Top 8 Bad Money Habits You Should Break Forever

bad money habits

Building good financial habits is essential for an abundance of reasons, not the least being that it helps you to provide security and a decent quality of life for yourself and your family.

Yet far too often people fall prey to the same bad money habits that set them astray from this track.

Learn to identify the common bad money habits you possess and the tools to break them, once and for all.

Top 8 Bad Money Habits and Ways to Break Them


1. Making Poor Spending Decisions

According to credit reporting agency Experian, in 2019, Americans spent almost $18,000 to buy nonessential items, such as dining out or getting food delivery to their home, getting coffee to-go or buying the hottest new fashion item in the trendiest new catalog.

The more you spend on nonessential items, the less money you have available for essential items like paying the rent or mortgage, buying groceries, paying down credit card debt or student loans and preparing for retirement.

Ask yourself how many of the following types of poor spending decisions you may be prone to making:

  • Impulse buying
  • Convenience purchasing
  • Spending more than you make


How to Break this Bad Money Habit

  • Use cash for purchases - By buying with cash instead of credit, you see the direct effect of your choice to make a given purchase in the moment of making that purchase. When you buy on credit, you get misled into a false sense of security by the convenience of putting off awareness of that direct effect, and accountability for it, for at least a month, but you do so at a price.
  • Cook meals at home - Dining out and ordering in can eat into your finances faster than you can ever eat all that food. Cooking nourishing, wholesome meals at home not only costs less up front, but it also costs you less over time by nourishing you better in body and soul, keeping you healthier and cutting down on healthcare costs in the future.
  • Pause prior to paying - Before you buy anything, take a moment to step back, breathe deeply and consider how much you really want or need this item. Ask yourself if it's really worth the expense to own this item right now, because more often than not, it's probably not.
  • Avoid deal-temptation - Deals, discounts, sales, special offers and rewards all sound great enough at first to make the cost of a particular purchase seem like such a bargain, you'd be a fool to overlook it. What even the best of these so-called deals don't take into account, however, is how much costlier the item still remains than not purchasing it at all.
  • Evaluate all subscriptions and memberships - How many subscriptions and memberships do you have, each of which presumably comes with a regular fee, generally either monthly or yearly, and how often do you actually utilize the service or product for which you have this subscription or membership? After carefully considering each subscription and membership you pay for, see if there are any you can do without or, if you still utilize the product or service somewhat, if there is a lower, more affordable, level to which you can downgrade your membership or subscription.


2. Irresponsible Credit Card Behavior

Experian reported that, as of May 2020, Americans held around $5,300 in credit card debt, on average.

The problems that failing to reign in credit card debt and spending can cause for a person's life are vast and widespread and include:

  • Divert cash from an emergency fund or retirement savings
  • Cost you far more for an item or service than it's worth
  • Force you to sell items you wouldn't otherwise
  • Deny you simple pleasures and conveniences you can no longer afford
  • Make you sacrifice needs like food and proper health care
  • Hurt your credit score and make you ineligible for a home, car, student or other loan or refinancing

How to Break this Bad Money Habit

  • Make a budget - As you'll soon see, creating and sticking to a thoughtfully-crafted, realistic and practical budget is actually a way to break many, if not all, of the bad habits listed here. A budget takes into account all your fixed expenses, like bills, and flexible ones, like clothes and gas for your car, so you can keep better tabs on how much is coming and where it needs to go next.
  • Pay more than the minimums on your credit card bills - You can pay far more than an item or service could ever be worth by paying only the minimum monthly payment to your bills, while you could pay off that charge so much faster and cheaper if you make each payment just the slightest bit bigger. Your credit card bill will even show you how much you can save in interest over the life of your debt if you pay just a certain amount more than the minimum each time to your monthly payment.
  • Limit your monthly credit card spending - One way to reign in your credit card spending is to work it into your budget. Simply set a predetermined maximum amount you're allowed spend on credit each month, ideally an amount you can then pay off completely at the end of that month or by the due date of the first bill, so you pay no interest on it.
  • Remove your credit cards from your wallet - You can't use what you don't have. If you're not carrying your credit cards on your person while you're out and about then you can't very well use them to make purchases, can you?
  • Only use your ATM/debit card to shop online - Removing your credit cards from your wallet is all fine and good when you're shopping in person, but what about all the online shopping you do? Only using your ATM/debit card to shop online is akin to only paying for in-person purchases with cash, the benefits the same.
  • Erase saved credit card data and disable autofill - Another way to cut down on online credit card spending is to make it more difficult and, yes, annoying to complete online purchases. Autofill features and saved account data at your "favorite" online stores only make it more convenient for you to spend your money on more nonessential expenses.


3. Irresponsible Borrowing

Similar to making irresponsible use of credit is making irresponsible use of debt.

Credit and debt are, after all, two sides of the same coin.

Every day, it seems, your inboxes and mailboxes alike are overflowing with loan offers.

Borrowing money for things you can't currently afford only puts you into deeper debt, however, making you more unable to afford even basic necessities.

How to Break this Bad Money Habit

  • Never take out payday loans - Advances on pay you've already earned may seem like the safest type of loan to take, but not when you take into account the interest rates and fees. Plus, by doing so, you only leave yourself short of funds for the period after your actual pay arrives, which you now have to pay back to the payday lender or rack up even more debt.
  • If you borrow, do it only for specific purchases - One way to stay conscientious about your your borrowing and keep it down to a minimum is to limit it to specific needs, like a car to get to your new job or a refrigerator to replace your old, failing one.
  • Shop around before you borrow - Don't accept the first loan offer you're made. Before deciding on a lender and a loan offer to accept, explore multiple potential lenders, not the least being your local credit union, with whom history and statistics suggest you may likely get the best offer of all.
  • Make a budget - At the risk of sounding redundant, making a budget helps you avoid scenarios where you fall short financially and even need to consider taking out a loan.


4. Failing to Save for the Future

Speaking of borrowing, to borrow a timeless saying and scientific principle, the only constant is change.

That is, the only thing you can count on is the unexpected, yet one of the most common bad money habits is failing to prepare for that entirely predictable event.

You may not know what form that unexpected event will take, but you certainly know that it's immanent.

So, why not take steps here and now to protect yourself from whatever curveballs life invariably throws you next?

How to Break this Bad Money Habit

  • Automate savings - One of the best ways to save is to do it without thinking about it. By automating your savings, perhaps to come out of your paycheck as soon as it's direct-deposited, you avoid ever presenting yourself with the temptation of spending that money, just this once, instead of saving it.
  • Cut costs - No matter how tight your current budget, you can always find ways to trim your expenses. Go from name brands to generic, cut out an item of food you know is bad for you anyway, cancel any subscription you haven't used in a month, to start with.
  • Take up a side hustle - The modern gig economy offers greater opportunities than ever before for anyone with the motivation to put themselves out there and make some extra money. Find a skill or an interest you have and market it locally and online.
  • Make a budget - Another invaluable benefit of budgeting is that you can include a line item in your budget for savings. By including savings in your budget, you're far more likely to see that commitment through and make the regular contributions for which you've so carefully and conscientiously budgeted.
  • Prepare for retirement - Again at the risk of sounding repetitious, whatever your age, it's never too early to start planning, and saving, for your retirement. The sooner you start, the better off you'll be when that time comes.


5. Having No Emergency Fund

Yes, this is almost identical to the previous bad habit, but an emergency fund is so important it merits its own line item and list number.

Emergencies are those life and death situations for which being unprepared can alter your life forever.

Having no emergency fund is how people who suddenly and unexpected lose their jobs subsequently lose their homes.

It's how people who get stricken with a sudden health condition progress far worse, perhaps even permanently or mortally, because they didn't have the funds to care for it properly and in time.

How to Break this Bad Money Habit

The solution to this problem is obvious: start an emergency fund. Then, once it's started, make regular contributions to it.

One way to ensure you do this is to set up automatic contributions from your credit union account, perhaps after each pay period.


6. Paying Bills Late

Every late fee you pay is money wasted. Moreover, anytime you pay a bill late, you run the risk of facing a rate increase from the given vendor or creditor and of getting another negative mark on your credit.

How to Break this Bad Money Habit


7. Not Creating or Adhering to a Budget

As mentioned frequently throughout this list, simply knowing where your money must go and where it's coming from can help you tremendously to structure your life in a way that's most rewarding to you.

How to Break this Bad Money Habit

  • Calculate income and expenses - Figure out what you make and what you must spend each month, then see where you have an excess or a lack.
  • Determine financial goals - Set both short-term and long-term monetary goals for yourself to help keep you on track and on target.
  • Monitor spending - Closely observe your spending habits to see where all your money is going. You'll almost undoubtedly find small expenses you hadn't even been aware of that add up to more than you could have imagined or believe before now.


8. Deflecting Responsibility

Responsibility for your financial condition falls squarely on your shoulders alone. There is nothing to be gained from blaming anyone else.

It will not improve your financial situation.

How to Break this Bad Money Habit

Only taking full accountability for where you are and how you got there will show you the way out.

Good Money Habits Start Today

The best way to start a new habit is to simply start it, here and now, without delay, as if it's always been the way you've lived your life.

Spend and save wisely, and you'll soon start reaping the rewards that help compel you to continue behaving financially responsible moving forward.

If you live in the Jacksonville, Florida area and want help setting up a new savings or checking account, managing your credit and debt or otherwise improving your money habits and financial situation, speak with one of our friendly and knowledgeable financial experts at 121 Financial Credit Union.

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