In today’s podcast episode, we hear from a listener who reached out with a dilemma:
They were contributing to a Roth 401(k) while in the 32 percent tax bracket. Later, they realized they could have postponed their contributions until their income fell to a 24 percent tax bracket and opted for a Roth conversion instead.
Now they’re left pondering:
Did I make an error? Did I lose money?
If you've ever questioned a financial decision, you’re not alone. Feelings of regret, guilt, and overthinking past choices are prevalent, particularly when it comes to finances.
In this episode, we discuss how to address financial missteps, the inevitability of these mistakes, and how to shift your perspective so they don’t drain your mental energy.
Higher Net Worth Equals Bigger Mistakes
It’s a common misconception that reaching a certain level of financial success means the mistakes will cease. That is not the case.
As your net worth increases, your financial decisions become larger and more intricate—which also means the errors do too.
The only difference? Instead of worrying over a $500 budget mistake, you could find yourself stressing about a six-figure investment loss or a problematic real estate deal.
The takeaway here isn’t that errors vanish with increased wealth—it’s that they scale. The most successful investors, business owners, and entrepreneurs all make poor judgments. The essential skill is knowing how to move on without being bogged down by regret.
Tuition in the School of Hard Knocks
Joe proposes a straightforward way to rethink financial mistakes: consider them as tuition.
You wouldn’t expect to receive a law degree or an MBA without cost. The same principle applies to your financial education. Each mistake—whether buying the wrong stock, misjudging your tax strategy, or overspending on a home improvement—is a lesson that comes at a price.
The aim isn’t to eliminate tuition entirely. The goal is to learn from what you’ve spent so that you don’t repeat the same error.
You Can’t Optimize Everything
This leads to a reality we often overlook:
Cognitive capacity is limited.
Your brain has only a finite amount of space for making decisions. If you’re concentrating on one area—be it negotiating a salary increase, starting a business, or maximizing tax-advantaged accounts—you’re simultaneously neglecting something else.
You’ll never be able to optimize every financial choice, because there are always trade-offs.
Maybe you dedicated all your time to researching investment options, leading you to overlook whether you were using the best credit card rewards program. Perhaps you developed an amazing long-term savings plan but didn’t maintain enough liquidity for an unexpected opportunity.
The objective isn’t perfection. It’s about making the best choices available with the information and focus you possess at that moment.
Reframing Financial “Mistakes”
This brings us to a broader concept: Not everything that seems like a mistake is genuinely one.
Many groundbreaking inventions originated from accidents—from Penicillin to Post-it Notes. In this episode, we highlight several notable examples, including:
The Microwave Oven — A Raytheon engineer observed that a candy bar in his pocket melted near an active radar set. Rather than dismissing this, he conducted experiments that ultimately led to the invention of the microwave oven.
Velcro — A Swiss engineer saw burrs sticking to his dog’s fur. Rather than viewing them as a nuisance, he examined them under a microscope and discovered the design that would result in hook-and-loop fasteners.
Chocolate Chip Cookies — A widely accepted myth claims that Ruth Wakefield accidentally invented chocolate chip cookies when she ran out of baker’s chocolate. In truth, she was intentionally experimenting with texture—and her efforts succeeded. (Takeaway: sometimes the world may label our actions as ‘mistakes’ when we’re actually being creative or innovative, so don’t heed the crowd. The crowd will often guide you towards mediocrity.)
These narratives highlight a crucial point: Sometimes, what appears to be a mistake is merely a well-structured experiment.
The Real Question: What Happens Next?
Ultimately, dwelling on a previous financial decision won’t alter the result.
What truly matters is your next course of action.
If you've made an unfavorable tax choice, what changes can you implement moving forward? If you selected an underperforming investment, what lessons have you learned that will inform your next decision? If you overspent, what strategies can you establish to prevent it from reoccurring?
The best investors and financial decision-makers don’t strive for perfection. They prioritize progress, iteration, and learning from their experiences.
Mistakes are unavoidable—but how you learn from them is your choice.
How to handle financial errors and regrets, the reasons they are unavoidable, and how to reframe them to prevent them from draining your mental energy.