something it isn’t a mistake. It may be an impulse buy where not much thought went into it. This is almost never done by accident. It is easy to look back on decisions and think about what you could or should have done.
What you don’t know is what would have happened had your decision been different. Would things be better, would things be worse? Would you ever get the opportunity to make what ended up being a great decision had you not made a bad one previously? I’m talking about alternate timelines which is a topic that is filled with paradoxes and endless loops.
My DVD Collection
Before Sarah and I started our life together, and well before Couple of Sense was born – I was not much of a saver. My money decisions were based on the here and now, having fun and gathering collections. I would spend my pay on DVDs, CDs, concert tickets. I partied with friends and even had a pretty decent collection of Simpson’s figurines. The decisions I made to spend that money were based on how I felt about money at the time.
Recently, just before we welcomed our little baby Ava into the world, Sarah and I did a thorough cleanup of our house including going through our old storage containers. We ended up sending out a list of 90% of the DVDs I had amassed. The list was sent out to friends and family to see if they wanted them. We probably could have thrown the list up on eBay or something and made a few bucks. I wanted to let friends get the first crack at them. We ended up giving away almost 500 DVDs.
My first thought while loading these cases by the hundreds into bags for people was “what a waste of money”. If I had just saved or invested this money we could use it for our future”. Safe to say, I was feeling some financial regret. This collection easily cost me around $10,000 to complete. Now I look at that as about 5 months of extra mortgage payments, or a nice RRSP contribution.
Our Coffee Maker
Another example of financial regret is our espresso machine. We purchased a super-automatic espresso machine as a joint gift for each other several years back. The price tag on it was about $1,500 (can you say indulgent?). At the time the thought was that we both love coffee and it made more sense to get something of higher quality that would last us several years instead of one that we’d need to replace every couple of years.
If I add up how many coffees we’ve made using the machine I can safely say at this point it doesn’t owe us much. That said, we ended up with two waves of financial regret. The first came when we found a comparable machine about a year after our purchase for $500 less. While our model had a few more features, this was the same manufacturer and would have done everything we typically use it for. It seems silly to regret our initial purchase. We didn’t have both options available to us at the time. Sarah and I didn’t chose to spend more money for no reason. We made the best decision we could at the time with the information we had available.
The second wave of regret came when our beloved espresso machine started having problems. The grinder was jamming, the nozzles were clogging – in general it was having problems. We took it in for service which ran us over $300.00 for a thorough cleaning. Despite the tune-up, the machine was never the same and has been a pretty big headache since. It seems silly to regret buying something because it has issues after several years of heavy use but when problems arose we felt we had no choice but to pour money into fixing it since we had spent so much money on the original purchase. The other funny thing about regret is you can feel it even if you wouldn’t change the decision you made. In reality you don’t regret the decision but a part of the result.
Remember I mentioned that regret can launch thoughts of alternate timelines which can be beyond complicated? Most of the time making a single change in spending would not have that large of an effect on the future. There is a chance that a small, somewhat insignificant event can snowball into something huge in the future. Take playing the lottery. I’ll admit in the past I would buy the odd scratch ticket or weekly jackpot ticket. I have never won anything of significance, and if I add up every dollar I spent and every dollar I won I am quite confident I’m in the red.
Given that – I could say that if I had never purchased a lottery ticket I would have more money now and therefore I regret making the purchases. However, what if the next ticket I would have bought would have been a jackpot – should I then regret not continuing? Again – we make decisions based on the information we have available.
Learning From Mistakes
Sometimes it is pretty crystal clear that a financial decision was made in error – the result is immediate and we think how stupid we were for making the choice we made. When this happens we have to take a mental note and learn from the mistake. If you make the same mistake again, the regret will be even more prevalent because you have better information and are still making the wrong choice.
If you loan someone money and they refuse to pay you back, you might regret making the decision to loan them money in the first place. Again – regret in this case is affected by the result. If the person paid you back, and maybe threw in a thank you gift for your efforts you probably wouldn’t regret the decision. If you loan that same person money again after they refuse to pay you back – well that is probably a decision you should regret.
What is your biggest money regret, and is that regret based on the result or would you regret it regardless of the outcome?