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Financial habits: How to break bad ones and start good ones

This fall, set your finances on the right track by breaking bad financial habits and you’ll be ready for a year of financial stability in 2021.

When you’re caught in a cycle of poor financial habits it can be hard to break free of them. Whether you’re overspending, paying bills late, making minimum payments or paying off credit cards with cash advances – all “no-no’s” when it comes to being financially responsible – you need to break the cycle and start fresh to avoid damaging your credit score.

If you’re looking to kick bad financial habits to the curb, and start building good financial habits, here are 6 steps to get you on the right path:

1. Ask yourself the three “how much” questions

How much money do I have? How much money do I earn? How much money do I owe?

Answering these questions will help you establish where you are financially. Check each of your debit, savings and credit card accounts, as well as any loans, lines of credit, mortgages or registered accounts. Once you know how much money you have, earn and owe, you’ll be able to identify your current financial trend – are you heading in a direction you’d like, with a healthy balance of saving and spending? If not, read on.

2. Spot your weaknesses

Read through your debit and credit card statements line by line to identify frequent spending habits. Highlight any expenses or actions that seem unnecessary, or that represent patterns of behavior that are hurting you financially. From unnecessary online shopping to frequent takeout dinners, spending patterns can really build up to expensive habits over time.

3. Write your weaknesses down, then flip them

When you put pen to paper and actually write down bad financial habits, you’ll make them real for yourself. First just write down the issues (for example, “I often pay my credit card late”). Then, you’re going to change the way you tackle these issues. Rather than having a list of problems, re-write the list as a can-do mantra (changing our example to “I will pay my credit card on time each month” instead). Some mindful positivity can go a long way toward making your new financial goals a reality.

4. Take action on your can-do list

Now that you have a list of what you can (and will) do to set yourself on a better financial path, take steps toward making these actions a reality. Write down bill payment dates on your calendar or agenda, set up payment alerts and reminders and automate any payments you’re able to. Set a date to build a budget, and put that date on your calendar – it’s like a meeting with yourself that you can’t miss. Whatever actions you can take to make this process more real will help establish new patterns of behaviour.

Tip: You can often request that bill payment dates are shifted to a new date that works better for you, such as the day after you’re paid. That way you’ll always know there is money in your account to cover your bills.

5. Avoid temptations by giving yourself something positive

If your bad money habits revolved around things you enjoy, such as shopping, lattes or frequent takeout, you’re still going to have the urge to meet that enjoyment need. Give yourself something positive to replace that habit – for example, consider buying a milk frother if you can’t do without lattes, or set up a trivia night with friends rather than shopping or getting takeout in the evenings. Fill your days with activities that cost less money, and over time these past times will become a habit.

6. Make it a habit

Lastly, don’t let yourself get lazy about your finances. Set a date with yourself every few months to go through your accounts and re-assess your financial standing. Celebrate steps you’re taking in the right direction and identify any habits that still need work. Keep your money mantras handy, and build on the list as you need.

Replacing bad financial habits with good ones can’t be done overnight, but by committing to yourself, conducting an open, honest assessment of your financial situation and setting dates for positive actions you can change the course of your finances.

If you’re finding you’re simply too behind on debt and are having trouble managing overdue bill payments, you may want to consider simplifying your finances with bill consolidation. With a consolidation loan, you’ll pay off outstanding bills and debts and can focus on making regular, on-time payments on your new loan product. Over time as you make on-time payments, this responsible financial habit will be reported to credit bureaus and can help improve your credit score. You’ll still need to address the habits that got you into debt in the first place, but consolidation can be a good first step to making your finances more manageable.

Interested in a loan? Try our free loan quote! In just a few minutes, we’ll tell you how much money you could qualify for and what your payments might be. No obligation and no impact to your credit score.