The Regret Test
Set financial goals by forecasting future regret, not by copying someone else's plan
- Difficulty
- Easy
- Time to result
- ~days to results
- Steps
- 6
- Confidence
- 82%
Housel's Regret Test replaces the usual optimisation question ('what maximises my net worth?') with a forecasting question ('what will I look back on and wish I had done differently?'). The mechanism is deliberately two-sided: you interrogate both the regret of under-saving and the regret of over-saving, because the second is real and largely ignored. Financial advisers report clients who saved diligently for decades, hit 65 with millions, and physically cannot spend it — saving became identity rather than instrument. The test forces you to name the vacations, the car, the family time each dollar buys or forfeits, and to accept that the answer is unshareable: what Housel would regret differs from what you would. Output is a target you can hold without resentment. Re-run it every life stage, because the good habit of your 30s can be the liability of your 60s.
Origin
Extracted from Young and Profiting. Housel frames it as the mental formula he applies to his own finances, noting he deliberately lowered his savings rate in his 40s to spend on his family — not because he broke a good habit, but because he built the money in order to use it.
Core principles
- 01Money is a tool for a better life, not a scorecard for social comparison
- 02Regret runs in both directions — you can regret saving too little or saving too much
- 03What you will regret is personal and unshareable; no blanket advice applies
- 04A financial skill that serves you at 30 can become a liability at 60
- 05The right savings rate is the one you will not resent later
How to run it
- 1
State the decision, not the number
Write the actual choice you face — save more, spend on a trip, take the startup risk — rather than an abstract percentage target.
Pro tip If you cannot state the trade-off in one sentence, you are optimising, not deciding.
- 2
Forecast regret in both directions
Ask separately: what would I regret about doing too little of this? And what would I regret about doing too much of it? Housel insists the over-saving side is a genuine failure mode, not a humblebrag.
Pro tip Run the question at three horizons — one year, ten years, fifty years — the answers rarely agree.
Watch out Most planning tools only model the under-saving regret, so this step will feel unnatural.
- 3
Price the trade-off in life, not dollars
Translate the number into the specific thing it buys or forfeits: a vacation not taken, a car not bought, a year of freedom gained.
- 4
Check whether the habit has become identity
Ask whether you are saving because it serves the plan or because 'saver' is now who you are. Identity-level habits are the ones you cannot switch off when the plan changes.
Pro tip The tell: you feel guilt spending money you explicitly saved in order to spend.
Watch out Decades of diligent saving is exactly what makes this failure mode invisible from the inside.
- 5
Set the target where both regrets are tolerable
Pick the level you can defend against both future selves — the one who wishes they had saved, and the one who wishes they had lived.
Watch out Do not import someone else's answer; Housel is explicit that his differs from yours.
- 6
Re-run at every life stage
Kids, a business, a move, or retirement all reset the regret calculus. Treat the output as dated, not permanent.
Pro tip Diarise it annually rather than waiting for the crisis that forces the question.
In the wild
Housel relays what financial advisers describe as one of their biggest client problems: someone saves diligently for decades, retires at 65 with millions of dollars, and simply cannot bring themselves to spend any of it. Saving has become so ingrained in their identity and personality that they can never switch gears. The nest egg exists but the life it was meant to fund never arrives. The Regret Test, run at 30, would have surfaced this: the question 'will I regret saving too much?' has a real answer, and it is not zero.
→ A decades-long savings plan that succeeds financially and fails at its own purpose.
In his 20s and early 30s Housel was, by his own account, a very big saver and remains proud of it. In his 40s, with two kids, he and his wife spend more and run a lower savings rate. He explicitly refuses to frame this as breaking a good habit: he built the money up so that he could spend more of it now, on a bigger family and on vacations. The regret forecast changed because the life stage changed, so the target changed with it.
→ Money used as a tool for a better life rather than a scorecard of social comparison.
Common mistakes
Only modelling the under-saving regret
Spreadsheets and advisers almost always optimise for having enough, never for having spent enough. Running only one side of the test is how you build a nest egg you cannot touch.
Importing someone else's regret
Housel is explicit that what he would regret is probably different from what you would regret. Copying a peer's savings rate imports their psychology along with their number.
Treating the answer as permanent
A good financial skill in your 30s can be a liability in your 50s or 60s. An un-revisited regret forecast quietly becomes the wrong plan.
Is it for you?
Best for
Anyone setting savings, spending or career-risk targets at a life-stage transition.
Not ideal for
Someone in acute financial distress where the immediate constraint is cash, not preference.
From the transcript
“You have to understand what you're going to regret. And what I might regret is probably different from what you might regret.”
“They have millions of dollars saved for retirement and then they're 65 years old and they retire and they cannot bring themselves to spend it.”
“The more that you can use money as a tool to live a better life rather than just a scorecard of social comparison, the better…”
From the episode
Morgan Housel: How Smart Entrepreneurs and Investors Grow Wealth on Autopilot
Morgan Housel