Breaking Bad Habits: Five Money Behaviors to Change

By Mike Peterson
In March 26, 2014

Let’s face it.  We all have a few habits we’d like to break.  Some people spend way too much time glued to their smartphones.  Others bite their fingernails or eat too much junk food.  And still others watch more TV or play more video games than they probably should. 


These are typical things that we think of when we hear people talk about “bad habits.”  But what about finance-related bad habits?  If you find yourself struggling to pay down high-interest credit card debt or wondering why you’re always flat broke at the end of every month, you might have one or two not-so-great money habits.


That’s why I thought I’d spend some time this month discussing bad money habits – and ways to go about changing them.  Here are my picks for the five worst money habits, along with some strategies for changing those habits.


Bad Money Habit #1:  Carrying high-interest credit card debt.  As I’ve said many times before, I don’t think credit cards are inherently bad.  After all, responsible use can help you build a good credit rating, which can make it easier to do things like buy a house or rent an apartment; get approved for a loan; and even get a job. 


Of course, by “responsible use,” I mean paying your balance off – in full – every month.  Once you start carrying a balance from month to month, the interest starts piling up.  It gets harder and harder to keep up with your payments.  Pretty soon, your debt is out of control.


How to Break It:  If you’re already struggling with high-interest credit card debt, the first thing you should do is stop using your cards immediately.  Next, come up with a plan to pay off all of your credit cards, starting with the card that has the highest interest rate, and start paying.  Not sure how to start?  Two methods I like are the snowball method and the waterfall method.


Bad Money Habit #2: Not Saving.  When it comes to saving money, most folks simply aren’t doing enough.  Saving isn’t easy, and it’s easy to find excuses for not doing it, especially when you’ve got other things to do with your money – like paying down debt or saving for a major purchase.  The truth is, though, that there’s never going to be a “right” time to start saving money.  You just have to get in the habit.


How to Break It: If you’re not in the habit of saving money, the simplest way to start is to use automatic bank transfers.  With automatic transfers, you don’t have to do any work.  You can’t forget or make excuses.  And, it’s super-easy.  Just pick an amount to set aside, and schedule a monthly, transfer into a designated savings account.  Choose a realistic amount – even $20 or $30 per month is better than nothing.  Chances are, you won’t even miss the money.


Bad Money Habit #3:  Buying Lunch Every Day.  There’s nothing wrong with buying lunch every now and then.  But buying lunch every day?  That can add up quickly. Let’s say that a typical lunch at a deli or a fast-casual place near your office costs around $12.  If you buy your lunch every day, you’re looking at a whopping $84 per week! 


How to Break It: Obviously, brown-bagging it is the cheapest option.  But you don’t have to completely give up buying your lunch at work.  Try a compromise instead:  Bring your lunch Monday through Thursday and treat yourself to your favorite deli sandwich on Friday.  Or, give yourself a weekly lunch budget – say, $30 or so – that you can spend however you want.  But once it’s gone, it’s gone.


Bad Money Habit #4: Overspending on Monthly Bills.  You’ve gotten used to paying a certain amount for your phone bill, your Internet bill, your cable TV bill, and so on.  But when was the last time you actually shopped around for these types of services?   If you’re not looking for a better deal, you might be paying way too much.


How to Break It:  Do some comparison shopping – and some prioritizing.  Can your cell phone provider offer you a more competitive rate?  Can you find a company that will give you a better deal on your Internet service?  Could you cut out cable TV completely and switch to something cheaper, like Netflix or Hulu?  Do you need a landline phone and a cell phone? 


Bad Money Habit #5:  Going Overboard on Entertainment.  It’s really easy to overspend on fun things like music, movies, books, and games, and it’s gotten even easier thanks to digital downloads and one-click ordering on sites like iTunes and Amazon.  And if you’re not careful, your entertainment spending can get way out of hand – and way over budget. 


How to Break It:  You don’t have to give up your favorite hobby in the name of financial responsibility.  But there are things you can do to make sure that you don’t blow your entire budget on entertainment-related expenses:  Instead of buying that new book you want to read, check the used bookstore for a copy.  Or, swing by your local library and borrow it instead.  Trade DVDs, CDs, or games with friends. 


So, how many of these “bad money habits” apply to you?  If you were a little dismayed to realize that you have more than one not-so-great money habit, don’t worry.  Money habits are just like any other habits:  It might take a little work, but you can change them if you try. 


Happy saving!

Mike is the author of “Reality Millionaire: Proven Tips to Retire Rich” and he has been published in a variety of local and national publications including Entrepreneur Magazine, Deseret Morning News, LDS Living Magazine, and Physicians Money Digest. He holds a B.S. in business administration from the University of Phoenix.

Click "More" for important American Credit Foundation client transition information