Bad Money Habits: Name Them and Break Them
Wondering if you’ve got some bad money habits? Here are the 5 most common bad money habits that are killing your financial wellbeing, and some strategies you can try to break them and get financially healthy.
Racking up Credit Card Debt: Credit cards are great if you use them properly. They offer perks like travel credits and points you can redeem, but these perks aren't worth the cost if you don’t manage them wisely. Too many people see credit cards as “free money” and use them to live beyond their means. If you’re swiping your plastic without considering whether you can afford something, this is a bad habit. Credit card interest rates are ridiculously high (sometimes up to 25%), which means that if you are not paying off your credit card every month, the credit card company is charging you interest on every dollar of your balance. That means you are just lighting money on fire.
Using Installment Options to Finance Low Dollar Purchases: Financing is a great option for affording big purchases like homes and cars. With the onset of installment financing options like Affirm, AfterPay, or even PayPal, you can now finance anything from a $20 t-shirt to a $3,000 Peloton. While these options are often better deals than credit cards (the interest rates are often lower or 0%), they can also tempt you into buying things you can’t afford. Bottom line: Buy Now Pay Later is just another credit card. It’s not free money.
Impulse Shopping: Impulse shopping is often the habit we all think of when we think of bad money habits. It’s when we buy something on a whim without considering the price and whether we really need it. To be clear, this is not the same as “treating yourself” - you make money so you can create the life you want. Treating yourself is spending money you have on things you value. Impulse shopping is getting distracted by what Target has in the dollar aisle or Sephora has in the checkout line. It is unplanned and often something you regret later.
Compulsive Money Hoarding: When we think of bad money habits, we often think of spending too much. An equally damaging bad habit is the opposite - spending too little. For some, money is a security blanket, and while saving can be healthy, if you’re sacrificing the quality of life or depriving yourself of essentials, that’s just as bad as spending too much.
Putting off Saving (and Investing) for the Future: It’s very easy to think you’ve got time to save and invest. But here’s the secret about saving and investing: compound interest. By putting off investing, you’re leaving money on the table and missing out on earning interest. You can’t get the time back, so the earlier you start, the better.
There’s one thing all of these bad habits have in common: they’re driven by emotions. That’s why you say to yourself, “Ugh, I know I shouldn’t have bought that!”...and then you do it again.
The only way to overcome these emotions is to use strategies that help your rational brain catch up with your emotional brain, and in doing so, train yourself on healthier money habits.
Here are some strategies to try:
Define your “why”: There’s a reason you want to break a bad habit. Maybe you’re in financial trouble, or maybe you’re going through a life change that is making you rethink your priorities. Whatever the reason, having something to work towards. Keep it top of mind by writing it on a Post-It, making it your phone background, put it somewhere visible to keep you motivated!
Add friction to the process: If you want to break a bad habit, make that habit hard. Leave your credit card at home. Remove it from Apple Pay. Start paying for things with cash. Delete your installment accounts. Whatever it takes to make it harder to do the thing you’ve been doing mindlessly.
Start small: Quitting something cold rarely works, and often you’re just setting yourself up to fail by setting an unrealistic goal. Instead of “no buy July” or “I’m cutting out takeout”, try something more realistic, like limiting spending on something to a certain amount or a number of times per month. By achieving a small goal, you will build momentum towards achieving something bigger.
Replace one habit with another: Find yourself scrolling Amazon before bed? Is it part of your routine to browse the aisles of Target on a Saturday? These habits are habits because they make you feel good in the moment, so the way to break them is by finding something else to do in those moments when you are feeling bored, stressed, tired, or hungry. Instead of scrolling, play a game on your phone. Instead of window shopping, go for a walk and listen to a podcast. Think of something that sounds fun to you because it’ll be more motivating to do that thing instead of your old habit and fit it into your routine.
Keep trying until it works: You might not nail it your first time, and different strategies work for different people. The best plan is the one that works for you, so if you try something and it doesn’t work, try something else. The problem is not you, it’s the plan.
Give yourself some grace: Finally, try not to beat yourself up. There’s a lot of shame and guilt tied up in money, but the reality is that our brains are wired to be bad with it (instant gratification is real). Keep your “why” top of mind, so that when you fail, you are motivated to try again.
If you want some help, the Habit app and our team of coaches are here for you.
