When it comes to financial wellness, toss a stone in any direction on the internet and you’re bound to come across a slew of information and tips. Granted, it may be solid advice, but it’s easy for even useful nuggets of insights to go in one ear and out the other. The key to make something stick is to develop and maintain positive habits.
Conversely, you’ll need to break unhealthy ways with money. Which is easier said than done, no doubt. And where should you start? Here are six money habits you should break now, and simple ways to go about doing so:
Spending Based on Your Bank Account Balance
We’ve all been there: When times are good, you feel you have money to spend. When the bank the bank account is low, you feel like you’re stuck and stressed out. Everything is reactive. You see a number and you act, versus being intentional with your spending.
It’s easy for this to happen when you spend based on what’s left in your bank account. In turn, your savings will sink to zero. “The downside of being reactive is that you always are seeing what has been,” says Garrett Philbin, a money coach and founder of Be Awesome Not Broke.
“It’s a guilty exercise. If you don’t have a plan and you aren’t being intentional, you’re never going to be happy with it, because you never created a plan.” If you run out of money, ask yourself where the money is going right now. “By being proactive, you can create the future you want.”
How to Break It: Instead of spending nilly-willy based on how much you have in the bank, create a spending plan. First, know what’s important to you, says Philbin. Figure what your priorities, values and goes. From there, figure out how much money you have coming in each month, and your housing expenses, bills, and savings goals. Be sure to put the money where it’s most important to you.
Making a Budget
This seems counterintuitive, but if you’re not one to count calories, skip budgeting on a granular level. Instead, opt for tactics such as automation, setting reminders and accountability, explains Kristen Berman, co-founder and principal of Common Cents Lab.
For starters, automate your bills, savings, and rent, and if you can’t time so they coincide with your payday. Another pro tip? Berman and her team at Common Cents recommend changing your credit card and utility bill due dates to be within a few days of your payday.
“This method helps you keep track of how much you have spent and makes trade-offs very saliently.” she says. “You can only spend as much as you have after bills.” Spending more on discretionary purchases such as coffee, clothes and gadgets today just means you have less to spend later in the week.
Not Paying Yourself First
A common habit people have is when they get a paycheck, they spend the entire paycheck. So what ends up happening is you either end up overspending and resort to using a credit card. Or you have no money leftover to sock away toward savings goals that are important to you—an emergency fund, trip you want to take, toward retirement, a hobby or passion.
How to Break It: When payday comes around, before you do anything else, take a percentage of that money, and put it toward savings goals that are important to you, suggests Philbin. “If they don’t put that money away first, at the end of the month, life rarely goes according to plan,” says Philbin. “We humans are adaptable. If we save 10%, then one’s spending habits will automatically shrink because they can’t spend money they don’t see.”
If you get a steady paycheck you can have your employer can automatically deposit a portion of your paycheck into a separate bank. If your employer can’t do that automatically, whenever a paycheck comes in, stash a portion of your take-home pay into a savings account.
Making Minimum Loan Payments
Sure, you’re only required to pay so much each month on that car loan, student loan, or credit card debt, but making the minimum payment on any kind of loan is super expensive. “Your monthly payment is only a minimum required payment, not the recommended amount,” points out Berman. “This required minimum is set by a company whose financial interest is to have you pay off the loan as slowly as possible.” Thus, they’ll rake in as much money in the form of interest from you as they can.
How to Break It: To potentially save you thousands, set up autopay and round up your loan payment to pay more than the minimum, recommends Berman. If you can’t pay the whole balance, considering rounding up your minimum monthly payment to the closest $50. Other tactics? Set up automatic payments for the same day you get paid. “That way you always have enough money in the bank to make a payment,” says Berman.
It’s incredibly important to understand how expensive it is to only pay the minimum payment on any kind of loan product, whether it be credit card debt or student loans. Your monthly payment is only a minimum required payment, not the recommended amount. This required minimum is set by a company whose financial interest is to have you pay off the loan as slowly as possible.
Eating Out For Lunch
Depending on where you like to dine for lunch during the week, a decent lunch can cost you 15 bucks a day. That means it’s costing you $300 a month, where that money could go somewhere else. “Most people don’t get too much out of it,” says Philbin. “It becomes a habit, and they don’t understand how it adds up pretty quickly.”
How to Break It: Instead, prepare lunch to take to work. While it requires a little bit of effort and planning, that several hundred dollars can go toward your savings or to pay down debt. And you don’t necessarily have to make lunch at home. You can get those prepared take-out salads that may cost you four bucks a day.
If you’re going to the trouble of saving intentionally, make sure that money is spent intentionally, too. So if you are saving $300 a month, make sure to sock $300 a month (or $75 a week) toward an specific goal. “If you don’t give it a purpose, then you are going to spend it,” says Philbin.
Buying Coffee on Credit
If you carry a balance month over month, you don’t want to accrue more expenses. If you carry a balance, credit cards will charge you interest immediately on these expenses, explains Berman. So as a rule of thumb, try to avoid buying coffee and lunch on credit.
Avoiding these small charges will also help you avoid building up a larger balance that could affect your credit score. Generally, try never have a balance over 30% of your limit, which keeps your credit utilization at a decent level. And be sure to set up autopay. “When used wisely, credit cards can be a great tool,” says Berman. “They can help build credit, help smooth consumption, and many offer cash back and rewards that are appealing. However, many people use them to excess, which can harm their credit and cost them hundreds or thousands of dollars a year.”
How to Break It: If you don’t have the cash for these small, everyday purchases, seek alternatives. For instance, pack your lunch, or prepare your cup of joe at home. Chances are you won’t miss it, long for it the next day. But running up a credit card balance solely because you’re spending out of habit could have you feeling the financial damage for some time.
By being aware of these common unhealthy money habits, you’ll be able to get your spending under control. In turn, you’ll be on task with your financial goals and avoid the stress that comes from overextending your money.