If you’re anything like me, you’ve probably got a bad money habit or two that’s led to debt and financial stress.
Maybe it’s impulse buys, constantly raiding your emergency savings, or just ignoring your precarious financial situation.
Regardless of what your bad habits are and how entrenched you feel they may be, it is possible to replace them with good financial habits.
After reading Atomic Habits by James Clear, I felt motivated to replace every bad money habit with a good habit.
Here are 4 tips to help you create better money habits so you can stop stressing and start saving.
Awareness is Key To Creating Good Money Habits
“The first step to changing bad habits is to be on the lookout for them.”James Clear, Atomic Habits
Do you have a mindless spending habit?
Awareness can be tough to put into practice, but it’s important to try.
This is one of the reasons I love budgeting.
It got me in the habit of giving every dollar a job.
When you budget, you’re really just making a financial plan – telling your money what you want it to be used for.
By aligning your budget to your priorities you’ll be able to reduce unnecessary spending, start growing your savings account, and reach your financial goal.
Getting clear on your priorities will help you avoid impulse buying and stick to your saving goals.
That clarity will help you focus on being deliberate when you plan and when you spend.
Developing the habit of awareness means being deliberate in each and every purchase.
Track Your Spending If You Want To Establish Good Money Habits
“The mere act of tracking a behavior can spark the urge to change it.”James Clear, Atomic Habits
Starting to track your financial actions can have a massive impact on creating good money habits.
Tracking goes hand in hand with awareness and can help you avoid common pitfalls and establish better goals.
I prefer to track my spending as close to the point of purchase as possible. I’ve made a habit of recording my receipts as soon as I get in the car or get a confirmation email.
When you start tracking your spending you’ll likely discover ways to spend less as well as find the encouragement and motivation to stick with long-term goals.
Tracking Will Help You Spend Less
The act of tracking itself, knowing you’ll be accountable for that purchase, can sometimes stop you from making it at all.
If you’ve ever said to yourself “Where’d all my money go?”, tracking will help you find out.
You’ll gain more awareness of how much you’re really spending versus how much you think you’re spending.
The most common expense that seems to surprise people is realizing how much they actually spend eating out.
Most people are shocked at what they discover. I know we were.
Simply by tracking our eating out expenses we were able to see that with a little adjustment we could get a quick money win.
By replacing the bad habit of eating out multiple times a week with the better money habit of meal planning and eating at home we saved hundreds of dollars per month.
Tracking Will Keep You Motivated
Another way tracking can help you form good money habits is by encouraging you to continue with them.
A great example of this is debt-free or savings goal charts.
Use goal trackers to get in the good habit of tracking the positive financial steps you’re making, like building your emergency fund or paying off your credit card.
This allows you not only to see your debt shrink or your savings grow but to associate that positive behavior with the gratification of advancing toward your goal.
Appreciating What You Have Can Lead to Good Money Habits
“Being poor is not having too little, it is wanting more.”Seneca
There are psychological aspects to why we spend the way we do, and you can bet the advertising agencies and retailers know all about them.
The best way to avoid being manipulated into buying more stuff you don’t need and may not even want is to get in the habit of being appreciative of what you already have.
A daily gratitude practice is a great habit to start for numerous reasons.
It helps you start the day with a positive attitude as well as recognize the little things we often take for granted.
Gratitude is also great for your bank account. By being greatful for the things we have, we’re less likely to covet the things we don’t.
Gratitude leads to financial success.
Why We Buy Things We Don’t Need & How To Avoid It
Suggestion Impulse Buying is used by companies to manipulate us into buying products, not because we want them, but because of how they’re presented to us.
Stores arrange products in a way that intentionally encourages impulse buying.
Grocery stores are notorious for this.
Checkout lanes are filled with guilty pleasures like gum, candy, and magazines that are not only positioned in a way to drive our impulsiveness, but also priced cheaply enough to make us more inclined to buy.
So how do we avoid these types of impulse buys?
Well, at the grocery store I’ve got in the habit of using self-checkout.
I find I’m less likely to even see the candy when I’m busy scanning and bagging the groceries, and since my son loves scanning too, he rarely asks for a treat either.
For other stores (especially online) I’ve found the best way to avoid impulse purchases is to make a habit of waiting 24 hours before buying.
Since a lot of my shopping is done on Amazon, I add wants to my wishlist and needs to the cart, but I don’t checkout for at least a day.
Giving myself the added wait time ensures I’m making a deliberate choice when (or if) I do check out.
Also, even if you manage to avoid impulse buys, you’ll still want to be careful anytime you make a purchase.
The act of spending money itself can actually lead to the desire to spend more money. There’s even a name for it – The Diderot Effect.
It’s basically the idea that one purchase leads to another. The
A good habit you can adopt to avoid this spiral of buying is to make a rule that for every new thing you buy, you have to get rid of something else.
Automate the Good Money Habits
“Sometimes success is less about making good habits easy and more about making bad habits hard.”James Clear, Atomic Habits
Automating certain aspects of your finances can not only help you make good money habits, but it can also help you eliminate bad ones.
Studies have shown we’re more likely to pursue good habits when they’re easy.
Employers who offer 401k plans find more people participate when they’re automatically opted-in instead of asking them to opt-in on their own.
Most of us are aware that we should be saving money for retirement, but it’s hard to think about future you’s needs when current you has bills to pay.
By automating savings deposits we can save for the future without much effort.
Automation can also help avoid some consequences of bad money habits like late payments, overdraft fees, and penalties.
Set up minimum payments so you never have to worry about bank fees again.
Automating your financial habits is a great way to meet your money goals without much effort.
Time to Go Set Your Own Good Money Habits
Whether you’re working to pay off credit card debt and student loans or are well on your way to financial freedom, adopting these 4 healthy money habits will transform your financial future.