How to break bad financial habits and form good ones

Wellness Check

How to break bad financial habits and form good ones

Breaking bad financial habits isn't always easy, but it's worth it. Use these tips to guide you along the way.

By Sylvie Tremblay October 24, 2021
How to break bad financial habits and form good ones


You probably don’t need us to tell you that both good and bad behaviors, even seemingly small ones, have a cumulative effect over time—and those behaviors become habits. However, your habits aren’t set in stone.

“Habits are formed by making continuous decisions until these actions become automatic responses in our brain,” says psychologist Martha Horta-Granados. The more decisions you make, the more you train your brain to reinforce positive habits, and, eventually, the more effortless those habits will feel. This process may happen quicker than you think. Research shows that habits can gain strength quickly during the first 75 days. That means less than 11 weeks of consistent reinforcement can put you on track to forming more positive money habits.  

To help you stay the course, we went to the experts to learn how to break bad habits effectively and replace them with positive financial habits that last.  

Start with awareness 

To truly break a bad habit, you need to understand it inside and out, Horta-Granados notes. “Old habits are generally carried out without awareness. It may be that you have it so ingrained that you had not realized when you started to do it, why, and what effects it is bringing to your life,” she says. 

Note when (and how often) your bad habit shows up in your daily routine, and any circumstances that contribute to it. You’ll come away with a sense of when you’re most at risk of slipping up—and when you need to be mindful.  

Stop the cycle 

Once you’re aware of your habit, use mindfulness to halt it in its tracks. Horta-Granados recommends the stop technique: Literally saying the word “stop” when you’re about to carry out a bad habit, and taking a moment to reflect on the consequences of the habit.  

“Stopping will help you think calmly and analyze the situation,” she explains. “For example, you can decide if it’s really a good idea to splurge on fast food when you have food at home.” 

Cement new habits around a routine 

Forming new habits involves making a series of conscious decisions—at least until those actions become automatic responses in your brain. “I often recommend to clients to identify a routine that they feel confident in and then pair the behavior that they want to adopt with that habit,” says Kristin M. Papa, a Licensed Clinical Social Worker at Living Open Hearted. “This serves as a reminder to practice the new habit and helps you incorporate it into a system that has already been working for you.” 

If you’re trying to break a mindless spending habit, for instance, you might want to review the previous day’s transactions or update your budget over your morning coffee. By anchoring the new behavior to a mainstay in your routine, and giving yourself a built-in reminder, you’re more likely to stick with it.  

Raise the stakes 

The full impact of a bad habit may not manifest for years, so create short-term consequences for falling back into bad habits, advises Horta-Granados. Keep your mindset positive by opting for productive “penalties” that actually double as rewards and help you reach your goals. For example, “If you stick to your bad habit of buying fast food instead of cooking at home, put $5 in a savings jar,” she suggests.  

Look at the bigger picture 

Replacing a bad habit with a better one isn’t always easy, so try taking a higher-level look to keep yourself motivated. “Understanding your larger 'why' can be very beneficial to provide motivation and also clarify the deeper reason why it is worth it to you to take the time and energy to break this habit,” says Papa. 

Take a moment to write down the core values that prompted you to make this change, she advises. Visualize two scenarios: What your life might look like in five years if you don’t break your habit, and what it might look like if you do. Reminding yourself why you’re making a change can help you overcome gaps in willpower and stay on track.

Anticipate roadblocks and get back on track 

The road to progress isn’t always linear, so expect a setback every now and then. “We can all expect to have slip-ups and encounter obstacles to maintain new habits. Anticipating and exploring those challenges ahead of time can help us identify strategies to navigate those moments,” says Papa.  

Reflect on why you got off track and if there’s anything that could have prevented it, but don’t beat yourself up. “Remind yourself that any change is hard, and recognize the efforts and positive changes you have made thus far,” says Papa. Revisit your list of core values to rekindle your motivation; then, make a game plan for how you can stick to your positive habits when you encounter similar situations in the future.   

Find resources for support 

Breaking a bad habit isn’t easy, but you don’t have to do it alone. “If you want better financial habits, don't hesitate to reach out to an expert who can talk to you about it,” says Horta-Granados. “Surrounding yourself with people who have similar practices to the ones you want to achieve can also help you make better decisions to follow your goal of pursuing a new habit.” 

We’re here to assist you as well. Upwise is designed to help you replace bad financial habits with  positive ones by engaging in challenges. From setting up a budget to creating a digital estate plan, Upwise can support you on your journey to developing better financial habits.

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