Use the phrase when you do something that you believe you shouldn't do, because you do not think it is sensible or wise.
For example, eating an entire package of junk food in one sitting: "Against my better judgement, I ate the whole bag of chips." or "I ate all the cookies, against my better judgement."
Or staying up late when you have an early appointment the next day: "Against my better judgement, I was up until 1AM playing video games."