Bad Money Habits to Break This Year

How many of these bad money habits are you guilty of doing on a regular basis? It’s never to late to course-correct and develop a healthy attitude toward your finances.

What if you could totally change your relationship with money? What would you do differently?

If the answer is “everything,” then you’re not alone. Many people feel like they somehow missed out on learning how to responsibly manage money. Maybe you’re living paycheck to paycheck, spending without saving, or hurtling toward retirement with no idea how to pay for it.

woman holding open an empty wallet

While breaking your bad habits might seem like an overwhelming—even impossible task—there’s hope. Here are some of the most common ways that we sabotage our budgets, plus strategies to overcome those ingrained behaviors.

Not Saving for a Rainy Day

Emergency fund written on a jar with money.
Adobe Stock

We all know that saving money for emergencies is a smart, responsible, adult thing to do. And yet, over half of Americans don’t have enough money in savings to cover an unexpected expense of $1000, according to CNBC.

For those living paycheck to paycheck, the idea of saving might seem like something that only “rich” people do. However, it’s important that everyone tries to put back at least a little bit of money every month to cover emergencies. They will happen, and if you’re not prepared, you could have to ask loved ones for a loan—or worse, get stuck with a predatory car title or payday loan.

Paying Bills Late

Paying your bills late is a huge waste of money. Have you ever calculated how much you’ve thrown away in late fees and added interest? Chances are good that the number would shock you. Set up automated payments if you can’t count on yourself to reliably pay your bills on time.

Buying Too Many Things Below Your Money Threshold

Everybody’s money threshold is different, aka the dollar amount that registers as a significant purchase in your mind. If you’re loaded, your threshold is probably a lot higher than someone struggling to make ends meet. For some people, it might be a daily $5 coffee; for others, it’s $20 on random Amazon junk. Too many of us with bad money awareness fail to realize that those little mindless purchases add up! A month of coffee could run you $100. In a year, that’s $1200! Suddenly, that seems like “real” money, doesn’t it?

Be more mindful of your spending. It can help to keep a running tally of your purchases to see how quickly they add up.  

Not Checking Your Credit Report

Credit report with a score of "Fair"
Adobe Stock

When was the last time you checked your credit report? Out of sight, out of mind shouldn’t apply to your credit score. It’s simply too important to ignore. You are entitled to a free copy of your credit report from all three major bureaus every year. Pull one of them every four months to make sure that all of the information is accurate. If you know that there’s negative information on your report, find out how to address it and make a plan to get back on track. Start by going to to get your official free report.

Thinking of Credit Cards as “Free Money”

Credit card companies love people who are bad with money. After all, the more recklessly you spend, the more interest you end up paying. It’s very easy to think of credit as “free money,” but that mindset could get you into a lot of trouble. While it’s possible to use credit cards responsibly while building a stellar credit score and picking up plenty of perks along the way, the reality is that the average credit card debt is over $5,000. Depending on your interest rate, carrying that much debt could become a huge financial burden and lead to late fees and default.

Ignoring Investments

Think that investing is something that only wealthy people do? You’ve got that backward, my friend. People build wealth by investing—and anyone can do it. In fact, thanks to modern technology, you can start investing right now with $20 and an app on your phone. If you’re not sure how to get started, check out this guide.  

Leaving 401(k) Matching Funds on the Table

coins in glass jar representing retirement fund

Does your employer offer 401(k) matching? That’s fantastic! Wait… you’re not maxing out your contribution? Why not?!

Start thinking of 401(k) matching as part of your salary. You wouldn’t give up 3% of your paycheck for no reason, would you? That’s essentially what you’re doing when you fail to contribute enough money to your retirement count to max out your employer’s contribution.

Indulging in Retail Therapy

You’ve heard of “retail therapy,” but did you ever stop to think about what that actually means? Spending money when you’re bored, sad, or angry is a really unhealthy coping mechanism. Not only does it fail to address the underlying emotions, but it also puts you in an even worse financial position, thereby increasing your stress levels and setting you up for a vicious cycle of overspending and overwhelm.

Repeat after me: shopping is not therapy.

Signing Up for Free Trials—Then Forgetting About Them

Subscription bloat is becoming a real problem. There are so many subscriptions for such a wide range of services, and many of them offer very tempting free trials. In 2019, there were already over 300 options for subscription entertainment. That number has only risen since then—and that doesn’t even take into account online classes, game passes, and other memberships.

But if you’re reading this, you’re probably not the type who remembers to cancel subscriptions on time. You might also sign up for services with the best intentions of using them, only to realize that three months have gone by since you logged in. Take stock of your current subscriptions—check your bank statements if you can’t remember them all—and figure out how many you can cut. Chances are good that you won’t even miss them.

Saving Payment Info on Your Phone or Computer

using phone to make payment

The easier something is to do, the more likely you are to do it. That’s great if you’re trying to build good habits! But it’s less great when you make it easy to overspend.

Swiping a card is already easier—and less mindful—than paying with cash. (That’s why we recommend the Envelope Method for newbie budgeters.) When your payment information is saved to your phone or browser, it’s even easier to buy, buy, buy at the tap of a button. Do yourself a favor and delete your saved payment methods. You’ll be shocked at how much money you’ll save when it’s just slightly more difficult to make a purchase.

Shopping Without a Plan

Going to the store without a clear plan about what you’ll buy is a recipe for disaster. You’ll spend more on things you don’t need and forget things you do need, requiring additional trips to pick everything up. That’s true whether you’re making a weekly grocery run or buying holiday gifts. Getting in the habit of making a grocery list is a great place to start. There are a few steps involved, but once you get the hang of it, you’ll wonder how you ever shopped without one.

  • First, make a “master list” of your household’s favorite snacks, go-to recipe ingredients, and must-have pantry staples.
  • Next, inventory your cupboards and fridge. Add it to today’s shopping list if you’re out of anything on your master list.
  • Think about the meals that you plan to prepare this week and write down all the ingredients you’ll need that aren’t on the master list. Add those to your shopping list, too.
  • If you want bonus points, check your shopping list against the sales circulars for your favorite grocery stores to see where you can get the best deals. Clip any coupons for those items, too, and enjoy the savings.

Trying to Keep Up with the Joneses

LOS ANGELES - NOV 04:  Kim Kardashian arrives for the 2017 LACMA Art + Film Gala on November 04, 2017 in Los Angeles, CA

Lifestyle Creep: “when an individual’s standard of living improves as their discretionary income rises and former luxuries become new necessities.” (Source: Investopedia)

When you live beyond your means, it catches up with you eventually. It’s especially difficult to be realistic about money and lifestyle in the social media age when it seems like everyone is living their most fabulous existence 24/7. That goes for influencers and your old high school pals on Facebook. But the truth is that social media isn’t real life, and those people who seem to have it so great might be in serious debt behind the scenes.

Forget trying to impress anyone and quit buying things just because an influencer told you to.

Making Impulsive Purchases

When you boil it down, almost every bad money habit is rooted in impulse control. You spend without thinking, seeking instant gratification. All the while, you might be racking up debt, living beyond your means, and failing to track your spending habits. The result is always feeling like you don’t have enough money, which can make you deprioritize good habits like paying bills on time and investing in your future.

It takes time and effort to break a lifetime of bad habits. A good place to start is imposing a “cooling-off” period on non-essential purchases. Make yourself wait a day, a week, or a month, depending on how expensive the purchase is. If you still want it after that—and if it fits in your budget—then go ahead. But more likely than not, the urge to splurge will have passed.

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