3 Money Mistakes I've Made (And You Can Avoid)

As a personal finance writer, I've learned a lot about money management and have been able to correct some of the money mistakes I made when I was younger. But no matter how much you learn about money, there's still the potential to make new errors as you undertake new financial management tasks.

In fact, in recent years, I've made several new mistakes -- which hopefully you can avoid by learning from my bad experiences.

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1. Overpaying people I hired because of unclear terms

As a homeowner, I've had to hire out for many different tasks around the home. Unfortunately, I've had a number of bad experiences when paying for services.

In one case, we hired a landscaper to plant trees and agreed to pay an hourly rate. We didn't cap the number of hours the project could take, though, and the project ended up costing us far more than we had originally anticipated.

In another instance, the company we hired to close our pool for the season decided to tack on some services we weren't expecting -- and that we found unnecessary. We ended up being billed several hundred dollars for the extra work they did and, although we fought to get some of the charges removed, we did have to pay some of the expenses.

These experiences have taught me the importance of getting very clear estimates and making sure to have a written agreement about both the scope of the work and the price. Now, we don't hire anyone to do work unless there's a clear understanding on all sides.

2. Not anticipating extra expenses when building a house

When we built our house, we had a detailed contract and a price from our builder. What we didn't realize was that there were going to be a lot of add-on costs during the process of building a home.

In some cases, these costs were our fault -- we couldn't find countertops we liked at the standard price and had to upgrade, for example. But in other situations, the costs were unavoidable -- like when we had to dig a well that was three times as deep as anticipated in order to get enough water flow.

By the end of the process, the build was a lot more expensive than we'd planned and we went way over budget. We had to tap into our emergency fund and use other savings to cover the excess costs.

This taught us the importance of budgeting for extras in any future real estate transactions. And we'll also make sure we're more detailed in our specifications upfront so we'll have a better idea of what the final price will be before we get started.

3. Underestimating closing costs on refinancing a mortgage

When we borrowed for our house, we took out an adjustable-rate mortgage to try to get the lowest possible interest rate.

We had a hefty down payment and excellent credit and we also planned to make extra payments so we felt very confident we'd be able to refinance before the rate adjusted upward.

We were, in fact, able to refinance. But what we didn't count on was that we'd incur significant loan closing costs when we did so. We had to come up with several thousand dollars to pay a fee for waiving escrow, to cover the appraisal and application fees, and to cover the costs of title insurance.

While refinancing still made sense to switch to a fixed-rate mortgage at a lower rate, we again had to tap into our savings to cover all of these added expenses.

Learn from my money mistakes

As you can see, my money mistakes center around problems associated with buying or owning a home. But the lessons apply in many different situations.

Before you enter into any transactions -- whether it's a repair or building a home or taking any kind of loan -- it's essential to understand the total costs you'll incur. When I failed to do that, it cost me. Hopefully, you can learn from my errors to make sure something similar doesn't happen to you.

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