How To Break Bad Financial Habits

by Joel Fink

If you have fallen into bad financial habits, it’s time to take action. We outline three simple steps you can take to realize your bad habits and replace them so you can enjoy a happier, healthier, and more fulfilling life.

Sometimes, we are our own worst enemy. We have the best of intentions. We know that we should watch our spending. We know that we should be saving money and contributing to our retirement plan, but somehow, we just can’t seem to do it. So, what is holding us back?

Can You Relate to These Bad Financial Habits?

It could be those little detrimental habits. Often, they don’t seem so bad. They’re just a little thing. You know the ones I’m talking about.

Things like:

• I only grab that expensive coffee drink every once in a while or when I really need one. It’s not like I have one every day.
• Sure, I used my credit card again. Yeah, I only make the minimum payment, but I’ll pay more on it next month.
• I know I should fill out that form to start contributing to my retirement account, but I’ll do that next year.

Even “little things” can add up over time. That can be a good thing if you’re talking about growing the balance in your retirement account. However, it’s a bad thing when you’re talking about those little expenses or procrastinations that wreak havoc on finances. So, how do you break bad financial habits?

Denise Mann wrote an article for WebMD.com entitled “3 Easy Steps to Breaking Bad Habits.” In her article, she discusses three steps for breaking a bad habit.

3 Easy Steps for Breaking Bad Financial Habits

Step 1: Make It Conscious

The first step is to figure out when and why you are engaging in the habit. Identifying the circumstances and feelings associated with the behavior helps you figure out why you are doing it.

Are you grabbing that cup of expensive coffee because you didn’t sleep well or maybe because you didn’t have enough time to make coffee at home? Did you use your credit card because it’s convenient or maybe you were bored, so you went shopping? Is the reason you don’t want to fill out that retirement form because it makes you feel confused?

Step 2: Put It in Writing

Writing down the behavior that you want to change can help you analyze what is causing the behavior. Logging the behavior can help you identify the conditions that trigger it and your feelings that initiate the behavior.

Keeping track of the frequency of the behavior is also helpful. Maybe you’ll find that you are buying that expensive coffee almost every day. Maybe you’re pulling out that credit card twice a day instead of just a few times a week. Measuring a behavior makes you more aware of it and makes you more likely to change it.

Related: Let’s Stop Repeating These Financial Mistakes

Step 3: Bait and Switch

Eradicating a behavior is very hard to do, especially if it has become a habit. One way to overcome the difficulty is to “replace” that unwanted behavior with another behavior. In her WebMD article, Ms. Mann talks about replacing a behavior like biting your nails with chewing gum instead.

You can use a similar approach with those bad financial habits.

• Use a flavored creamer in your coffee that you made at home instead of buying that expensive espresso drink.
• When you’re bored, instead of going shopping, try calling up a friend, going to the library, or volunteering at a local charity.
• When you feel overwhelmed by those retirement plan forms, try talking with a trusted friend about how they handle their retirement saving or talking with your HR department about what resources or advisors are available to you.

Related: Get Your Personal Finances In Order One Day at a Time

Creativity is your friend when it comes to changing a bad habit. Don’t be afraid to try different things that might work for you. You can change that bad habit into a good one or at least into a less financially damaging one.

If you have fallen into bad financial habits, take action. Make yourself conscious of the habits, write them down, and replace them so you can enjoy a happier, healthier, and more fulfilling life.

• Do You Have a Relationship With Debt?
• 8 Reasons You Don’t Have an Emergency Fund
• 6 Ways To Build a Healthy Relationship With Money
• Prescriptions for 5 Common Financial Ailments
• 9 Reasons You Can’t Save (and How To Overcome Them)

Reviewed December 2023

About the Author

Joel Fink is a retired CPA and financial services executive living in Dallas, Texas. He enjoys writing articles that help real people with simple ideas to manage their money and improve their lives.