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Whether it's waiting last minute to pay bills, routinely over-withdrawing your checking account, or spending more than you earn, your bad financial habits are likely to cause you stress.

While bad habits are hard to kick, it's certainly not an impossible feat. It's important to form healthy money habits now in order to set yourself up for a year of financial success.

Take Stock of Your Spending

In order to recognize the financial habits that are holding you back, start with a mental snapshot of your last month from a financial perspective. Look for areas where your money management felt uneasy, and pay attention to moments of stress. These could include late payments, juggling money between paychecks, being faced with financial decisions, and putting them off. Now, try to find the patterns. Being realistic about what type of spender you are will help you recognize and head off negative spending before you do it.

Common unnecessary spending can be on anything from lottery tickets to fast food. Obviously, anything you can cut back on is a good thing, but long-term, it’s best to recognize when you buy what you buy, so you can plan ahead of time. For example, if you see that you typically run out of groceries in the middle of the month and spend a few days ordering out to compensate, you may want to think about a plan to stock up the weekend before. This isn’t about avoiding things you enjoy or skipping going out for coffee every once it awhile. It’s more about recognizing the patterns of your spending and establishing work arounds, so you have what you need and feel in control.

How to Cut Back on Spending

Now that you’ve identified your spending habits, you’re ready to work on changing patterns that are unhealthy, cut back where you can and refresh your spending boundaries. To get started, create a spending plan and set limits. First, include your regular bills. Planning around those amounts and due dates will help ensure you cover them and let you know how much you have left for needs, like food, and discretionary spending, like dinners out. Make sure to account for subscriptions and memberships that are regularly debited as well as bills that might not be due monthly, like car insurance or garbage fees.

Once you have your plan in place, make sure you regularly monitor spending, so you can spend within your means. Your financial situation may change, and its important to be aware of how your plan should change with it. Going through this exercise would help you avoid impulse buys, since you should be able to recognize when you’re about to make one. But they’re called impulse buys for a reason, so give yourself some slack if you buy things you didn’t necessarily plan on once in awhile. Checking in and being honest with yourself about what you want to buy something, is often enough to say no to that spend.

If you're unsure about how much unplanned spending costs you, use a money management tool to monitor how much you spend at a particular place. It could lead to some surprising discoveries. Many budgeting apps allow you to track your spending from a single retailer or from category, like food or coffee shops.

Set a Limit

Once you understand your current spending habits, you can set daily, weekly or monthly limits on how much you'll spend on any one thing. You can do this by either allocating a certain amount in that category or setting alerts on your credit or debit card.

Find Cheaper Alternatives

Another way to stay under your newly established limit is trying the "swap it, don't stop it" approach. To reduce the price tag of a costly habit, opt for less expensive options. Try using the coffee maker that's collecting dust in your cabinet, and save visiting coffee shops for when you need a special pick-me-up.

Change is hard and you may need help getting yourself on track. Reach out to KeyBank for a Key Financial Wellness Review and guidance on how you can set yourself up for success.

Check in On Your Money

Spend 30 minutes with us. We’ll talk about your money realities and goals to give you personalized advice and ideas you can start using right away.

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This information and recommendations contained herein is compiled from sources deemed reliable, but is not represented to be accurate or complete. In providing this information, neither KeyBank nor its affiliates are acting as your agent or is offering any tax, accounting, or legal advice.

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