6 bad spending habits you need to break
As the old saying goes, we are what we repeatedly do. When it comes to spending your hard-earned money, your habits can make the difference between reaching your financial goals or living paycheque-to-paycheque.
It’s not always easy to break a habit – and we get it. That’s why we want to help you identify bad habits and replace them with new ones to help you optimize your spending.
1. You aren’t saving any money
You probably won’t be shocked to hear shopping feels good. When we buy something, the pleasure centre in our brain is activated and releases dopamine when we’re excited about the reward we’re about to get.
But as we all know, what feels good is (unfortunately) not always good for us. Saving money might not give you that same immediate reward, but it pays off big time in the long run.
Solution: Pay yourself first
The idea behind paying yourself first is simple. When you get paid, you set aside a certain amount of your paycheque for your future-self – meaning you move that money directly into your savings or investments. It’s important to do this before you spend money on anything else.
How much you should set aside for paying yourself first is totally up to you. It’s good to be ambitious with your goals, but it’s also good to not push yourself too hard. Start by making a budget of the absolute essentials (like rent, utilities, groceries, etc.) and then decide what part of the remaining money you want to save each month. Be sure to treat yourself once in a while!
2. You don’t know where your money goes
Figuring out where your money is going can feel like a daunting task. If you’ve never tracked your spending before, it’s hard to know where to start.
Solution: Get an app to track your spending
Using an app to track your expenses is a game changer. Having all your purchases and expenses laid out in one place to see where your money goes can be a sobering experience, but you‘ll see where you’re overspending and where you can cut back. By making this a part of your everyday life, dealing with your finances can become much simpler.
3. You shop a lot of sales
Some deals are just too good to resist – getting 3 pairs of sunglasses for the price of one sounds like a great offer, but there’s always a fine line between taking advantage of sales to save money and shopping for sales just because.
Solution: Do a personal audit before you go shopping
Whether it be groceries, clothes, or household items, you can curb excessive shopping by doing a personal audit and listing out everything you have, and a list of items you still need to buy. Keep the list on your phone so you can easily keep it updated, and do your best to stick to it.
4. You make too many impulse buys
Let’s face it – we’ve all gotten carried away as we shop. It’s easy to get on a roll and buy way more than we planned.
Sometimes, the things we don’t plan on buying end up costing the most.
Solution: Try a no-spend challenge
A no-spend challenge can help you rein in impulse spending and get your savings goals back on track. You pick a defined time – like a weekend, week, or even a month – and don’t spend money on anything other than absolute necessities.
Things like your bills (including mortgage/rent payments, utilities, insurance, etc.), transportation, and groceries are allowed. As for the rest – you’ll have to do without them until the challenge is over.
Not only will you save money during the challenge, but you’ll also have a better understanding of what you value most and what you didn’t miss spending money on. No-spend challenges also give you the opportunity to think outside of the box and try new, creative ways to have fun for free. Who knows? You just might find your new favourite hobby.
5. You’re spending money on the wrong things
Spending money on the wrong things means you’ll have less to spend on what makes you happy. It also means you’ll likely make slower progress towards your financial goals.
Solution: Prioritize and make the most of your spending
Start off by making a list of your wants and needs, then take a good look at your list of wants and ask yourself:
- What am I spending too much money on?
- What can I be happy without?
- What do I want to have more money for?
Once you have a good idea of where you want to spend less and where you want to spend more, you can start making lifestyle changes and see how they feel.
Research shows people tend to value experiences more than things, but everybody’s different. What you prioritize might be different than what someone else prioritizes – and that’s okay.
6. You believe you’re just bad at saving
If you think you’re just bad at saving in general, you’re not alone. Buying something nice for yourself – like your favourite bottle of wine – feels a lot better than putting money in your RRSP.
Solution: Use the stranger test
Imagine a stranger gave you the option of getting something you want to buy, or the object’s value in cash. Which would you take? Deciding which one is more valuable to you can help you decide if you should make the purchase or hold off.
Remember – it can take a bit of work to break a bad habit. But once you replace your bad habits with good ones and integrate them into your daily routine, they’ll become second nature. We hope these solutions make it easier for you to save money, spend smarter, and reach your financial goals faster.