Some bad habits affect our physical health, such as smoking, nail biting, or eating too much junk food. But others affect our financial health.
How do you know if you have unhealthy financial habits and what can you do to develop better habits? Take these three steps.
1. Dig deeper into your relationship with money
Relationships with money are complex. It’s not always easy to identify financially unhealthy behavior. But there are some signs you can look for. Common problem areas include spending more money than you earn, not starting an emergency fund, and not saving for retirement.
Taking a financial health test can be a good first step in spotting weak spots. However, our struggles do not always reflect bad habits or bad decisions. Many experts say it’s important to consider the role systemic issues can play in shaping financial health.
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“Not being able to get a living wage, not having health insurance, having student loans in a career where you can’t find a job. The fact that there is nowhere in this country where someone living on minimum wage can rent a two-bedroom apartment. Those are all systemic problems,” says Saundra Davis, founder of Sage Financial Solutions, an organization based in the San Francisco Bay Area focused on providing financial services for low-income communities.
If you’re dealing with these kinds of systemic issues, focus on finding support. United Way’s 211 service can connect you with resources if you’re having trouble paying bills or meeting basic needs.
On the other hand, if your income should be enough to cover your expenses but isn’t, then that’s when you should watch your behavior, says Davis. What decisions do you make on a regular basis and what do you have the power to control?
Look for patterns. Maybe you shop online when you are bored or upset. Or ignore your debt because it’s overwhelming. Maybe you tend to spend windfalls rather than use money intentionally because your family didn’t emphasize the importance of saving growing up.
Emotions and experiences can have a huge impact on our money habits. That’s why it’s also possible to develop unhealthy habits if you’re in good financial shape. For example, a person who pays all of his bills on time and has a lot of savings may still feel anxious about spending or argue about money with her partner.
“Oftentimes there is that history of scarcity and financial loss somewhere in their history that is unresolved and leads them to not being able to fully connect with the fact that they actually have financial security now,” says Ed Coambs, a planner. certified financier and financial therapist. in Charlotte, North Carolina.
Once you have a better understanding of what’s behind your unhealthy habits, you can begin to fix them.
2. Set personal goals
Ask yourself, “Where are you trying to go? And where are you now? And then how do you close that gap? Davis says.
Setting financial goals can put you on the path to healthier habits. Your goals may revolve around specific dollar amounts, such as being debt-free or saving three months’ worth of expenses in an emergency fund, says Davis. Or, the goal could be to change the way you think about money, such as becoming more aware of your spending or feeling comfortable talking about money with others.
Create a plan that supports your vision of financial health. Let’s say you want to build up your emergency savings or make credit card payments on time. Automating those transactions can help. You can transfer a specific amount from your checking account to your savings account each month or set minimum credit card payments through your issuer’s website.
Coambs suggests reviewing your finances once a month or every other month. Review your budget and behavior to determine if you’re on track to reach your goals.
3. Lean on resources
Breaking financial habits can be challenging. But you don’t have to do it on your own. There are people and activities you can turn to, “whether it’s journaling or having a conversation with your partner or some other way to help yourself feel confident about money again,” says Coambs.
There are also many professionals who can offer guidance. A financial therapist, for example, can help you unpack your money relationships.
“All of us have a history of money. And if your money history is one where there is a lot of emotional pain and chaos related to money, then oftentimes those problems in your past need to be treated like any other type of trauma,” says Coambs.
You can also choose to work with a financial planner or seek free advice on managing your budget, credit or debt from a nonprofit credit counseling agency.
Throughout your journey to improve your financial habits, learn to advocate for yourself, says Davis. “What that can do is reduce or eliminate embarrassment about going to get help wherever you need it. If that means public benefits, if that means family and friends, whatever that means to you,” she says.
This article was written by NerdWallet and originally published by The Associated Press.