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I’ve never been one to struggle with making money; however, when it came to keeping the money that was being made, that was a whole other challenge in itself. Every time money flowed in, it was going right back out, and the worst part is I never knew what I was doing wrong.
It wasn’t until I forced myself to sit down and really comb through my bank statements that I discovered these 5 bad money habits that I had to give up.
These are 5 common habits that we do every day, things that come second nature to us, but we don’t even know we’re doing them, and they’re ruining our financial goals.
Keep reading to the end because the third tip literally changed my life, and you’re never going to guess what it is.
Let’s get into it.
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In This Guide: 5 Bad Money Habits To Give Up To Stop Living Paycheck To Paycheck
- Get Organized With Money
- Thinking Debt Is Normal
- Automating My Savings
- Putting My Eggs In One Basket
- Stop Comparing Myself To Two Parent Households
1. Getting Organized with Money
Being unorganized with money was a major hurdle. I used to jot down on paper my due dates and all the bills I had to pay, even birthdays and trips.
Everything went down on a little piece of scrap paper, and then I told myself, “Oh, I’ll remember it,” or “Oh, I’ll refer back to that paper.” I never did. I just had this budget in my head, and if you know, you know the budget in your head is really not a budget at all.
If this is you, then you need to create a budget to organize your money. Knowing where your money is going definitely stops the overspending, and you’ll probably be pretty shocked at the areas where you can cut back.
This discipline is crucial for breaking free of these bad money habits and saving more money each month. The most important thing you need to remember when making a budget is to pick one that works for your life.
Here’s how:
- Choose Your Budget Type
- Zero-Based Budget: Every dollar you earn is assigned a job, whether it’s for spending, saving, or investing, ensuring there are no unallocated funds by the end of the month.
- 50/30/20 Budget: This method divides your income into three parts: 50% for needs, 30% for wants, and 20% for savings or debt repayment.
- Pay Yourself First Budget: Before you pay bills or spend on other necessities, you set aside a predetermined amount for your savings. This is my personal favorite because it prioritizes your future needs.
- Monitor Your Money Weekly
- Set aside time each week to review the money coming in and going out. This routine helps you stay on top of your finances and prevents any surprises. Tracking your spending can also highlight areas where you might be wasting money or identify patterns of impulse buying—something I’ve struggled with myself. If you find money just sitting in your account, it’s tempting to spend it on things you don’t really need.
- Account for Every Penny
- Make sure you know where each dollar is going. It’s easy to overlook small expenditures, but they can add up quickly. Keeping a detailed account helps you understand your financial habits better and controls unnecessary spending.
- Set Weekly Financial Goals
- Implementing financial goals such as no-spend days, savings challenges, or setting income targets can be highly effective. These goals provide clear targets to aim for and keep your financial plans dynamic and responsive to your needs. Change them up monthly to keep your budgeting exciting and tailored to your changing lifestyle.
2. Thinking Debt Is Normal
Thinking debt is normal is a misconception that needs to be addressed immediately.
DEBT IS NOT NORMAL!!
I know a lot of us grew up thinking that debt was normal because we saw our friends and our family do it, and we just assumed that that was part of life.
You grow up, you get a car payment, you get a mortgage, and that was just the facts of life. However, history has shown that more than likely our parents were just doing what they saw their parents doing or what they picked up along the way. Nobody really taught them how to manage money, so this is just what they did.
So, by shifting our mindset to debt being something that we should avoid or looking at it as free money that could be paid back later, you end up prioritizing paying debt off and avoid taking on new debt without good reason.
If you are trying to paydown debt or payoff debt completely, here is what you want to do:
- List and Organize Your Debts
- Begin by writing down all your debts. Include everything from small credit card balances to larger loans. Once you have your list, organize these debts by interest rate, placing the highest interest rates at the top.
- Use the Debt Avalanche Method
- Start tackling your debts by paying off those with the highest interest rates first. This strategy is known as the debt avalanche method. By focusing on the most expensive debts, you minimize the total interest you pay over time, which can significantly speed up your journey to being debt-free.
- Avoid Accumulating New Debt
- While you’re working on paying off existing debts, it’s crucial to avoid taking on new debts. Each additional loan or credit card not only increases your financial burden but also hinders your progress towards your financial goals. New debts can lead to a slippery slope of increasing balances and interest charges.
- Save for Big Purchases
- Instead of charging big purchases to a credit card or taking out new loans, start saving money specifically for larger expenses. This practice encourages better financial discipline and helps you avoid further debt. It may take longer to acquire what you want, but you’ll buy it without the added stress of debt.
- Explore Alternative Funding Options
- Look for ways to fund your needs that don’t involve debt. This could include saving, as mentioned, but also consider other creative solutions like earning extra money through side jobs or selling items you no longer need. By finding alternatives to borrowing, you keep your finances healthy and your future secure.
3. Remove the friction (Automate your budget)
What I mean by remove the friction is you want to make your budget as simple as possible. I don’t know about you, but if there’s anything in between me and my goal, I’m probably not going to do it, and I know that sounds bad, but it’s the truth.
So, what I did was I set up my budget to be as simple as one, two, three.
Every paycheck, I set up a minimum of 10% to go from my paycheck to my savings account. I don’t have to think about it. I also set up most of my bills on automatic pay, so therefore, I don’t have to remember due dates or play the little game with myself of, “I’ll pay it back before it’s due.” I literally never paid it back. I was always late.
Setting up automatic withdrawals for my savings account and my bills, I feel like it took a lot of the excuses away as to why things weren’t getting paid. Setting up part of my budget to be an automatic budget literally changed my life and removed these bad money habits from my life.
4. Putting All My Eggs In One Basket
Putting all your eggs in one basket is a risky approach because why is your checking and your savings in the same account? Using just one account definitely makes it a little harder to see what you’re saving versus what you’re spending.
If you’re using multiple bank accounts, you can set them up for a specific purpose, like paying bills, daily usage, or even a savings account. This will make it much easier for you to break these bad money habits and also much easier for you to save because it’s literally separated into different pots.
Now, if you’re unsure as to what bank account you should have I recommend The High Five Banking Method by Poised Finance & Lifestyle
High Five Banking Method
- Checking Account for Bills
- Set up one checking account specifically for managing all your bills. This account should be used exclusively for fixed expenses like rent, utilities, and subscription services. Keeping these payments separate helps you maintain control over your monthly obligations and ensures you never miss a payment.
- Checking Account for Lifestyle
- Open a second checking account for your daily spending on lifestyle needs, such as dining out, entertainment, and personal shopping. This division allows you to clearly see what you’re spending on non-essential items, helping you manage discretionary expenses better.
- Savings Account for Emergency Fund
- Establish a savings account dedicated to your emergency fund. This is crucial for financial security and should cover at least three to six months of living expenses. This fund acts as a safety net for unexpected situations like medical emergencies or sudden job loss.
- Savings Account for Long-Term Savings
- Create another savings account for long-term goals, such as saving for college, buying a house, or planning for retirement. Having a specific account for these goals can motivate you to contribute regularly and watch your savings grow over time.
- Savings Account for Short-Term Savings
- Lastly, have a savings account for short-term objectives. This could be for upcoming expenses like a school trip, a concert, or holiday gifts. Separating this from your long-term savings allows you to set and reach shorter financial goals without impacting your larger savings plans.
5. Stop Comparing Yourself To Two Parent Households
Comparing myself to two-parent households used to drive me crazy. I would do almost anything to keep up with the joneses. I would take out loans for sports equipment, make sure my kids had the best outfits, and did everything that I could to sort of overcompensate until I realized that doing this was causing me so much financial stress.
So, instead of focusing on what other parents had going on, I started to focus more on myself and stop comparing myself to a family dynamic that literally was not my own.
I started to focus on how I could structure my budget in a way that made sense for my life as a single parent, and what I started to notice was that when I started to do that, I felt more encouraged, more confident in the way that I handled money. I started making better financial decisions and just feeling better about my financial journey overall.
If you find yourself in this battle of comparison, here are some things that can help.
- Set Personal Financial Goals
- Tailor your financial goals to fit your lifestyle, especially if you’re managing on a single income. When budgeting, be realistic about your resources and avoid the pressure to overcompensate during financially demanding times like back-to-school season or Christmas. Planning according to what you can truly afford helps avoid unnecessary debt and stress.
- Celebrate Your Financial Victories
- No matter how small, each financial achievement deserves recognition. Celebrating your successes reinforces positive behavior and keeps you motivated on your financial journey. Whether it’s paying off a small debt, sticking to your budget, or saving a little extra, acknowledge and reward yourself for these wins.
- Connect with Like-Minded Communities
- Join groups of other single parents who are facing similar financial challenges. Engaging in communities can provide emotional support, valuable advice, and a sense of belonging. Knowing you’re not alone in your struggles helps you stay motivated and can offer new strategies or encouragement when needed.
Wrapping Up
That wraps up our talk on the 5 bad money habits I changed to escape the paycheck-to-paycheck cycle. Remember, each step you take, from organizing your finances to managing multiple accounts and cutting the habit of comparing yourself to others, moves you toward greater financial independence.
Set realistic goals, celebrate your successes, and connect with communities that understand your challenges. Managing your finances is about laying a foundation for your future and empowering yourself and your kids.
Stay motivated and remember, you’re not alone on this journey.
Download Our Free Ebook
You can be great with money. You will be great with money. Learn everything you need to know to stop struggling as a single mom.
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