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  • Writer's pictureHarry N. Stout

92- Improving Financial Health: Developing Better Money Habits

Updated: Jan 15, 2021

The last key to improving your financial health is to develop good money habits. Just like your physical health, there are habits that are good and habits that are bad. You can’t eat ice cream for every meal and expect to lose weight. With money you need to be mindful about all aspects of your actions. Let’s explore habits as they relate to money.

What is a Habit?

According to, a habit is defined as a way of behaving that is repeated so often it no longer involves conscious thought. A habit might be a person brushing her teeth every night before bed or walking the dog every morning before school or work. These habits would typically be considered "good" habits to have because they are of benefit to the person performing them. Other kinds of habits might be a person stealing one item from a department store every time he visits the store or drinking alcohol every weekend at a friend's house. These habits would typically be considered "bad" habits because they may bring harm to the person performing them.

Developing good financial habits and overcoming bad financial habits are essential to success in the FinancialVerse. Let’s look at some money habits and we will begin with the bad habits first – the habits that plague most people.

Bad Financial Habits

Here are three particularly bad habits that can undermine your financial success:

Wasteful Spending

As I have written, many people are living way beyond their means and borrow every month to make ends meet. For example, they spend without thinking on items such as entertainment, clothing, and eating out (when that was possible prior to COVID-19) amassing increasing amounts of consumer debt each month. People cannot spend money on unnecessary items and expect their financial affairs to be in order.

Not Repaying Unnecessary Debt

Not eliminating unnecessary consumer debt when you have the cash to do so is a very bad financial habit. Getting out of the cash flow crushing impact of debt service on your monthly budget has to be a top priority. Most people just spend extra cash they have rather than having the discipline to repay the often very high interest rate debt they have accumulated.

Money Distancing

Many people simply ignore their financial situation. They get as far away from the details of their money as they can without losing almost complete control of their financial affairs. I call this habit Money Distancing. Staying away from the details of your financial life is a bad habit. In fact, the closer you are to the details of your money the greater likelihood of financial success.

Good Financial Habits

Here are some examples of good money habits that you can develop with planning and focus.

Planning Purchases

Instead of making a quick run to the store or browsing your favorite website to buy a few items here and there, plan out your shopping. Know what you are looking to buy and the price range you are willing to pay. By having a list and sticking to it, you’ll be better at avoiding impulse buys or picking up items you don’t really need.

The same goes for things you buy online. It is so easy to just click on an item and have it arrive at your home in a few days. Carefully contemplate what you really need, how much you can afford to spend, and wait at least a few days before pushing that button. If it’s not an item you really need, try to wait a few days before adding it to your cart.

Paying Yourself First

As I have written many times, if you want to make sure you’re not overspending, create a budget. The habit of creating and using a budget should result in you generating excess cash. If you want to grow your savings, you should take this excess cash and pay yourself first. That means putting your excess cash into your savings account. You can do this by auto-transferring dollars into a savings account or saving a percentage of your take-home pay each month. Saving regularly over time will yield significant financial benefits.

Setting Up a Savings Account

If you’re making a concerted effort to save in different areas of your life, make sure the money you save goes toward your savings. Otherwise, it’s easy to spend the savings, leaving you back where you started.

For instance, if you’ve been walking to work rather than taking the train or ride-share, netting you $50 in monthly savings, directly transfer that $50 into your savings account. Saved $20 on groceries by buying things on sale and scouring for deals on the store app? Put that $20 in an account so it will be there when you need it.

Saving Windfalls

If you get a raise, earned more from your side gig than you planned, or received an unexpected work bonus, commit to putting some of it away. While you may want to enjoy some of the extra money—which is perfectly okay—allocate a percentage of this “bonus money” toward your saving goals. I always made sure I took 10% of these windfalls and spent them on fun items and saved the remainder.

Measuring Your Cash

Invest dedicated time each month to see how much progress you’ve made on your money goals. How much debt have you paid off, and how much headway are you making on saving for a down payment on a home, or for that dream trip next year? Seeing results will help you stay on track. It is positive psychological reinforcement. Great results give you a boost in motivation and could help you ramp up on saving.


Developing good financial habits takes some study and practice. Remember a habit is defined as a way of behaving that is repeated so often it no longer involves conscious thought. Many people managing their money with four or five key habits. This discipline has led them to financial success and security. In the FinancialVerse, practice makes perfect. Once you develop the proper mindset and improve your financial knowledge you can develop the money habits you need for success.


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