When it comes to money decisions, there’s a lot of room for error. That can leave you feeling pressured to make all the right moves now.

The good news is that we can learn from other people’s experiences to help us make better choices today so we don’t end up saddled with regrets about how we used our money in the past.

The following 5 money decisions are ones that you’ll likely wish you could take back in the future. Here’s what you’ll want to avoid so you can help set yourself up for a more financially independent future free of choices you regret.

1. Prioritizing Stuff Over Experiences

We see a huge amount of advertising for things to buy every single day. It’s hard to avoid wanting to turn to shopping as a way to try and make our lives better and ourselves happier.

Here’s the problem: it doesn’t work.

There’s a wealth of research out there that shows spending money on material things not only fails to make us happy, but can leave us feeling downright miserable. If you want to spend and don’t want to regret the purchase, use your money to buy one of two things:

Experiences, not things
Services that create more time in your day

2. Not Defining Your Values

This might not sound like a money decision, but understanding your values can directly impact how you use your money (and how happy you are with the choices you make financially).

When you understand your values, you can make sure your spending and how you use your money aligns with what’s most important to you. This can help you prevent making money decisions that you regret down the road.

Societal pressure (and pressure from your own community, like parents or friends) is real and massively influential. When you don’t know your own values, it’s easier to end up making financial decisions that aren’t right for you.

For example, if you deeply know how much you value adventure and personal growth, you’re in a better position to not feel pressured to buy a home before you’re ready. But if you aren’t in tune with how important that is, you might end up buying a home because everyone told you it’s better than renting (even though it wasn’t better for your unique situation).

Know what’s important to you. Define your values and align your spending — and your financial goals — with them to help you avoid big financial decisions you’ll regret down the road.

3. Borrowing from or Cashing Out Your 401(k)

Borrowing money from your 401(k) is almost never a good idea. The best advice around this topic? Just don’t do it.

Create an emergency fund instead that you can dip into should you need to pay for an unexpected expense, like a medical bill or car accident. You emergency fund will help you avoid debt, and it provides a cash cushion you can use freely without disrupting your retirement savings.

When you leave your current job and start a new position, consider taking your 401(k) with you. Either rollover your old 401(k) into your new employer’s plan, rollover the account into an IRA, or leave it where it is, if that’s an option.

Cashing out your old 401(k) will leave you with a big tax bill, you’ll end up with less for retirement, and you’ll miss out on the opportunity to let that money earn compound interest. Leave it invested so you won’t regret bankrupting your retirement down the road.

4. Giving in to Lifestyle Inflation

You’ve come a long way from being that broke college student living off Ramen. You earn a good income and can enjoy a more expensive lifestyle because you work hard and deserve it.

These kinds of thoughts are like gateway drugs to lifestyle inflation. Lifestyle inflation, or lifestyle creep, is when your spending constantly increases to keep pace with your earnings. The more you earn, the more you spend.

Allowing your spending to track your earnings is a money decision you’ll regret in the future because it will prevent you from saving, investing, and earning wealth. It’s not enough to avoid spending more than you earn. You want to spend way, way less than you earn.

The longer you can live on a small budget with minimal expenses, the more you can save and invest — and the easier it will be to have more choice, freedom, and flexibility in the future.

It’s tough to dial back your spending when you’re used to a certain lifestyle. By practicing more frugal habits now, you can do more with the money you choose to save and invest.

5. Not Saving Right Now

When you’re in your 20s and 30s, you have a massive advantage on your side when it comes to saving and investing: time.

The sooner you start, the more you can benefit from earning compounding returns with your investments. Take a look at the following example that shows the exponential effect of compounding.

Let’s say Person A and Person B are both 25 years old right now. Person A decides to save $500 per month into investment accounts, and continues to do so until age 63.

Person B, on the other hand, feels they have plenty of time to start saving and chooses to wait before they begin. They wait until they’re 40, when they’re earning a higher income, can contribute more ($1,250 per month), and retirement is closer on the horizon.

If Person A and Person B both start with $1,000 to open their brokerage account and Person B contributes $750 more per month — who comes out ahead in the end at age 63 if we assume a 7 percent return for each investor?

	Age to Start Investing	Starting Investment Amount	Monthly Contribution	Balance at Age 63
Person A	25	$1,000	$500	$1,048,445.39
Person B	40	$1,000	$1,250	$806,282.64

Even though Person B contributed much more per month, they end up with a quarter of a million dollars less than Person A. Person B had to work a lot harder than Person A to try and make up for lost time — but still came out behind.*

If you want to avoid money decisions you might regret later in your life, know that the best time to start saving was yesterday. The second-best time to start? Right now.

* Hypothetical (chart/situation) for illustrative purposes only and does not represent actual or future performance of any specific product or investment strategy. Investing involves risk, including risk of loss.

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