Five Bad Financial Habits to Break Now

Change your habits, change your finances

Our life is a reflection of our habits. If you have bad financial habits, your finances probably show it. So if you want to reform your finances, you have to reform your habits. The key is consistency—make good choices on a consistent basis and watch your finances change. Here are five bad financial habits to break in order to set your finances on the right track.

Bad Habit #1: The paper bill, pay-as-you-go system

If you’re still opening paper bills and writing checks, you’re not just stuck in the former century—you may be hurting yourself financially. This antiquated system requires constant juggling and attention. One of the most common downfalls of this method is late (or missed) payments, which result in late fees, extra interest, and damage to your credit score.

The Solution: Automate

Take charge of your finances by automating as much as you can. Setting up automatic payments prevents late payments and fees and also helps you maintain your financial health. Automatic payments create a sort of forced budget because you can see what you have left for spending once all of your monthly expenses are accounted for. The best part of automatic payments—it makes your life so much easier. No more juggling and scrambling—it’s all done with the click of a few buttons.

Bad Habit #2: Impulse Buying

We’ve all been there. The cute, red shoes in the window catch our eye and before we know it, we’re walking out of the store with several new pairs of shoes that we didn’t even know we needed or wanted. Impulse buying may feel good and even give you a quick high—but it will be followed by a sobering low when you try to balance your budget. Impulse buying is the quickest way to overspending. The payoff is rarely worth the financial suffering.

The Solution: Discipline

Discipline isn’t easy, but with practice it can become a habit. Establish some ground rules for yourself, such as a 24-hour waiting period for any impulse purchase. Often the temptation will pass given a little time. If you need help with discipline, consider asking your credit card company to lower your limit.

Bad Habit #3: Minimum Payments

If you make the minimum payments on your credit card each month, you’re simply prolonging your debt—and likely building more all the while. When you make a minimum payment, your rolling over nearly 97 percent of your balance plus interest. This is great for the credit card company, but not so great for you.

The Solution: Step it up

The best solution is prevention—avoid racking up credit card debt in the first place. Unfortunately, this is not always possible—especially when emergencies arise. If you have a balance on your credit card, pay more than the minimum each month.

Bad Habit #4: Failing to Save

Day-to-day life can be busy—and expensive. It’s easy to get so caught up in the present that you forget to plan for your financial future, but saving should be non-negotiable. It’s important to save for emergencies, transition, hopes and dreams, and retirement.

The Solution: Start Small

Saving does not have to be an all-or-nothing proposition. Every little bit adds up. Don’t wait until you feel like you have “enough” before you start saving because the day will never come. Instead, commit to a realistic amount of savings each month and then automate the deposit so that it happens no matter what. Then watch with delight as your savings grow over time.

Bad Habit #5: Easy Spending on the Little Things

You’ve heard of the “latte factor” because it’s a real thing—that daily latte could be costing you upwards of 1,000 dollars per year. Is it worth it? Only you can decide. It’s the little, inconsequential expenditures that really add up—daily coffee, eating lunch out, the afternoon visit to the vending machines. Even if you’re only spending an extra 10 dollars per day on these small pleasures, it adds up quickly.

The Solution: The Devil is in the Details

Take stock of your small, daily expenditures. If that daily latte brings you great pleasure, then maybe it’s not worth eliminating—but do you need gum, lifesavers, candy bars, or an expensive sandwich every day? Choose one small habit to break, do the math, and instead put that money in savings. You won’t be sorry.