• Career & Money

5 Bad Financial Habits — And How to Break Them Forever

3 min

Do you frequently catch yourself paying your bills late? Or eating out too often? Bad financial habits can creep into our lives slowly and wreak all sorts of havoc over time.

For instance, carrying a balance on your credit card can cost you hundreds or even thousands of dollars in interest payments. Paying your bills late can hurt your credit score and impact your access to credit in the future.

If you’re caught in a loop of bad money habits, the good news is that you can change them. By identifying the bad habit, you can start to shift your behavior and make different decisions.


5 bad money habits you need to drop

The best way to change a bad financial habit is to identify it first. Here are five bad money habits to watch out for — and how to break them forever. 


1. Relying on credit cards for emergencies

Financial emergencies have a way of popping up at the worst possible moment. Your partner is out of town for a week when your car unexpectedly breaks down. Temperatures are supposed to reach record highs, and your AC stops working.

Unfortunately, financial emergencies are a part of life and will never stop happening. For many people, the bigger problem is that they never have the money available to cover them. So they’re forced to turn to high-interest credit cards to cover the expense. 

Then they get hit with costly interest charges because they can’t pay their credit card bill in full at the end of the month. Once they’re finally almost finished repaying that debt, another financial emergency arises, and they’re back where they started (or worse).

This is how many people get trapped in a cycle of credit card debt. It’s a frustrating place to be, and it leaves many people feeling like they can never get out of debt for good. 

The solution

Obviously, there is no overnight solution to getting out of debt — but the best way to get started is to save an emergency fund. Your emergency fund should be big enough to cover three to six months’ worth of expenses.

The first place to start is to determine how much you need in your emergency fund. Add up how much you spend on essential expenses each month — these are things like your rent or mortgage, food, gas, etc.

From there, take some time to determine how much you can save each month. Don’t get discouraged if this number is low at first — the important thing is that you’re making progress toward your goal. Set up a direct deposit to your savings account, so you don’t have to think about transferring the money each month.


2. Lifestyle inflation

Most people expect that as they continue to earn more money, their lifestyle will continue to improve as well. Who doesn’t look forward to the day when they can afford a nicer car or a bigger house?

The problem is, this can quickly turn into lifestyle inflation — every time your income increases, your spending goes up as well. Every tax refund, bonus, or pay increase you receive is immediately spent on clothing, food, housing, etc.

The problem with lifestyle inflation is that when you spend all your extra money on unnecessary purchases, there’s little left over to save for the future. Instead of creating the financial future you want, you’re in a constant rat race to afford your lifestyle.

The solution

To deal with lifestyle inflation, you should start by identifying your financial goals. For instance, do you want to be able to pay for your kids’ college education? Build your own home? Take your kids on vacation to Disney World?

If you don’t have a clear picture of what you’re working toward, it’s easy to justify those spur-of-the-moment purchases. When you write down your goals and spend time visualizing what you want, it will help you stay focused.

Another way to get control of your spending is by setting a minimum 72-hour waiting period for purchases. When the urge to buy something hits, give yourself at least three days to think about it. That way, you know you’re not just engaging in emotional spending or spending out of boredom.


3. Failing to create (or stick with) a budget

Do you ever wonder where your money goes each month? Does it seem like the funds leave your account faster than they come in? If so, this probably comes down to a budgeting issue.

Few people enjoy budgeting, but you’re going to have a hard time reaching financial independence if you don’t budget every month. It’s one of the cornerstones of good financial management.

A budget is kind of like a blueprint for your money. You’re deciding how you’ll spend your money ahead of time, so you have the funds available to meet all of your needs and enjoy life at the same time. 

The solution

The solution to this problem is pretty obvious — come up with a budget! You can do this by putting pencil to paper, creating an Excel spreadsheet, or using budgeting software like Mint or EveryDollar. The method you use doesn’t matter as long as it works for you.

However, it’s not enough to come up with a budget and forget about it. Schedule some time to check your budget every day and track your spending. Then at the end of the month, take some time to review your budget and how you did.

Are there any categories where you continue to overspend? Tracking your budget may feel tedious at first, but it’s the best way to become aware of your spending habits. 


4. Overlooking insurance

When you’re young, it’s easy to overlook things like life insurance and disability insurance. After all, you have health insurance, so what else do you really need?

But this is almost always a mistake — if you wait too long to purchase life insurance, you could pass the costs onto your family if you expectedly die. And disability insurance protects your income if you're injured and unable to work. 

And the truth is, it makes the most financial sense to buy these types of insurance when you’re young. Your policies will be cheaper, and you’ll have greater peace of mind knowing you’re protected financially.

The solution

Start looking into life insurance and disability insurance policies. At Asteya, we refer to disability insurance as “income insurance” because it protects your income if you’re unable to work due to an injury or illness.


5. Not planning for the future

Most people fall into financial problems because they aren’t planning for the future. They make their money decisions based on their current circumstances, which perpetuates their lack of savings and cycle of debt.

For instance, a survey by Northwestern Mutual found that 15% of people don’t have any money saved for retirement. Over half of all Americans don’t even know how much they’ll need to retire comfortably.

Of course, it’s hard to focus on the future if you’re currently struggling to get by financially. But if you’re in a bad financial situation, it’s even more critical that you develop a future-focused mindset.

The solution

The only solution is to start saving for the future. Find out whether you have access to an employer-sponsored 401(k) and start contributing money to it each month. If your employer will match your contributions, even better — that’s free money you can take advantage of.

Of course, it may be hard to find the money to set aside for retirement each month. If you’re dealing with a low budget, look for ways you can cut your spending and save more money.

And if you’ve cut every possible expense, you may need to look for ways to bring in extra money each month. See if there’s an opportunity for more pay in your current job, or you could take on a side hustle.


The bottom line

Bad financial habits can be hard to break, but it’s not impossible. By identifying your bad habits and replacing them with good ones, you’ll slowly start to change your financial situation.

An easy place you can start is by contacting Asteya about disability income insurance. We don’t require a medical exam or blood test to get started, and we offer affordable plans starting at just $6 per month. Visit to receive your free quote today.


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