5 Steps to Breaking Bad Financial Habits

Your bad financial habits are breaking you

There’s a good chance it’s your seemingly harmless bad financial habits that are holding you back from all the financial freedom of your dreams. This was true for us, and this is how we changed them. Below you’ll see how downloading this worksheet will help you lose your bad financial habits.

Our bad financial habits seemed small but were bad

We’re super fans of the late, great Jim Rohn. Rohn was a motivational business speaker back in the day. He once said, “Success is a few good habits repeated every day. Failure is a few bad decisions repeated every day.”

Um, when you think of your good and bad financial habits, would you say you’re succeeding or failing? If it’s the latter, then your task is to replace your bad financial habits with the former. That’s what we did.

Ha! I say that so flippantly, it sounds easy. It’s not, and I get that. But, it’s the truth, and to suggest otherwise will only repeat bad money habits.

One bad financial habit of mine was ignoring my bank account. I was always scared that I didn’t have money in my account, so I didn’t look at it, and that’s why I was always paying unnecessary and expensive overdraft fees.

A bad financial habit of David’s was going to Einstein’s every day for a bagel and coffee and putting these on his credit card. He thought, “These are small purchases. How bad can they be?” Well, they add up. To add insult to injury, he had the cash to pay for his Einstein’s. So, WTF?

I broke my bad financial habit by paying attention to my accounts. Just paying attention made a world of difference. David (and I) started packing breakfast and lunches for work, and he stopped going to Einstein’s every day. This seriously cut back our week-to-week expenses and saved us money.

 Breaking bad financial habits with good habits

Bad financial habits are typically triggered by something. My bad financial habit was triggered by fear, so I stuck my head in the sand. David’s bad financial habit was the morning. There are five steps to breaking bad financial habits:

1. Identify your bad financial habits

Deep down, you know what your bad financial habits are. The challenge is being honest with yourself.

Especially because money brings up a lot of emotions, because we have limiting beliefs about ourselves our self-worth and money, it’s easy to lie to ourselves. It’s easier to blame someone or something else.

The easiest way to ID your bad financial habits is to write down on a sheet of paper (we’ve already done the work for you, download our free worksheet here) what stirs emotions in you about money from month-to-month and payday to payday. What frustrates you? What scares you? How do you feel about paying certain bills, i.e., does the rent or mortgage payment cause anxiety? How do you feel when you use your credit card?

Remember your prior experiences about money. When you feel a negative emotion, write down what were you doing at that time and what your emotion was/is.

2. Identify what triggers your bad financial habits

Using the exercise above, what patterns do you see. What circumstances seem to cause bad financial habits? Is it based on a day of the week or the time of day? Is it a recurring emotional feeling, like fear, anger, sadness or boredom? Is it tied to a certain bill or dollar amount?

Triggers are typically caused by a recurring emotional state. When you identify what your triggers are for exercising your bad financial habit, you can prepare a new response to your trigger.

3. Choose your new, better financial habits to replace your bad financial habits

Next, identify your new response to your recurring triggers. For David, it was packing breakfasts and lunches. For me, it was scheduling a couple times a week to log into my accounts and look at my balances and transactions.

When we decided to break our bad financial habits with our credit cards, we got all the cash we needed from paycheck to paycheck from the ATM on payday.

If your habit is shopping when you’re depressed, how will you place shopping? Journaling? Exercising? Reading? Calling a friend?

4. Understand your motivation for adopting better financial habits

This is the step where you decide how your life will change by changing your habits. What will be new with you and your life?

For us, it was having more money to pay off $51,000 worth of debt and becoming debt free. The thought of no longer worrying about credit card bills ended our financial stress.

Sometimes changing a bad habit has multiple benefits. For David, replacing Einstein’s with home cooked food also meant eating healthier.

5. Choose your reward for breaking bad financial habits

Completely breaking bad financial habits that you’ve had for years is hard. In fact, it can suck and take a while to change. So, choose milestone rewards to use as your carrots as you change your habits.

For example, your first week of changing a bad habit, you might reward yourself with a glass of wine simply for going a week without the bad financial habit. Or, you might treat yourself to a bouquet of flowers to put on your dining room table to act as a reminder of your week’s success.

Bigger milestones justify bigger rewards. Maybe if you go a whole month without getting take-out or dining out, you treat yourself to a reasonably priced dinner out.

Of course, the ultimate reward will be when you’re debt free or you’ve achieved another financial goal.

These are the five steps we took to break these and many, many other bad financial habits. So, click the button below to download our free Breading Bad Financial Habits Worksheet. It’ll walk you through step-by-step breaking your bad financial habits.

Bad Habits
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