5 Financial Regrets to Avoid (And How to Set Yourself Up for Wealth)

Many times in life, regret is unavoidable. When it comes to financial regret though, you really try to avoid it as much as possible.

Regret over money is just the worst...

And it’s happened to everyone, including myself. Heck, even Charlie Munger has regrets about times he lost money or didn’t invest in a certain company from 35 years ago. Those things really stick with you.

While some financial mistakes can be corrected over time, others compound and grow harder to fix the longer they're left unaddressed. That's why Rule #1 investors believe that proactive financial management — from saving to investing — is essential at every stage of life. The best way to avoid regret is by thinking like an owner, not a consumer, when it comes to your money.

Here are five major financial regrets that far too many people fall prey to. Don’t let these happen to you.

1. Financial Regret #1: Not Having an Emergency Fund (And How to Build One)

No matter what career you have, no job is 100% secure and emergencies tend to happen when we’re all least prepared for them. Unforeseen situations that eliminate your source of income can arise at any moment - from injuries to layoffs and everything in-between.

Because of these unforeseen situations, saving money is extremely important.

In some cases, it takes time to bounce back from these predicaments.

If you don't have any emergency money set aside to live off in the meantime, though, bouncing back from losing your source of income can be incredibly difficult.

I recommend that everyone should have at least six month's worth of income set aside in an emergency fund.

If you are able to set aside six month's worth of income in cash, you can ensure that you are able to maintain your lifestyle for at least six months after a job loss or some emergency.

Pro Tip: Consider keeping your emergency fund in a high-yield savings account or a short-term Treasury money market fund, where it can earn better interest without risking your principal. Rule #1 investing teaches that your emergency fund should be safe, accessible, and separate from your investing capital.

2. Financial Regret #2: Not Setting Up an Automatic Savings System

Most people don't set aside money specifically for savings and investing.

Instead, whatever money is leftover at the end of the month goes into savings. If you are serious about saving for retirement you shouldn't rely on yourself to set aside money for savings after the bills have been paid.

If you do this, the amount of money you have leftover to invest at the end of each month is rarely going to be much if any. The temptation to spend money when it is available to spend is just too strong for most of us to overcome.

If you set up an automatic savings system that takes money out of your account before you ever see it you can ensure that you are setting aside as much as possible for savings and investing while avoiding the temptation to spend it.

A great way to structure your automatic savings is by using the "pay yourself first" model — treating your contributions like a mandatory bill. Rule #1 investors prioritize building investment capital early so that compounding can do the heavy lifting over time. Even small amounts invested consistently can grow significantly over decades.

3. Financial Regret #3: Having Low-Quality Health Insurance

A common financial regret that people fall prey to is not having catastrophic health insurance. If you are young and healthy, good health insurance may seem like an unnecessary expense.

Keep in mind that everyone sitting in a hospital room right now was young and healthy at some point in their life as well. You never know when your health will fail you, and, without good insurance, medical issues and the enormous bills that go along with them can be financially crippling.

Financial stress from unexpected medical bills is one of the biggest causes of personal bankruptcies. Protecting your health also protects your financial freedom, ensuring that your investment journey isn't derailed by avoidable medical debt.

Have good insurance, even if you don't think that you need it. It's far better to pay a little extra each month and have more coverage than you need than it is to be stuck with a pile of medical bills that you have no way of paying.

4. Financial Regret #4: Buying Things to Impress Others

Trying to "Keep up with the Joneses" isn’t worth it AT ALL.

Unfortunately, it's also something that is incredibly common in our society.

It's difficult to prepare for your future if you are spending all of your disposable income on designer clothes and fancy cars. What's more, buying things to impress others isn't likely to truly impress anyone at all.

True wealth isn't about what you show; it's about what you grow. As Warren Buffett famously said,

"If you buy things you don't need, soon you will have to sell things you do need."

Rule #1 teaches that your financial choices today should support your freedom tomorrow.

If there is something that you genuinely want and would genuinely enjoy having, there's no harm in splurging a little from time to time.

Go ahead and add that Guac onto your burrito bowl, so long as you’re still putting your financial goals first.

After all, money is meant to be enjoyed. But buying something to impress someone else is never beneficial.

5. Financial Regret #5: Not Getting an Investing Education Early Enough

The last and probably the most important financial regret you’ll ever have is not getting an investing education.

Far too many people go through life without ever learning how to invest. Far too many others never show an interest in investing until they are nearing retirement, which can be very stressful for families.

Remember, when it comes to investing, the earlier you start to invest the better and know that even if you’re close to retiring it’s never too late.

There's no better time to start getting an investing education than right now. If you’re going to get an investing education, make sure that it's the right one. Make sure it’s going to get you the returns that you need.

Investing wisely isn't about gambling or guessing; it's about understanding a wonderful business and buying it at a price that gives you a margin of safety. That’s what Rule #1 Investing is all about — and why education focused on value investing principles is the single most important investment you'll ever make.

**Editor’s Note (Updated April 2025): This article was originally published in 2019 and has been significantly updated in 2025 to reflect current examples and Rule #1 investing insights.