Personal Improvement

Financial Makeover: Transform Your Life with These Powerful Money Habits

Listen Money Matters is reader-supported. When you buy through links on our site, we may earn an affiliate commission. How we make money.
Table of Contents  
  1. Common Bad Money Habits
  2. Better Money Habits
  3. Forming Habits

Good money habits just like good health habits should be built slowly, so you stick with them for your whole life. If you change one thing at a time you don’t even notice doing that thing anymore. Then you can move on to the next. Here are money habits to adopt today. Here are some better money habits to adopt.

Common Bad Money Habits

There are several types of bad money habits that many of us are guilty of. How many do you have?

  1. Avoidance: You’re afraid to open your bills or add up how much debt you owe.
  2. Carelessness: You have plenty of money to pay your bills, but you forget actually to do it.
  3. Laziness: Your employer offers 401k matching, but you can’t be bothered to submit the necessary paperwork to participate.
  4. Procrastination: You know you need to start saving for retirement, but you just haven’t gotten around to it yet. You’re 43.
  5. Disorganization: You put the check to the mortgage company into the envelope with the bill for the cable company.
  6. Overspending: You make a pretty good salary, but you never have any money in the bank.
  7. Penny Wise Pound Foolish: You drive across town because there is a sale on toilet paper, but you upgrade your cell phone every time a new model comes out.
  8. You Think You’re a Baller: You don’t make a good salary but spend as you do.
  9. You Have FOMO: You never pass up an opportunity to go out which always ends up costing a fortune.
  10. You Equate Spending with Happiness: Whenever you have a bad day, it’s nothing a trip to the mall won’t cure.
  11. Shopping is Entertainment: If you’re bored, you go shopping.
  12. You’re Cheap, Not Frugal: You always choose the cheapest version of whatever you are buying.
  13. You’re Haphazard: You owe money on a few credit cards and just throw extra money at them randomly.
  14. You’re a Luddite: You do everything on paper.

Better Money Habits

These are the fixes that will give you better money habits.

Avoidance: Confront It

We know it’s scary when you see those “Final Notice” envelopes, dodge phone calls from creditors or haven’t logged onto your Mint account in months because you don’t want to look at the numbers. But the scariest thing in life is the unknown.

Those numbers might not be as bad as you imagine. Or they might be worse. It doesn’t matter. You have to know what they are so you can start dealing with them.

Get all of your bills together and open up the most recent of each. You can triage them to start. If your utilities are about to be shut off, pay those first. Prioritize the list from there. Start making phone calls. You will be surprised at the willingness of creditors to work with you.

We promise, no matter how bad things are, you will feel better once you know what you’re dealing with.

Carelessness: You’re an Adult, Act Like It

If you are late paying a bill and get hit with a fee because you didn’t have the money to pay it on time that’s one thing. It happens. If you get a late charge because you just forgot to pay a bill you had plenty of money to pay, that’s another. It’s time to start adulting.

For real, get your shit together. There is just no excuse for this. Set up an alert on your phone a few days before a bill is due. Mark it down on your desk calendar. Make a spreadsheet of all your due dates. Write it on your arm in Sharpie.

Laziness: Just Do It

We’re all guilty of being lazy in some aspect of our lives but being lazy with your finances will have terrible consequences. We know it isn’t fun to fill out those 401k forms or to roll over old 401k’s from previous jobs into an IRA, but once you do them, they’re done, and you can stop thinking about them.

Procrastination: Stop Putting Things Off

This is probably the worst personal finance habit you can have. There is no substitute for time when it comes to growing your money. Here is an example:

If you invested $5,000 a year between the ages of 25-35 at a return of 8% a year,  you would have $615,580.00 at retirement. If you invest $5,000 a year from ages 35-60, you would have just $431,754.00 at retirement.

The early investor invested just $55,000 compared to the late investor’s $125,000 and ended up with $183,826 more! More money cannot make up for the loss of time.

Stop putting investing off. You don’t have to know much to open an M1 Finance account. If you’re scared of investing, read this.

Disorganization: Cut Out the Paper

Keeping your finances in one place like Mint or You Need a Budget can help keep your organized. Opting out of paper bills and getting online statements will help too. No one wants to keep track of all those pieces of paper.

I can’t think of a single bill that can’t be paid online. Even if the vendor doesn’t have an online payment portal, you can still pay their bill online through your bank. You schedule the payment, and your bank sends an old-fashioned paper check.

Overspending: Everyone Needs a Budget

If you want to feel enraged, read one of the many pieces about people living in London or New York and just barely getting by on half a million dollars a year. These people are whiny idiots for the most part, but plenty of us manage to spend whatever we make no matter how much that is.

Sometimes people who make a lot of money don’t think they need to keep a budget. Budgets are for poor people. But truly poor people tend to know exactly where every penny is going because they have so few pennies that they must keep track of them.

If you have enough money that you think you think you don’t need to worry about money, you are exactly they type of person who needs a budget. Keeping a budget isn’t just about making sure your bills get paid.

A budget is a tool that will help you pay off debt, save for future goals like a house or vacation, and save for long-term things like retirement and education expenses.

A budget is also a way to spot and stem your spending leaks. The poor person with a budget might realize that the candy bar and soda they buy each time they fill up at the gas station is costing them $20 a month. The rich person with a budget might realize they’re spending $500 a month going out to dinner.

A budget is the first step and the best defense against overspending regardless of your income bracket.

Penny Wise and Pound Foolish: Coupons Don’t Make You Rich

Saving money is important, and every penny counts. But every penny isn’t equal. Some people go to great lengths to save relatively small amounts of money. Clipping coupons for example. But those same people think nothing of buying a new car every two years.

Good for you if you make coffee at home every morning rather than buying it out. But bringing a lunch to work every day rather than ordering out would be more impactful. Sometimes people feel virtuous when they have saved small amounts of money and let it justify spending larger amounts.

If you need to save money, focus on the big areas, housing, transportation, food. Find ways to lower those expenses and don’t worry so much about grabbing a coffee out now and then.

You Think You’re a Baller: You Are Not a Baller

You spend money like you earn six figures but you don’t. Buying rounds of drinks, always picking up the tab. All of this is going on your credit cards which are nearly maxed out.

Why are you doing this? Do you think people won’t like you if you don’t? Are you embarrassed that you don’t make a lot of money so pretend you do? Do you just like showing off for attention? Do you hang out with people who do have baller money and you spend to keep up with them?

You might need new friends or better self-esteem. If you aspire to be a baller, you better start making extra money on the side.

You Have FOMO: Have Fun Staying In

What’s wrong with you? Don’t you ever want to stay in, lay around in your pajamas and not see or speak to anyone? Some of you don’t, and you’re like aliens from another planet to me. There is nothing wrong with an active social life until that life costs more money than you can afford.You have FOMO, fear of missing out.

A lot of people fall into this. We base so much of our socialization around food and drinks, and it gets expensive if you’re going to a bar or restaurant for those things. Luckily this is one of the easiest, least painful things on this list to fix.

You just have to start socializing, at least some of the time, in free or inexpensive ways. Hold a potluck, invite a few people over and order some pizzas and play board games, have a picnic, spend a few hours at a museum and eat from one of the food carts parked outside, attend a free event in your area, like a festival or outdoor concert.

There are lots of ways to have a good time that is cheaper and more fun than hitting the bar.

You Equate Spending with Happiness: You Can Buy It But…

If you think money can buy happiness, you’re right. But only if you know what to buy. It turns out, buying experiences do make you happy, but buying things does not. It makes sense when you think about it. Do you have fond memories of the last outfit you bought? Did you tell anyone about it? Did anyone come with you to buy it?

Now think about the last vacation you went on. Do you have fond memories of that trip? Did you tell anyone about it? Did someone come with you on the trip? Get it? Another way of putting it is that memories, not things make us happy.

Shopping is Entertainment: Get a Hobby!

A lot of us do this with food too. We eat for reasons other than hunger like boredom or loneliness. It can be hard to leave the house without spending money, but we can’t stay inside all the time. (Even if we did, you could buy more stuff at home online than you can buy if you go out shopping to a store. I can’t purchase a snow blower in New Orleans, but I can buy one online).

To stop this habit, you just need a hobby. Find something to do with your time that doesn’t revolve around spending money. A hobby can cost money, but spending money is not a hobby itself. Try to find some hobbies you can do both inside and outside. Sometimes you are stuck in the house for whatever reason, so you want to be able to occupy your time.

Read a book, work crossword or jigsaw puzzles, knit, cook, sew clothes for your cat. Better yet, find a hobby you might be able to make a little money on. Sell your bespoke cat clothes on Etsy or Amazon Handmade.

It can be hard to go out without spending any money. You might have to spend money on museum admission or an ice cream in the park; maybe your hobby is something that requires equipment, like cycling.

That’s okay. Those are all either small expenses or one-time(ish) expenses. The point is, spending money is not the entire point of what you are doing to stave off boredom.

You’re Cheap, Not Frugal: Understand the Difference

Big, big difference. And if you don’t make the distinction, the frugal people will let you know it. They don’t like being lumped in with cheap people. Cheap people don’t like spending money. When they have to spend, they will always choose the cheapest option, believing that doing so saves them money.

Frugal people don’t mind spending money, but they want to get the best they can for that money. If a cheap person needs a new kitchen knife, they might head to the dollar store to buy one. In six months, that knife is dull, or the tip has broken off, or it’s become warped. So they have to buy another.

The frugal person will do a bit of research and choose a knife of good quality. It costs more; they might even have to save for it. But the knife will last a long time, not have to be frequently replaced.

Be frugal, when you spend money, get your money’s worth.

You’re Haphazard: Have a Plan

You have some debts, and you’re paying them, but you’re not paying them in the most efficient, money-saving way. Or you’re saving money, but just whatever is left at the end of the month. And sometimes there is nothing left over at the end of the month.

You have to be more deliberate with your money. If you have debt to pay off, choose the snowball or stacking method. The stacking method will cost you less in interest but both have merits, and importantly, either one is an organized method which means there is structure to follow.

You have good intentions to save and invest money, and sometimes you even do it. But those months when you have nothing left over, nothing gets saved. You can’t spend what you can’t see, so you must pay yourself first. You can automatically have money deducted either directly from your paycheck or your checking account into an investment or savings account.

You should schedule that just like you schedule your rent or car payment. Paying yourself is just as important as paying any other bill and more important than some.

You’re a Luddite: Get with the Times

So much technology is available to help us with anything personal finance-related. You don’t have to use a calculator and spreadsheet if you need to budget. You can use Mint, or You Need a Budget, both of which do most of the work for you.

You don’t have to have a personal stock broker if you want to invest. You can open a Betterment or Vanguard account. Answer a few questions, and you’re investing.

You don’t have to open and keep track of paper bills. You can go digital, so you receive your bills online. You don’t have to sit down with a checkbook, stamps, and envelopes to pay those bills. You can pay them online. Let technology take the strain.

Want to get your money under control?

This is our guide to budgeting simply and effectively. We walk you through exactly how to use Mint, what your budget should be, and how to monitor your spending automatically.

Get the Course

Forming Habits

Every habit on this list is one to develop. But you don’t have to try to tackle them all at once. Have you ever tried to change your eating habits completely? You throw away all of the “bad” food in the house, give up soda, alcohol, and fast food and swear you will only drink water and eat protein and vegetables from now on.

How does that usually go? Not well because you tried to do too much at once. A better, more sustainable approach to breaking bad habits and forming good ones is to make small changes over a long period.

You trade soda for water. After a few weeks, you don’t miss or crave soda. You only have a glass of wine with dinner when you’re out to a restaurant. You like the feeling of waking up clear-headed instead of hung over.

You cut the fast food from every day at lunch to once a week and then to only when you’ve forgotten your lunch at home. You notice you feel better, weigh less and are saving money.

That’s how you should approach breaking bad and forming better money habits.
Do one thing at a time starting today until you don’t even notice doing that thing anymore. Then you can move on to the next and the next. Good money habits just like good health habits should be built slowly, so you stick with them for your whole life.

Get our best strategies, tools, and support sent straight to your inbox.

Candice Elliott - Senior Editor Candice Elliott is a substantial contributor to Listen Money Matters. She has been a personal finance writer since 2013 and has written extensively on student loan debt, investing, and credit. She has successfully navigated these areas in her own life and knows how to help others do the same. Candice has answered thousands of questions from the LMM community and spent countless hours doing research for hundreds of personal finance articles. She happily calls New Orleans, Louisiana home-the most fun city in the world.
learn courses podcast popular toolbox