13 Everyday Money Habits Keeping You Broke

1. Not Tracking Your Spending

It’s impossible to improve what you don’t measure. While most people have a general sense of where their money goes each month, if you never track where every dollar goes, you’ll never really know. Tracking your spending for just 1 month can illuminate surprising patterns your vague mental impression could never pickup.

FIX IT:

Track every.single.expense for at least 30 days before making any major changes to your budget. You’ll want real data to base your decisions on instead of guessing where your money goes.

2. Only Making Minimum Debt Payments

If you only make minimum payments on your debt, you’re letting compound interest work against you. All that interest quickly adds up over time, and you’ll end up paying back several times what you originally borrowed. When you’re only making minimum payments and never have a payoff plan, it’s easy to lose sight of the debt as “something you’ll always kind of have.”

FIX IT:

Pick a debt payoff strategy (debt snowball vs avalanche), commit to paying an EXTRA specific amount above the minimum each month, and track your progress towards your payoff goal.

3. Not Building an Emergency Fund

When you don’t have emergency savings, every little surprise pops on a credit card. Coffee spoils? Put it on credit. Computer breaks? Credit card. Next thing you know you’re paying interest on your emergencies.

FIX IT:

Prioritize saving up a small emergency fund (starter emergency fund) of $500–1000 if you currently have none. It can help you break the cycle of credit card debt.

4. Lifestyle Inflation

When our paychecks increase from raises or promotions, we often increase our spending to match. Problem is, we rarely adjust our spending DOWN when our pay decreases. Instead we FORCE our lifestyle to keep up with our income increases…this is called lifestyle inflation.

FIX IT:

Automatically increase the amount you’re saving/payoff when you get a raise. By forcing yourself to save/payoff FIRST you’ll avoid the lifestyle inflation trap.

5. Spreading Extra Money Across All Debts

When you pay minimums on ALL your debts, your debt will linger…and accrue interest forever. Instead of throwing ALL of your extra money at your debt, you should focus on paying off 1 debt at a time.

FIX IT:

Your budget should always be fluid. If you have ANY extra wiggle room each month, it should go toward your debt payments.

6. Missing Out on Employer Retirement Matching

If your employer offers a retirement match, fail to take advantage of it at your own peril. Your employer is giving you free money and all you have to do is contribute enough to your retirement account to capture that match.

FIX IT:

Make sure you at LEAST contribute enough to your retirement account to get your full employer match. This is basically free money.

7. Avoiding Your Finances

Procrastination due to anxiety is one of the biggest mistakes keeping people broke. We avoid our bank account balance because it stresses us out. We ignore our bills because they intimidate us. We don’t look at our credit score because what if it’s bad?

FIX IT:

Calendars are your friend here. Schedule a weekly, month financial check-in (even if it’s only 10–15 min a week) and STICK TO IT. Spending just a few minutes regularly keeps anxiety at bay and prevents you from avoiding your finances.

8. Carrying Credit Card Balances

You should ALWAYS pay your credit cards in full if you can. If you aren’t paying your credit cards off every month you’re essentially paying interest on everything you buy.

FIX IT:

Pay your credit cards off EVERY MONTH. Use them for the convenience/rewards and pay them off like you would a debit card. If you have an existing balance you want to payoff, make sure you have a PLAN with a specific endpoint.

9. Comparing Your Lifestyle to Others

Let’s say you want to buy a new car because all your friends have new cars. But you can’t really afford the car you want. So you stretch your budget to get the car, which forces you to live paycheck to paycheck. Now you’re just LIKE ALL YOUR FRIENDS who can’t afford their cars and are living paycheck to paycheck.

FIX IT:

Make financial decisions based on YOUR goals and YOUR finances. Just because someone else can afford to spend money a certain way doesn’t mean you can or should.

10. Setting Vague Financial Goals

“I want to get my finances under control.” “I want to be better at saving money.”

Statements like these are great, but they aren’t going to change your behavior. Clarify your goals by giving them a specific number and deadline.

FIX IT:

“I will save $5,000 for an emergency fund by December 2020.” Now you have a way to measure your progress and hold yourself accountable.

11. Ignoring Insurance Protection

You know how you pay your rent or car insurance every month because if you didn’t you’d be homeless or driving without insurance? What about disability insurance? If something happens to you and you’re unable to work, that could leave you in the same position as being homeless.

FIX IT:

Just as you review your monthly expenses, periodically review your insurance coverage as well to make sure you’re adequately protected.

12. Forgetting About Subscription Payments

Canceled that monthly subscription because you forgot you were even signed up for it? Understandable. We all do it. But did you know those little subscriptions can add up to hundreds of dollars over the course of a year?

FIX IT:

Take 10 minutes every few months to review your statements for any subscriptions you may be paying for that you forgot about or don’t use anymore and DITCH THEM.

13. Making Emotional Financial Decisions

Maybe you decided to buy a house out of excitement. Or you started investing after getting a big promotion at work.

Emotions can cause you to make financial decisions that you might not normally make. During these times, you’re more likely to spend money you shouldn’t.

FIX IT:

Wait 24-72 hours before making any major financial decisions. Let the excitement/worries anxieties settle before you make a decision.

Update Your Budget as Your Life Changes

Maybe your budget was perfect when you were single and living in a studio apartment. But now you have a spouse/kids/a dog…and your old budget doesn’t work for your lifestyle anymore. You know this and yet you still use that outdated budget.

FIX IT:

Review your finances whenever your life takes a major turn. LEVEL UP your budget and financial planning as your income and responsibilities grow.

Frequently Asked Questions About Bad Money Habits

Q: If I’m having trouble with money, which of these habits do you think is the most damaging?

A: Carrying high interest debt with no payoff plan & not taking full advantage of employer retirement matching are big ones.

Q: These all seem like habits I’ve repeated for years. How do I know I can undo all the damage?

A: You can! Compound interest works both ways. While it’s better to start early, you can still turn your money around by practicing good money habits TODAY.

Q: Ugh…I know I do half of these things. Am I doomed?

A: No! In fact, it’s likely you do these because they’re common! Maybe you’re anxious about your finances so you avoid them. OR you avoid them because you aren’t tracking your spending. Recognizing you do them is the FIRST STEP to not doing them anymore!

Q: Okay I recognize a lot of these habits in myself. Where do I even begin?

A: Paying off high interest debt and creating an emergency fund will ALWAYS be step 1. If you can’t touch your income because you spend it ALL every month, it’ll be hard to fix any of your other bad money habits.

Q: How did I NOT learn this in school?

A: Uhh same… Someone please teach personal finances in schools! Finance.