10 Bad Financial Habits You Need To Break

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bad financial habits to break

Habits are the building blocks of one’s life. The direction of your goals or aspirations depends on the kind of things you habitually do at the moment. So when it comes to staying on track with your money, you must avoid bad financial habits completely. If you hold on to them, your financial situation will be stagnant and none of your major goals will be accomplished.

Now the big question is, what are the bad financial habits you need to break and how do you actually move on from them?

Thankfully, this post will do justice to that. You will learn some of the wrong things you commonly do that affect your financial growth. But most importantly, you will understand how to crush these bad money practices and attain financial stability.


What Are Bad Financial Habits?

Bad financial habits are wrong decisions you regularly make that could hurt your finances. Although these habits may not seemingly appear as “bad” choices, they always carry costly consequences that may result in major financial challenges such as debt trap, homelessness, or failed retirement.

Some common examples of bad financial habits are impulse buying, having zero savings goals, and failing to budget money.


How Do You Break Bad Financial Habits?

You break bad financial habits by first admitting to the fact that they are hurting your finances. Once you come to this realization, then you must make the hard decision of swapping every bad money habit for a good one.

For example, if you are used to impulse buying, you should always go to the grocery store with a shopping list. If you haven’t been saving money, you should set up automatic deposits to a high-yield savings account.

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10 Bad Financial Habits You Need To Break

If you are struggling to save up for an emergency fund, pay off a mortgage, or clear your credit card debt, that could be a sign that your finances are tied down by some bad financial habits. Here is a list of the most common wrong decisions you need to stop making if you want to succeed financially:


1. Not Having Savings Goals

bad financial habits you need to stop

The reason you are not saving money every month right now is that you have refused to create a savings goal. It means you haven’t given yourself a reason to save.

To break out of this habit, you must set both long-term and short-term savings goals. For example, you need to start planning for retirement. That’s a very valid long-term goal that should compel you to save.

Take your time to write down all the relevant goals you have, including your kids’ college fund, down payment for a house, vacation, etc. Then determine how much you need to save monthly to reach these goals on time.


2. Having No Monthly Budget

This is one of the common bad financial habits you need to stop. Budgeting is essential as it enables you to properly plan for your income every month. If you don’t have a working budget in place, you are likely to spend recklessly without reserving enough money to reach your savings goals.

There are various methods you can employ when building a budget. We have the 50/30/20 method, the pay-yourself-first rule, and the zero-based budget strategy. Ideally, the zero-based budget is the perfect financial plan to help you manage your income every month. It entails assigning every dollar to a spending category until your balance becomes zero.

Aside from your essential bills, you must also factor in your savings goals and miscellaneous expenses in the zero-based budget.


3. Spending Too Much On Nonessentials

bad financial habits to ditch

Sometimes people break their budgets by overspending on nonessentials. These unnecessary expenses build up and create a gap in your finances. Over time, you won’t be able to save for your goals, let alone stick to your monthly budget. It’s one of the bad financial habits to ditch immediately. Hence, you must be willing to focus on only your important bills. Avoid anything that doesn’t contribute much to your well-being.

Here’s a simple tip I usually recommend when it comes to curbing overspending. Whenever you find a nonessential item you are tempted to buy, write it down and wait for some days before purchasing it. In most cases, you won’t be interested in that item anymore once all that time passes. Now that money you planned on spending can be put toward your savings goals.


4. Piling Up Debt

According to Debt.com, the average American household has about $101,915 in debt. This includes credit cards, mortgages, student loans, and whatnot.

One obvious reason many households carry this ridiculous amount of debt is that they allow it. They simply stood back and watched their debt accumulate. This is one of the worst financial habits that can drastically ruin your finances, damaging your credit score over time.

If you want to get out of debt, the first thing to do is to stop taking in more debt. Avoid it completely. Then look for a reliable debt payment method that will help you pay down all your balances on time.

For example, the debt avalanche and debt snowball methods are the most common strategies many families use to become debt-free.


5. Having No Emergency Fund

Do you sometimes imagine what would happen if you suddenly lose your job or become too ill to even work? Have you thought about how to keep your finances afloat if another pandemic hits the world? As much as we don’t pray for unfortunate events like these, we need to be prepared.

Building an emergency fund to cater to your needs is highly essential. If you don’t prepare for emergencies, you will have no choice but to resort to borrowing money or maxing out credit cards when you need to cover expenses.

That’s one of the bad financial habits that will quickly trap you in debt. As you build your monthly budget, ensure you contribute a certain amount of money to a savings account for unexpected events.

Besides, if you want to learn more about setting up an emergency fund, check out this post. I have outlined and explained 7 simple steps to prepare for emergency expenses.


6. Using Out-Of-Network ATMs

ATM fees are unnecessary expenses you may be attracting from a bank when you don’t pay attention. When you constantly use out-of-network ATMs for withdrawals, the fees can add up to about $100 within a year.

Avoiding these charges is quite simple; start using in-network ATMs. Check your bank’s website or mobile banking app to find out where these ATMs are located.

On the other hand, you can create a checking account that refunds ATM fees.


7. Relying On Cash Advances

Occasionally, cash advances can be helpful when you need to make ends meet. But relying on cash advances all the time only leaves you in debt. It’s one of the common financial habits that keep you poor.

Although it may seem like you’re spending free money, you’ll end up struggling to pay back the advance. That’s another level of financial stress you don’t want to be in.

Instead of hoping to get a cash advance, try to increase your income. Get another job or find a side hustle that brings an extra income every month.

More importantly, you should learn to live below your means. This means you have to cut down on your expenses to save money. Examine your budget closely and see if you’re losing too much money in some spending categories.


8. Incurring Late Payment Fees

Many people don’t pay attention to late payment fees because they believe these charges are tiny amounts of money.

When you don’t pay your credit card on time, an extra fee is added to your balance. This won’t make much of a difference if it happens only once. But when you keep incurring these late fees repeatedly, then there’s a problem. You have simply developed one of the bad financial habits that will affect your income.

To avoid these extra charges, set up automatic payments so your bill can be paid whether you remember or not. Aside from saving money, this will prevent negative impacts on your credit score.


9. Borrowing For Big Expenses

This is one of the bad financial habits to break. You are not supposed to make big purchases without planning ahead. When you fail to plan, you will have no choice but to borrow money or swipe your credit card.

Big expenses like a wedding, home renovation, or birthday party should be considered money goals. What this means is that you have to gradually save money weekly or monthly to accomplish them.

Although it may take time to save the complete amount needed to make that purchase, it’s much better than being in debt.


10. Spending On FOMO Offers

The increasing growth of the internet and social media is significantly affecting the buying decisions of millions of Americans. This is why I consider online shopping one of the bad financial habits to break.

Many online marketers now use the FOMO strategy to compel prospects to buy things online. Known as the “Fear Of Missing Out” (FOMO), this trick can make you so excited about buying a product or subscribing to a service you don’t even need. Hence, you must limit your time on social media.

Also, ensure you unsubscribe from newsletters that always encourage you to buy one thing or the other.


How To Break Bad Financial Habits

It’s never too late to turn a new leaf. Now that you have learned about the common habits that halt your financial growth, here are some tips to help you break these habits:


1. Identify Your Bad Money Habits

If you don’t know what you are doing wrong, it’s very difficult or even impossible to make a change. So as soon as you start experiencing issues with your finances, take a step back and examine your innate money habits.

If you are in debt, look at your spending. How much did you spend on impulse purchases in the previous months? Did you max out your credit cards unnecessarily?

When you take your time to look at these various areas, you’ll find the loopholes and identify the bad financial habits you have.


2. Write Them Down

Breaking bad financial habits isn’t something you do in your head. You have to be quite practical about it since it’s a serious situation.

Begin by writing down every bad money habit you think you have. Write them in your notepad or use a sticky note and place it on your fridge, closet, or any place that easily gets your attention.

Aside from just writing them down, also write the changes you intend to make and how you are going to make them happen. This will help you to literally see your current situation and how you can make it better.


3. Tackle One Habit At A Time

When learning how to break bad financial habits, don’t expect instantaneous progress overnight. This means you shouldn’t try to tackle everything at once so you don’t get overwhelmed and give up too soon.

Instead, be realistic with your goal. Try to break one habit at a time. When you begin to get better in a certain area, you can decide to improve other areas.

Also, ensure you monitor your progress. At the end of every week, ask yourself how far you’ve gone. As you notice results, you’ll be encouraged to keep working.


4. Cut Yourself Some Slack

Most common bad financial habits are not so easy to break. Although it may seem like you have everything under control, you could find yourself defaulting again. It’s almost like struggling with an add#ction.

However, bear in mind that this is part of the process to break free completely. There are days you won’t get it right. You will make mistakes along the way. You won’t hit your goals on time. But always make sure you give yourself some grace.

Understand that there will be setbacks since you are human. Learn to pick yourself back up each time it feels like you’re falling off.


5. Develop Good Financial Habits

It’s important that you know all the bad financial habits you need to drop. But it doesn’t end there. You have to now develop good money habits in place of the negative ones you just relinquished.

Think about all the good things you can constantly do to improve your financial situation. If you haven’t been budgeting, you should know it’s time you changed that. If you haven’t been saving, it’s time you started stashing some extra cash aside. That’s how you win.

However, bear in mind that adopting good financial habits will take time. This is because you are adjusting to an entirely different way of managing and spending money. Be willing to take it step by step.


The Bottom Line On Bad Financial Habits To Break

Some of us didn’t grow up with parents who made wise money decisions, and that affected our mindset about personal finance. But by learning tips for breaking bad financial habits, you don’t have to repeat the same mistakes your parents made.

Using the insightful piece of information discussed here, you can gradually get your finances back on track. From savings to paying off debt, you can make better decisions that will guarantee favorable outcomes.


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Author: Anthony Ihz

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