8 Effective Ways To Break Bad Money Habits
Written by
Cindy Lamothe
Edited by
Levi Leidy
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
Learning how to be smart with money comes down to two things: how you save it and how you spend it. Thankfully, not only is it possible to break bad money habits, it’s also possible to become financially disciplined with the right strategies in place.
Whether you want to reduce impulse spending, build a better monthly budget or just start paying down debt, here are eight expert-recommended ways to go about it.
1. Set Clear, Attainable Goals
According to Nischay Rawal, certified public accountant (CPA) and founder of NR Tax & Consulting, one strategy that works well is setting clear, attainable goals. “I advise clients to break down their financial goals into smaller, manageable steps. For example, instead of saying ‘I want to save more,’ specify ‘I’ll save $200 a month,'” he advised.
This approach not only makes goals less daunting, but also provides a psychological boost as each milestone is achieved. This can vary widely from person to person, but some examples could include putting a certain amount toward your student loan payments each month or funding a retirement account.
2. Create a Budget
Budgeting is another effective tool. Creating a budget can not only help you get a handle on your personal finances, but also track each transaction to help determine where you may have wiggle room to pay down more of your credit card debt.
“I often recommend clients to review their monthly income and expenses to pinpoint areas where they can cut back,” said Rawal.
He recommended using tools like budgeting apps to track your spending habits and adjust accordingly. “I’ve witnessed clients who initially struggled with overspending find success by setting spending limits in specific categories, like dining or entertainment, and sticking to them.”
3. Share Your Financial Goals
A powerful technique Rawal uses involves accountability. This doesn’t mean you have to share your financial goals on social media, but talk to someone you trust who will check in on you regularly about what you are trying to do.
“Sharing your financial goals with a trusted friend or advisor can help keep you on track,” he said. “During consultations, I emphasize the importance of discussing progress and challenges openly.”
He said this method has led many clients to develop better habits by receiving regular feedback and encouragement, reinforcing their commitment to change.
4. Set a Pre-Spending Lock
“Setting up future-dated transactions for nonessential purchases is one method that I frequently suggest,” said Angelo Crocco, CPA and owner of AC Accounting.
For this, he advised planning seven days before making any nonessential purchase. “You now have some breathing room. You may discover that the impulse to buy subsides during that week.”
He explained it’s not about saying no forever; it’s about giving yourself time to think it over. “This minor adjustment can encourage more deliberate spending by breaking the pattern of impulse buying,” he said.
5. Establish a ‘No-Tech Zone’ for Making Decisions
Establishing a “no-tech zone” to make financial decisions is another helpful strategy.
“Make a commitment to discuss or decide on any purchases without your computer or phone in front of you,” said Crocco.
This pushes you to think more clearly and helps you take a step back from compulsive internet shopping.
“Using this time to manually record your expenses can also help you become more conscious of your spending patterns. It’s a simple way to break the habit of mindless spending.”
6. Open a Guilt-Free Spending Account
“Often, overspending is driven by guilt from depriving ourselves,” said Crocco. “I propose opening a ‘guilt-free’ spending account as a solution to this. Put down a tiny portion of your monthly income — perhaps 5% — into this account.”
In this manner, he said, you can indulge in a little retail therapy without breaking the bank. The knowledge that you have set aside a certain amount for enjoyable purchases will lessen the desire to overspend elsewhere.
“It gradually encourages a more balanced approach to spending.”
7. Maintain a Journal of Money Stories
Crocco advises clients to maintain a money stories journal. “It can be really enlightening to go back on your early memories and beliefs regarding finances,” he said.
Consider asking yourself, “How do I feel about spending?” or “What did I learn about money growing up?” By writing these thoughts down, Crocco said you can identify any limiting beliefs that might be holding you back.
“For instance, if you’ve always thought ‘I’m bad with money,’ challenge that narrative by saying, ‘I’m learning to manage my finances better every day.'”
Developing a new perspective might help you break negative habits more effectively.
8. Design Financial Environments
Crocco refers to this tactic as financial environmental design, and he said it can have a significant impact. It entails modifying your environment to support you in making wiser financial decisions.
For example, he said you might want to remove your credit card information from online shopping sites.
“This little step might complicate the purchasing process and cause you to second-guess your decision to hit ‘purchase,'” he said. “For daily expenses, you may also try paying with cash to feel the real effect of your spending.”
Caitlyn Moorhead contributed to the reporting for this article.
More From GOBankingRates
