7 Tips for Breaking Bad Financial Habits


For most of us, our financial habits were picked up early on from watching and learning from our parents as we were growing up.

If you were lucky enough to have financially savvy parents to guide you, managing your finances probably comes easily to you and is second nature. For many of us, though, myself included, making smart financial decisions has been a process that we’ve learned by way of trial and error -- just as our parents before us.

In my case, my parents were simply repeating the cycle and following the financial habits they learned from their parents, which were most likely learned from their parents before them.

So, how do you break the cycle of bad financial habits? I’ll be the first to admit, breaking habits is not easy. It takes time, commitment and a strong desire to want to make the change. If you’re serious about changing your financial habits, here are a few tips and guidelines that may help.

Identifying Bad Habits

This sounds obvious, but if you aren’t aware of what you’re doing wrong, it’s difficult to change it. If you have financial issues, take a step back and analyze your finances. What’s causing you the most trouble? Are you buried in debt? Relying on credit cards to pay for things you can’t afford? Living beyond your means? Not saving enough? Having trouble making payments on time? Before you can attempt to change any of these problems, you have to recognize that they exist and are “problems” caused by habits you want to change.

Defining New Habits

After you’ve recognized the problem, analyze ways to correct them and pinpoint scenarios or situations that cause you trouble. What changes or new habits do you need to make in order to correct the problems and headaches caused by these bad habits? Think big picture and look at every aspect of the problem in order to define ways to correct it. A few examples:

  • Struggling with Debt: Where are you over spending? Why are you overspending? Are there any situations or triggers that tempt or cause to spend more than you should? Can you limit your exposure to these situations or triggers?
  • Not Saving Enough: How much are you saving? How much do you want to save? How much should you be saving? How much do you need to save? Why aren’t you saving more? What can you do to reverse this problem?

Taking the approach of asking ‘who, what, where, when, and why,’ makes it much easier to identify and define new habits for almost any situation.

Committing it to Paper

Don’t waste the time you’ve spent to get this far by keeping it all in your head. Write it down -- all of it. Including the changes you want to make, why you want to make them, how you’re going to make them, the steps you’re going to take to get there -- and then post it in plain sight. This will help you clearly “see,” in specific terms, your end goal and will stand as a written affirmation to keep you committed to the end result. It’s harder to dismiss a promise or commitment when it’s in writing and the reminder is right in front of you.

Tackling One Habit at a Time

You know the saying, “Rome wasn’t built in a day,” and neither are bad habits changed overnight. Trying to tackle everything all at once isn’t realistic and usually leads to frustration and a higher likelihood of failure. Start slow and take one step at a time. Keep it simple and slowly work at implementing one or two rules at a time. As you begin seeing results and these rules begin to become habits, you can work more in as you go.

Setting Mini-Goals

New habits take time to develop and one way to stay on track is by setting periodic goals, or a series of milestones that help you stick to and develop strong “new” habits. For financial goals, you might consider setting milestones for 30 days, 60 days, 90 days or more. These mini-goals can help with planning more long-term goals like “I will be debt free in three years,” and keep you motivated in reaching that three year/long-term milestone.

Making Good Financial Habits Automatic

When it comes to financial habits, one great way to reverse bad habits is to automate good habits. Things like auto pay or online bill pay through your checking account, utilizing direct deposit to allocate a percentage of your paycheck to a separate savings account, taking advantage of 401(k) savings contributions at work, etc. It makes good financial habits so easy that you don’t even have to think about them. Sounds simple, and it is.

Learning to Expect Setbacks, and Rolling with It

We’re not perfect, we’re human. We make mistakes and we will slip up from time to time. The trick is accepting that there will be setbacks, and if you do slip, learning to pick yourself back up, brush yourself off, and keep going. It’s the difference between success and failure and if you “keep calm and carry on” the habit will eventually stick.

This isn’t an exhaustive list by any means. But hopefully, there are a few tips here that will help you in your own financial journey -- and as you go, you’ll develop others along the way. The most important aspect of changing bad behaviors begins with recognizing the behavior and then slowly implementing small incremental changes -- gradually replacing them -- until you essentially reverse the bad habits into good.

What tactics have you come across that have helped you break bad financial habits?

-- is a financial literacy advocate with 15+ years in the banking and consumer credit industries, including five years with FICO in their credit scoring division. She specializes in educating consumers on the importance of healthy credit management, and shares valuable insight on consumer credit and finance issues.

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