How to Change Your Financial Habits

According to financial expert Dave Ramsey, the key to changing financial habits that are not serving you well is changing your behavior. In order to change a bad habit, it first must be recognized as something that is hurting you. In her new book “Love Your Life, Not Theirs; 7 Money Habits for Living the Life You Want” author Rachel Cruze states, “Habits affect every area of our lives, including our health, careers, relationships, and especially our money. We all have money habits. Some are good, and some are bad. Some take us closer to where we want to be, while others take us further and further away.” If your financial habits are taking you further away from your goals, they are not serving you. Since your financial habits affect every area of your life, every single day, it only makes sense to harness this power and make it work for you.


When evaluating your financial habits for areas that might need changing in order to reach your financial goals, keep in mind that your goals are yours, not someone else’s. In her book, Cruze maintains that the most damaging money habit we have is comparing ourselves to others. Some healthy money habits for living the life you really want without being buried in debt, stress, and worry include not comparing your financial situation, goals, or life with anyone else’s, avoiding debt, developing and living according to a financial plan, controlling spending, saving for the future, having healthy conversations about money, and giving.


If you are an impulsive spender, living on a financial plan may be a foreign concept to you, and one that sounds restrictive and unpleasant. But living according to a plan and saving for the future doesn’t have to mean not having any fun right now. A plan is simply a framework that allows you to enjoy life now without going deeper into debt or sacrificing your future to have fun today. You may have to make some sacrifices in the short term, but daily choices have consequences and rewards which add up over time. Making a few good financial decisions over and over will set you up for long term financial success, and allow you to live the life you want, both now and in the future.


Here are four common spending habits that need to be broken to help make your financial dreams come true, and tips on how to start setting good habits to replace them.


Spending without a plan. If you don’t have a monthly budget, your money will disappear and you won’t know where it went. Too many people live on more than they make and use credit cards to cover the difference. When you have a plan in place to live on less than you make and save for a rainy day, you’re ahead of the game. Pro tip for a better spending habit: Designate a purpose for every dollar (Ramsey calls it giving every dollar “a name”) at the beginning of the month, and pay yourself first by putting something in savings. Without any savings set aside to cover emergencies, you put yourself at risk of running up your credit card debt if the car breaks down.

Paying for convenience. Picking up a burrito on the way home from work may not seem like a big deal financially, but when you’re paying for convenience all the time, you’re letting your money slip away. Using your “Restaurant” envelope to eat out as you run from commitment to commitment is one thing, but dropping $7 on fast food every night without planning for it will make your eyes bug out of your head when you start adding up receipts for the month. Pro tip for a better spending habit: Plan your meals at the start of each week to avoid paying an arm and a leg for fast food throughout the week. And when you do eat out, think twice before you up-size your order.

Not tracking spending. You don’t need to write down every penny as it is spent, but in our fast-paced, digital-era society it is easier than ever to spend money—and then forget where it went. While you may not use a paper checkbook or keep a ledger, you should always stay on top of your account balance. Pro tip for a better spending habit: Start using a budget tool to stay on top of your spending habits and track your expenses.

Making impulse purchases. You already know spontaneous purchases are bad news for your bank account, but there’s more to it than just the numbers. A survey by creditcards.com found that 75% of Americans have made an impulse buy—and almost half experienced buyer’s remorse afterward. Stay away from these spur-of-the-moment purchases for the sake of your bank account and your post-shopping guilt. Pro tip for a better spending habit: Consider putting a “Pocket Money” category in your budget. Use this money for whatever you want—impulsive or not. But when the envelope is empty, put the brakes on your spending.

With a little sacrifice and a lot of daily discipline, you can set yourself up for financial success by breaking these four spending habits and setting good ones to replace them. Before you know it, that dream vacation won’t seem so unrealistic, and your financial goals will be much easier to achieve.