Are you ready to create better money habits?
We all have them, bad habits, it doesn’t matter if they are big or litter they can be tough to break. Having lousy money habits can be even harder to
If you are looking to achieving financial freedom, you have to break your bad money habits and start forming better money habits!
By breaking your bad money habits, you’re setting yourself up to pay off debt, save more money, travel more, reach financial freedom, retire comfortably, and so much more.
The sooner you break any bad money habits you have, the sooner you will reach your financial goals.
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Here’s a list of bad money habits that you need to make sure you don’t slip into and some ideas to help you break them. Let’s start forming better money habits!!
Not Using A Budget
In my personal opinion, not budgeting your money is one of the biggest bad money habits you can have!
I saw a statistic the other day that stated 1 out of 3 households don’t budget their money. That statistic is crazy to me!
If you aren’t using a budget, do you really have control over your money?
Probably not.
When you use a budget, you can tell every dollar you make where it needs to go. This will help you pay off debt faster, save more money, and start planning for retirement.
If we didn’t budget our money, do not doubt in my mind, we would not have been able to save $100,000 in a five year period.
If you fall in the 33% of households that aren’t budgeting your money, it’s not too late to break that bad money habit.
Get started right now, seriously get out a pen and paper and start your budget.
If you don’t know where to start, check out our FREE Budgeting Course and get started budgeting today!
The cash envelope budget system is our personal favorite way to budget our money!! It’s so simple to use that it’s perfect for the first time budgeter.
For a detail description of how the system works check out our Beginners Guide to the Cash Envelope System.
Only Making Minimum Payments On Credit Cards
If you have been with us for a while, you know, we aren’t fans of credit cards.
Nothing screams bad money habits like borrowing money with a double-digit interest rate.
What’s even worse is that credit card companies make the minimum payments so low that they really make their money with the hidden cost called interest.
Everyone knows that they get charged a high-interest rate with credit cards, but they continue to use them for everything.
When you rack up a balance on your credit card, you need to pay that off as quickly as possible.
By making minimum monthly payments, you are basically getting charged even more money just to be able to pay off your purchase slowly instead of at the time you bought it.
If you have a balance of $1,000 on your 10% interest rate credit card and you only make the minimum payment of $20 per month, you are going to pay $300 in interest.
Ask yourself, is it worth it to use credit cards?? I think not it’s time to start forming better money habits!
To break this bad money habit, try leaving your credit card at home. You don’t have to go wild and cut it up (you can if you want to) but just leave it at home.
Get used to not having it on you.
When you take away the convenience of having it, you won’t use it as much.
Not Having an Emergency Fund
Having some form of emergency fund is extremely important, even before you start paying off debt, its a must
You never know when a future crisis might arise. Having even just a small emergency fund will keep you afloat when times get rough.
We recommend having enough money saved to cover 3-6 months of expenses. However, if you have yet to start an emergency fund your goal can be much smaller.
We keep our emergency fund in a high-interest Money Market account. CIT Bank has industry-leading interest rates on its Money Market accounts and we highly recommend them.
Having your money placed in a high-interest account means your money grows faster.
If you leave your money sitting in a savings account for a year, you’ll be lucky to make $20 in interest off your account. Having that same amount of money sitting in a high-interest money market, you’ll make hundreds every year.
>> Give CIT Bank a Try <<
Whatever you do don’t let your money sit in an average savings account!
You can read our CIT Bank review here!
Trying To Keep Up With The Joneses
This is a big bad money habit that you have to kick ASAP!
Everyone has heard of the term keeping up with the Joneses, and a lot of people do it unknowingly.
That’s right you see your friend get a new big-screen TV or the latest smartphone, so you go buy one.
Your neighbor talks about the lavish vacations they take, so you book one too even though you know you’ll be paying it off for a year or two.
You’re doing this to keep up appearances, and that’s a dangerous game to play.
Keeping up with the Joneses is a quick way to find yourself living above your means.
That’s like taking the fast lane to financial ruin.
Don’t make these mistakes; be happy with what you have.
Once you get out of the mindset of having to have all the newest and best toys, you’ll find yourself in a happier mental and financial state.
We have found the best way to avoid falling into this bad money habit and start forming better money habits is to pay cash.
If you can’t pay cash for that big screen TV or a new set of golf clubs, then you probably don’t need it right now.
Be happy with the things you have in your life, and don’t worry about what other people have. Trying to keep pace with other people if you don’t have the money isn’t good for your finances.
Making Late Payments
Late payments can be a killer to your financial wellbeing. Not only will you get charged late fees on top of the amount you already owe, but this one can hurt your credit score.
Almost everyone has a credit score, and at some point in your life, you are going to need it to be good.
Don’t mess up your credit score by missing monthly payments.
The best way to make sure you don’t make late payments is to write out all the bills you owe.
Do you have our FREE 2019 Budget Binder yet? In the binder, you will receive a lot of really great tools, one of them being a Monthly Expense Tracker.
Use that tracker to write down all of your bills and hang it where you can see it.
Check it daily to make sure you don’t miss a payment.
I also recommend setting up auto-draft payments to simplify your life. This way you won’t ever miss a payment!
Related Article: Don’t Let These 7 Mistakes Hold You Back From A Good Credit Score
Impulse Buying
Impulse buying is another one of those bad money habits out there, and this one can be hard to know you have.
This bad money habit is a real danger to your budget and reaching your financial goals.
How many times have you been standing in the checkout line at a store and grabbed a pack of gum or a candy bar? Even though it might only cost you a dollar, it adds up over time.
What about the times where you’re walking through the mall and see a shirt you just “have to have” so you buy it?
Those impulse buys really break the bank and can hold you back from reaching your financial goals.
Next time you find yourself about to make an impulse buy, ask yourself if you really need it?
Will this thing add value to your life?
For more significant purchases, wait a month to see if you still want it before you buy it.
Taking your time with purchases helps form better money habits and gives you a chance to really think it over and save some money for it.
Eating Out For Lunch Every Day
Breaking this bad money habit has saved us thousands of dollars over the years.
Think about how much it adds up throughout a year if you go out to eat for lunch every day.
If you buy a $10 lunch every day of the week and you work 48 of the 52 weeks in the year, that’s you spending $2,400 per year on lunch!
I started bringing my lunch to work every day about four years ago, and it was such a good decision. It takes me a couple of extra minutes in the morning to get my lunch ready, but it’s worth it to save all that money.
Each lunch I bring consists of a sandwich and some type of fruit, so it’s about $3 or $4 per day instead of $10-$15.
Next time you go grocery shopping, make sure to grab the makings for sandwiches and start bringing your own lunch to work.
You’ll be surprised at how much money you save each month!
Money-saving tip-
Don’t forget to use the Ibotta App to help you save even more money when you go grocery shop. Compound your savings by simply taking a picture of your receipt and using the Ibotta App to get cashback.
Once you send in your receipt, you’ll get the cash back right to your account. This is by far my favorite money-saving app.
Who doesn’t love earning money while they shop at their favorite stores!
When you sign up through my Ibotta link, you’ll receive a $10 welcome bonus when you try Ibotta. If you want to learn more about the app, you can check out my Ibotta review here.
Sign up with our link to get a free $10 welcome bonus!
Not Saving For Retirement
There are a million reasons why people choose not to start saving for retirement.
It could be that they don’t think they make enough money, retirement is still a long way off, so they have time, or simply because they don’t know how to get started.
Whatever the reason is, get rid of it and start saving for retirement today!
The magic of compounding interest is incredible. The earlier you start saving money for retirement, the less you will have to keep as you get closer to that retirement age.
Here is an example: Let’s say your 25 years old, and you make $50,000 per year.
You start saving 8% of your annual income toward retirement and get a 7% return on investment. At age 65, that would be almost $1,000,000!!
Now compare that to someone starting at 45 years old doing the same thing. At age 65, their retirement account would only be about $170,000.
That’s a huge difference. Start saving for retirement as early as you can.
Related Article: Retirement Planning: Grow A Million Dollar Nest Egg
Spending More Than You Earn
This bad money habit ties into several of the other ones, and it proves the importance of having a budget.
This lousy money habit is an easy way to find yourself in financial trouble.
If you’re spending more than you earn, you’re probably racking up credit card debt or taking out loans just to get by.
You have to break this habit right now!
There is no time to wait, and you actively have to work on this one. If you continue the trend of spending more than you earn, you’re hurting more than just your immediate financial well being.
Spending too much prevents you from saving any money. This means you aren’t able to build an emergency fund, pay off debt, or save for retirement.
It doesn’t sound like a good plan, does it?
Here are a couple of articles that can help you kick this habit fast:
- Free Budgeting Course
- Money Management Tips To Help You Retire Rich
- Beginners Guide to the Cash Envelope Budget System
- Easy Ways to Save Extra Money
Paying ATM Fees
This bad money habit is one that you might not think about very often, but it can add up.
Paying fees at an ATM is a tough one to notice because everyone just hits yes when the ATM asks you to pay them.
You hardly notice the $3 coming out of your account, but it’s still money you are losing.
The easiest way to kick this habit is to only use ATMs that are from your bank.
If you go to an ATM and it doesn’t have your bank’s logo on it, don’t use it.
Simple as that!
Keep in mind, there are some banks that do reimburse some of your ATM fees.
Paying Membership Fees That You Don’t Use
Here is a bad money habit that is easy to fix but can be costly if you don’t.
Think about it: how much money are you wasting on subscriptions that you don’t use anymore? This bad habit can easily slip through the cracks with all the automatic payments being made now.
Don’t let these fly under the radar.
The easiest way to break this bad habit is to check your bank statements and clean up your budget.
Whether it’s Hulu, a gym membership, your old Xbox Live account, or anything else that you aren’t using, just get rid of it!
Don’t just give away your money!
Not Discussing Finances With Your Spouse
This is really important. If you’re in a serious relationship, you better be talking about finances together.
If you aren’t talking about your financial situation, you could be in financial trouble and not even know it.
When you can discuss finances together, you become a stronger couple.
Being able to have discussions about spending habits, savings plans, and retirement planning can really help you both focus on your goals.
When you communicate and can both aim at the same financial target, you are more likely to hit it.
Talk about your finances and the goals that you see yourselves achieving.
We have covered quite a few everyday bad money habits and how to break them. If you saw some bad money habits on the list that you know you have, don’t worry.
We’ve been there too, and we want you to know that you will be able to break them and start forming better money habits.
We did it and so can you!!
What are some bad money habits you’ve concurred? Let us know below!
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This was a great, no-nonsense list. Do you have a particular type of budget system you recommend? * (zero-based budgting , 70/20/10, etc)
Thank you!
I’m glad you liked the list!! We really love using the cash envelope budgeting system. It’s simple to use and has worked really well for us so we just kind of stuck with it 🙂
Great thoughts on this. I think that many people would save a lot by simply putting a budget in place. Honestly, I feel a lot more freedom when I have a budget and I know how much I have to spend on certain line items. It also helps me figure out what will save me money in the long run when I’m making a purchase.
Budgeting is such an easy and simple-to-use tool that often gets overlooked. We love living on a budget because like you, we feel more free when we control our money. Thanks for checking out the post!
Great list! They are all so very true.
Thank You! I’m glad you liked the list!!
Saving for retirement is my thing RN… I’ve got to step that up!
xx,
Lacey
That’s awesome to hear your saving for retirement! We try to make it a game, can we save more this month than we did last month?? Every little bit counts!
I’m so bad for having memberships that I don’t use- it’s annoying how lots of things lock you into a years contract! Also budgeting stresses me out when there are unexpected expenses! But this post has definitely highlighted some things that I can do better.
Hi Rachel,
Thanks for checking out the post, I’m glad you liked it. The memberships were a big one for us that we cut out. They are easy to forget about and can end up costing people a lot of money.
Not budgeting is not mapping a direction for your money and not been able to track where your excesses are going. Impulsive or emotional buying leads to debt and financial distability most time.
Thanks for this great insight.