5 mistakes you make with your money today that you'll probably regret later in life

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Sometimes we make easy money mistakes that negativelyaffect us later.Retail therapy won't improveyour mental healthor your bank account.Without financial goals, you're more prone to impulse purchases and lifestyle inflation.Don't borrow money from your 401(k).The room for error in most money decisions can leave you feeling pressured to make all the right moves now. The good news is 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.Here are five common money mistakes and how you can avoid them:1. Prioritizing stuff over experiencesWe see a huge amount of advertising for things to buy every single day. It's hard to avoid "retail therapy" as a self-soothing technique. Here's the problem: it doesn't work.There's a wealth of research that shows spending money on material things not only fails to make us happy, but can leave us feelingdownright 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 thingsServices that create more time in your day2. Not defining your valuesThis might not sound like a money decision, butunderstanding your valuescan directly impact how you use your money and how happy those purchases make you. 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 regrettable money decisions.Pressures from your family, friends or social expectation are 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 know you value adventure and personal growth, you're in a better position to not feel pressured to buy a home before you're ready. Without those priorities in mind, you might end up buying a home because everyone says it's better than renting, even though it doesn't suit your unique needs.Know what's important to you. Define your values and align your spending and 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 moneyfrom 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. Your 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, take 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, undercut your savings and diminish your opportunity to earncompound intereston your 401(k). Keep it invested, don't borrow against your retirement.4. Giving in to lifestyle inflationYou've come a long wayno more ramen for dinner! You earn a good income and can enjoy a more expensive lifestyle because you work hard and deserve it.But "I deserve this" can be a gateway to lifestyle inflation, orlifestyle creep, which is when your spending constantly increases to keep pace with your earnings. It puts you on a savings treadmill, where you never get any closer to your long-term goals.Increasing your spending on track with your earnings prevents you from saving, investing and earning wealth. It's not enough to avoid spending more than you earn; you want to spend way less than you earn. Minimizing your expenses gives you more to save and invest, along with more choice, freedom and flexibility in the future. By practicing more frugal habits now, you can do more with the money you choose to save and invest.5. Not saving right nowWhen 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 compounding returns on your investments. Take a look at the following example that shows the exponential effect of compounding.Let's say Joe and Dan are both 25 years old right now. Joe decides to save $500 per month into investment accounts, and continues to do so until age 63. Dan, on the other hand, chooses to wait before he begins. He waits until he's 40, when he's earning a higher income, can contribute more ($1,250 per month), and retirement is closer on the horizon.If Joe and Dan both start with $1,000 to open their brokerage accounts and Dan contributes $750 more per month, who comes out ahead in the end at age 63 if we assume a 7%returnfor each investor'Even though Dan contributed much more per month, heends up with a quarter of a million dollars less than Joe. Dan had to work a lot harder than Joe to try and make up for lost timeandstill 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.Herbert Kyles is a Financial Planner with AspenCross Wealth Management dedicated to helping people live richer lives through better planning and investing.SEE ALSO:I became a self-made millionaire ' and it was incredibly underwhelmingJoin the conversation about this storyNOW WATCH: Why airlines ask you to raise the window shades for takeoffs and landings