How to Cut Bad Spending Habits Out of Your Life

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Overcoming a bad habit can be challenging in any area of life, including your finances. The willingness to spend money without a second thought is particularly dangerous. 

It’s easy to fall into habitual behaviors that involve reckless spending practices. These can involve larger purchases, but they can just as easily happen in a “death by a thousand paper-cuts” manner.

Regardless of how it manifests, if you have a bad spending habit, it’s important to take steps to cut it out of your life. Here are a few tips and suggestions to help you do so in a way that will nip the habit in the bud.

Track Your Spending

It’s very hard to stop a bad spending habit if you don’t even know how you’re spending your money. The problem is, too often, spending your hard-earned cash in a reckless manner means you aren’t keeping tabs on much — if any — of your purchases in the first place.

Fixing this is ground zero for reigning in your spending. There are several ways that you can do so.

For instance, you can get a good budgeting app. There are many options available that make it quick and easy to record expenses. If you go this route, it’s important that you get into a new, good habit of recording each and every purchase that you make.

Another way to track spending is by using plastic to make your purchases. These days, virtually all cards provide detailed reporting about how, when, and where you spent your money.

If you’re concerned about having an open-ended credit card, you can still use this method by getting a debit card. This will naturally limit your spending since you can’t spend money that isn’t in your bank account. In addition, some debit cards provide extra financial perks, like allowing you to round up each purchase to the nearest dollar and then stashing the extra cash in your savings.

Set Up a Budget

Once you’ve begun to track your spending, you should work toward creating a comprehensive budget. You may already have a budget, but don’t let that stop you from giving your current system a serious review. Your budget should include the following:

• Your income: Add up all of the money that you make each cycle (usually a month at a time);
• Your fixed expenses: This includes predictable or recurring charges;
• Your variable expenses: This is for groceries, gas, and other activities where the specific quantity spent tends to vary.

By adding up these financial elements in your life, you can gain a better grasp of where you stand. You can see how much money you start with, what your lifestyle costs, and how much (if anything) you can afford to spend or save after you cover your basic expenses.

Reckless spending often stems from an inability to understand how much money you have to spend in the first place. You might take a $1,000 paycheck home every week, but that doesn’t mean you have a grand to spend every time you open up an app on your phone, peruse Amazon, or put in a Grubhub order. By creating a comprehensive budget, you start to inform each of your financial decisions.

Set Financial Goals

It’s easy to spend money when you don’t have any other tangible purpose for it. A budget starts to address this problem. It helps you understand how much of your money is already accounted for with your living expenses.

But it can still be all too easy to spend whatever is left over for no other reason than because it’s there. That’s where goals come into the picture.

Setting financial goals can give you a north star to guide your finances. They provide clarity and motivation. They give you something to work toward.

There are different kinds of financial goals that you can set. The first is short-term financial goals. These should consist of financial milestones that you want to reach in the next few months or perhaps a year from now. They can be something like making an additional credit card payment, building an emergency fund, or going on a vacation.

Once you have your short-term goals in mind, you should also take some time to set long-term goals. These should look years into the future and can be anything from paying off school loans to buying a new car or setting up a retirement fund.

Stay Accountable

At this point, you’ve tracked your spending, gotten a hold of your budget, and begun creating financial goals. Now comes the hardest part: staying on track. It can take as much as 10 weeks to break a habit. Even when that’s done, it’s important to guard against any new habits forming. Just because you stick to your new financial system today doesn’t mean you’ll do so tomorrow.

That’s why the last suggestion is to set up an accountability system. This can be asking a spouse or partner to give you permission before you make a purchase. It could also be asking a friend or family member to check in on you once in a while.

However you go about it, make sure to choose accountability partners that you can trust — in more ways than one. On the one hand, you want to pick someone that you feel comfortable showing the ups and downs of your financial habits. On the other hand, you also want an individual who won’t be afraid to challenge you and call out bad behavior when it crops up.

Bad spending habits aren’t just a bother. They can cripple your present and future financial health. If you’re struggling with a financial habit of this nature, take steps to address it right away.

Track your spending. Build a comprehensive budget. Create clear, motivating financial goals. Set up strong accountability lifelines to keep you honest. If you can do these things, you can begin to move out of a place of fiscal pain and toward a brighter financial future.