How to Stop Bad Money Habits - Financial Mercury

Everyone of us needs money, but we know as well it can be so easy to creep in poor money habits into our days, bankrupting our wallets in the process. Ranging from impulsive purchases to the failure to budget, these behaviors can cause stress, debts, and loss of financial opportunities. The good news is that you can alter these habits and take charge of your money by knowing how to do it. In this guide, we’ll walk you through how to stop bad money habits and adopt new ones that can pave the way to financial freedom.

The Reason Behind Our Bad Monetary Habits

Before we jump into how we fix bad money habits, we should first understand why we develop them in the first place. A number of factors contribute to this:

Emotional Spending: When shopping or spending, you may feel emotional due to stress, sadness, or boredom. Such emotional attachment to spending normally ends up creating impulsive purchases and regret.
Lack of Financial Education: Misconceptions about the financial system can make one take decisions that aren’t in their best interest without knowing how money works, the power of budgeting, saving, or investing.
Peer Pressure and Social Media: Social media and influencers can make us feel the need to keep up with a certain lifestyle. This may cause overspending on products and over-living beyond your means.
Instant Gratification: We are in an era of convenience, where everything is instant. Purchasing has never been so accessible with a simple swipe of a credit card or a button press, and unfortunately, this often leads to debt.
Inadequate Money Management Skills: Budgeting, saving, and investing are skills many never learn. Financial illiteracy often leads to poor money habits that can accumulate into major financial issues.

Related: 10 Rules Of Money

The 7 BAD Money Habits and How to Stop Them

1. Impulse Spending

One of the most popular money-destructive habits is impulse spending. It occurs when you purchase something on a whim without considering whether you really need it or not.

How to stop it:

Shopping List: Before making a purchase, make a list of the items you need and stick to it. Don’t buy something just because it’s not on your list.
Attach the 24-Hour Rule: Before buying something non-essential, wait 24 hours and think about it. This can help you avoid impulsive purchases.
Follow Your Money: Download a spending app or make a list of what you’re buying so you can track where your money is going. It creates awareness and helps prevent impulse buys.

2. Lack of a Budget

It’s easy to go astray with your money and end up drowning in debt without a budget. A budget is vital to achieving your financial goals.

How to stop it:

Establish a Budget: The 50/30/20 rule is a simple suggestion: spend 50% of your income on needs, 30% on wants, and 20% on savings and debt pay-offs.
Budgeting Apps: Use apps like Mint, YNAB (You Need A Budget), or GoodBudget to prepare and track your budget.
Check Your Budget Regularly: Review your budget regularly, preferably monthly, and adjust it based on any changes in your income or expenses.

Related: How To Save Money On Groceries

3. Overspent Living

It’s easy to lose yourself in the concept of keeping up with others and spending more than you earn. Living beyond your means will eventually lead to debt and financial instability.

How to stop it:

Learn to Say No: You don’t need to attend every expensive dinner or buy the latest gadget. Learn to say no and focus on what really matters to you.
Needs vs. Wants: Before making a purchase, ask yourself if it’s a need or a want. Focus on necessities and saving for future security.
Save First, Spend Next: Make sure you have enough savings before spending extra money. It’s best to build an emergency fund of at least three to six months of living expenses.

4. Not Saving Sufficiently Towards the Future

Many people don’t save adequately for unforeseen expenses, retirement, or other needs. Without savings, a medical emergency, job loss, or necessary repairs can put you in a financial bind.

Related: How to Make Money as a Kid

How to stop it:

Automate Your Savings: Set up automatic transfers to your savings account. This ensures you save first before spending the remainder.
Start Small, But Start: If you can’t save much, start with small amounts. Saving even $50 a month can add up over time, and the habit will grow.
Contribute to Retirement Accounts: If your employer offers a retirement plan, like a 401(k) or IRA, contribute as soon as possible to benefit from compound interest.

5. Being Over-Dependent on Credit Cards

Credit cards can be helpful when used wisely, but they can become problematic when you rely on them for purchases you can’t afford, which leads to high-interest debt and ruined credit.

How to stop it:

Credit Card Debt: Pay off credit card debt as quickly as possible, starting with the highest-interest debt.
Avoid Non-Essential Purchases with Credit: Make a rule to only use your credit card for necessary purchases or emergencies.
Set a Credit Limit: Give yourself a monthly spending limit and stick to it.

6. Financial Avoidance

Money is a topic that many people avoid discussing. Failing to talk about finances with your spouse, family, or a financial advisor often results in problems down the line.

How to stop it:

Talk to Your Partner: If you’re married or in a serious relationship, talk about money with your partner. Discuss your financial goals, worries, and expectations.
Consult a Financial Expert: If you’re unsure of your financial status, seek help from a financial advisor to guide you in budgeting, investing, and saving.
Regular Check-Ins: Regularly review your finances with your family or partner to keep everyone on track and aligned with the same goals.

7. Ignoring Your Credit Score

A credit score is crucial for your financial life. A poor credit score can make it difficult to get loans, take out credit at favorable interest rates, or even get hired for certain jobs.

How to stop it:

Check Your Credit: You are entitled to one free credit report annually from each of the three major credit bureaus: Equifax, Experian, and TransUnion. Regularly check your report to catch any mistakes or signs of identity theft.
Pay Your Bills on Time: Payment history is a significant factor in your credit score. Ensure you pay your bills—credit cards, loans, and utilities—on time.
Lower Your Debt-to-Income Ratio: Pay off existing debt to lower your debt-to-income ratio. The lower your debt, the better your credit score.

Learning to Establish Good Money Habits

Although quitting bad money habits is a significant step toward financial freedom, it’s equally important to build good money habits. Here are some tips for establishing those habits:

Set Financial Goals: Having specific, attainable financial goals helps you stay focused and motivated to save and budget.
Monitor Your Progress: Regularly check your finances to track your progress toward your goals.
Celebrate Small Wins: Whenever you make progress, such as paying down credit card debt or reaching a savings goal, celebrate your success. This reinforces your positive behavior and keeps you on track.

Conclusion

Quitting bad money habits is an ongoing process that requires patience, persistence, and self-discipline. Understanding these habits and knowing how to quit them is the first step toward changing your financial future. Whatever changes you need to make, do it one step at a time. Start small, and as you do, a healthier relationship with your money and financial freedom are within reach.

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