6 bad spending habits to avoid for better financial health
We all have spending habits, some good and some not so good. Bad spending habits often go unnoticed, but they can quietly drain your wallet. In this article, we’ll highlight six common bad spending habits and offer tips to help avoid them.
1. Impulsive buying or paying for convenience
Impulse buying satisfies immediate desires; however, it rarely offers long-term value and often leads to buyer’s remorse. Additionally, these impulsive purchases are rarely accounted for, leaving you with less money than you anticipated at the end of every month.
To curb your impulsive spending, try waiting at least 24 hours before making any non-essential purchases. If you’re browsing an online sale, add the items to your cart and wait 24 hours before returning to make the purchase. Often, people find that when they return to their cart 24 hours later, the urge to purchase that item has faded. For convenience related spending, try setting aside time to do the tasks that you normally pay for before you are busy. If you frequently order delivery after work, try meal-prepping before the work week begins to reduce the temptation of paying for delivery.
2. Overusing credit cards
Credit cards can be powerful tools for building credit and earning rewards. However, overusing them for everyday expenses can quickly drag you into a cycle of debt. While it is tempting to swipe your credit card now and worry about the payments later, high interest rates make it challenging to pay off a balance once debt begins to accumulate.
This bad spending habit can quickly turn into a slippery slope, especially if you are only making the minimum payments, resulting in a mountain of growing credit card debt. It is worth noting that accumulating interest can end up with you paying twice as much over time for any one item.
To break this bad financial habit, set a monthly spending limit that you can comfortably pay off in full. Enabling the auto pay feature is another good tactic to help prevent late monthly payments, and for smaller purchases, try using cash or debit to stay mindful of your spending. Limiting your credit card use to planned, larger expenses, or emergencies, can help you stay in control and avoid accumulating unnecessary debt.
3. Non-essential subscriptions
With the popularity of subscription-based services, from video streaming to premium apps, it’s easy to accumulate non-essential subscriptions that quietly drain your wallet month after month. While these monthly charges may seem small, when forgotten about they can quickly add up. For example, two subscriptions at only $15 per month, amounts to $360 a year.
To cut back on this frivolous spending, start by reviewing your recent bank or credit card statements for recurring payments. Next, identify and cancel any subscriptions that are rarely used and/or offer minimal value. This is the fastest way to instantly increase your monthly cash flow. Additionally, try setting a monthly limit for subscriptions or rotating between services based on your needs.
Finally, make sure to set reminders to cancel free trials before you are charged, as these subscriptions are often the most easily forgotten about. These small steps will help free up extra cash each, ensuring that your money is only spent on what truly matters.
4. Forgetting to track small expenses
Small, everyday expenses like a morning coffee, post-gym snack or pack of gum may seem insignificant, but they can add up quickly. Over time, even these little purchases can keep you from achieving your financial goals.
For example, if you spend $5 on coffee every day, it adds up to $25 per week, or around $1,300 per year. When combined with a few other small expenses, this bad spending habit can quickly become devastating in respect to achieving your financial goals.
To take control over these frivolous expenses, start tracking every purchase no matter how small. It is best to keep track somewhere on your phone, like a budgeting app or spreadsheet, to ensure that you track the purchase directly after it is made.
Additionally, reviewing your purchasing patterns or expenses on bank statements is another helpful way to identify these repeat, small purchases. Once you are aware of your purchasing patterns, it is easier to cut back and set limits.
5. Stop the social spending
In today’s world of social media, it is easy to feel pressured to match the lifestyle of others. This can quickly lead to frivolous spending on the latest trends like the newest iPhone, trendy clothing or other status-driven luxury items. While these purchases may provide temporary satisfaction, they often add stress and leave you feeling financially stretched.
To break free from social spending pressures, focus on your personal financial goals rather than comparing yourself to others. Make a list of what truly adds value to your life and resist the urge to spend for appearances, as you’ll not only save money but also feel a greater sense of control. Additionally, being financially independent and secure can be its own form of status—one that comes with greater peace of mind.
6. Planning without a budget
The lack of a budget is one of the most common obstacles to achieving your financial goals. Not having a budget makes it easier to lose track of spending, forget about necessary expenses and make impulsive purchases. A budget serves as a guide for your finances, helping you allocate funds for essentials, savings, and even fun purchases.
To create your own budget, start by:
- Listing your income
- Categorizing your expenses
- Setting realistic spending limits for each month
- Researching different budget approaches (e.g. 50/30/20 rule) to see what works for you
Track your spending regularly and adjust as needed to stay on course. It is important to note that budgeting does not mean starving yourself or living below your own means; rather, it empowers you to make intentional choices when it comes to spending, ultimately reducing your financial stress and building toward long-term savings goals.
With a clear budget in place, you will find it easier to control your spending and start saving as you navigate your way through money management.
Breaking bad spending habits for a better financial future
Breaking free from your bad spending habits won’t happen instantly, but small, consistent changes will make a big difference in your financial health.
By recognizing and addressing these common bad spending habits, you’re taking proactive steps toward creating a more secure and intentional financial future for yourself. Start with small, manageable changes and gradually build better habits that will set you up for long-term financial success.
