How to break bad financial habits

How to break bad financial habits

There is nothing like the start of a new year for making a fresh start. We know a lot of people have trouble with spending and saving, so here are seven tips to help you break bad financial habits in 2016.

Many people use the start of a new year to put better habits in place, and sometimes that means improving their behaviour when it comes to spending and saving. So if your New Year’s resolution is to get your finances in order, here are our seven tips for breaking bad habits.

1. Set financial goals

It’s always easier to break bad financial habits when you have a tangible reason to change your ways. That means having some solid financial goals you’d like to achieve. Begin by asking yourself why you’d like to break your bad financial habits – is it to save a deposit on a home? To afford a holiday to Thailand? To pay the kids’ school fees? Whatever it is, make sure it’s realistic and achievable.

2. Budget

It doesn’t matter if you make $3000 a month or $30,000: you’ll never reach your financial goals if you’re continually spending more than you earn. It should go without saying that budgeting is a vital part of breaking bad financial habits. Make sure yours ties in with your financial goals and that you factor in saving some money each month towards achieving them.

3. Track your spending

Speaking of which, if you plan on sticking to your budget you’ll need to see exactly where your money is going. The good news is there are some great apps and tools to help you do this, including NAB Money Tracker. Seeing a breakdown of your expenses will show you where you have been spending too much in the past and where there are any holes you need to plug.

4. Pay on time

One of the worst financial habits is paying bills late – not just because you’re likely to attract interest and late payment fees, but also because, if you do it too often, you could end up with a bad credit rating. It may seem difficult if you’re living pay cheque to pay cheque, but it will be much easier to pay bills on time once you have a decent budget and can anticipate costs.

5. Build a buffer

One of the main reasons we fall into bad financial habits is because big, unforeseen expenses can suddenly put us into debt, such as car repairs, leaking gutters or a new strata levy. That’s why it’s important you build a financial buffer. Better still, consider making this rainy-day fund work for you by keeping it in a high-interest account. Alternatively, you could put it into your mortgage so that you’re not tempted to withdraw it to subsidise your lifestyle.

6. Revisit and revise

As time goes on, it’s inevitable that our personal circumstances will change – we change jobs, meet new people, travel, study and start families. When this happens, our financial goals usually change too. That’s why it’s important to regularly revisit and revise your budget, factoring in any new expenses and new sources of income.

7. Reward yourself

It may seem strange that we’re suggesting you reward yourself in an article about financial responsibility. But if you really want to break bad financial habits, that’s exactly what you need to do. After all, bad habits become deeply ingrained, and if you want to change your behaviour you need to retrain your brain. By allowing yourself a small reward every time you hit a goal, you’re reinforcing to your mind that you’re on the right track.

You should also make sure your budget allows you to have some fun, such as going to the movies or having dinner out. After all, the harder you are on yourself with your budget, the less likely you are to stick to it.

Its time to start saving

Breaking bad financial habits isn’t easy, but the end result is almost always worth any short-term pain. By following these seven tips, and with a bit of hard work, you’ll be on your way to reaching your financial goals.

Any advice contained in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on any advice in this article, NAB recommends that you consider whether the advice is appropriate for your circumstances. NAB recommends that you obtain and consider the relevant Product Disclosure Statement or other disclosure document available from, before making any decision about a product. NAB is the product issuer of a NAB Classic Banking Account.