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Toxic money habits sabotage your wealth building plans, often leaving you without funds for the necessities and in debt! If you recognise any of these habits (gasp!) find out how to ditch old toxic habits and build new healthy ones!
1. Emotional spending
If you spend when you are happy, sad, excited, bored, or just to feel better, you could be an emotional spender! Your bank account doesn’t like emotional spending, and neither do the long-term saving and investing plans, such as saving for a property, new car or overseas holiday! If you are spending because it makes you feel good rather than because you really need something, you are spending for the feeling, not the need!
2. Lying about money
Are you completely honest about your money? Do you share everything you spend, or just selected purchases? Lying about money, including hiding purchases and lying about prices, can lead to overspending and being over indebted.
3. Saying yes all the time
This is a tough one! You want to please people and make them happy, including giving your family and kids everything they want. But, if they don’t need it, and it puts you into debt or over your budget, you’re reducing your chances of being able to fund the really important things in life, including that tertiary education for your child!
4. Rewarding yourself with money
Whether it is a new item of clothing, a chocolate or a car, we all want to celebrate success! While it’s great to celebrate when you reach your goals, you shouldn’t do so at the expense of your bank balance.
5. Lifestyle creep
This is when your income goes up, but your savings and investments don't! For example, you get a salary increase, buy a new house , a new car, and send your children to a private school. But you don't add to your savings and investments. With a more expensive lifestyle you need more in your emergency fund if something goes wrong, and more money in retirement! Unless you match your increase in spending with an increase in saving your lifestyle will one day be unaffordable!
6. Repeating money mistakes
You’re human, you make mistakes. We all do, often more than once. Overspend on your budget every month, knowingly, and you’re reinforcing a toxic money habit that builds your debt, not your wealth! The situation won’t change unless you do. And yes, you can change!
7. Comparing yourself to others
Your neighbour looks so successful with a smart car, professional manicure, tailored outfits and designer shoes and shades. You want that too so you can fit in! If you spend what you don’t have to be the same, you’ll end up in financial distress! You aren’t your neighbour, you are you and the best version of you is financially independent and living within your means! Plus, looks can be so deceiving, your neighbour may well have lots of debt themselves!
8. Lending too much money
You are not a bank. Lend more than you can afford and you are undermining your wealth building plans. Especially if there is a chance you won’t get your money back!
Change your money habits
You can change your toxic money habits and adopt some new ones that will keep your finances in the black!
Firstly, you need to recognise toxic money habits. Then analyse them, looking at when you developed the habit, why, and what your triggers are. For example, ýou may recognise that you spend money you don't have on clothes or shoes when you have a family argument. You do this to take your mind off the argument and to feel better, but you feel bad when you see how much you spent.
Changing habits requires a conscious effort, you have to be aware of what you are doing and when, and try to stop yourself! A healthy approach is to focus on introducing new positive habits into your day and not just eliminating old ones.
Start small, for example focus on one habit you want to change or a healthy habit you want to build and work on that. You will also need to be patient with yourself, and persistent. Don't give up – learning how to manage money well and avoid toxic money habits is a lifelong journey!
You can also set some financial goals. These will help you identify what is really important to you, such as saving for a new home. Review your goals regularly and use them as motivation to build new habits.
Make sure you not only do the brain work, but also use some practical tips to help you break your toxic money habits, including:
- Planning shopping trips, with lists
- Taking a time out before paying for an item - you may find you don't really need or want it after a few hour's reflection
- Setting spending limits on your cards so you cannot overspend without thinking! Or, leaving your cards at home and only take enough for emergencies unless you plan a shopping trip!
- Finding non-monetary ways to celebrate, or budget for special occasions – within your affordability constraints
- Pay yourself first! Put money towards your long and short-term savings and make sure it is out of your reach.
Get help if you need it
Enlist the help of your family and friends and get their buy in to help you change your bad money habits! You can also look for a money buddy and support each other in your quest for financial independence. Financial coaches will also help you with support and advice on how to build good money habits.
Commit but be kind
A lifetime of toxic money habits may take some time to change. If you start today you will soon be practising good money habits, and be able to welcome an improvement in your finances sooner than you think!