How to Change Your Spending Habits for Good

June 15, 2021

Want to develop better spending habits? A solid money mindset can be more impactful than the most elaborate budgeting spreadsheet.

Like most day-to-day decisions and norms, spending habits are often based on unconscious beliefs. Becoming aware of what drives your choices could help you build better habits—and be the key to upping your money game.

Where do spending habits come from?

Whether you realize it or not, the spending habits you have today are likely the result of the environment you grew up in.

For example, if you grew up feeling poor compared to your friends and community, you may find yourself making unnecessary purchases to try to keep up with other people’s lifestyles. Or, if your parents gave you the impression that wealth is “evil,” you may subconsciously find ways to spend money whenever you feel like you have too much. In either case, cutting back on spending and increasing savings can be a challenge.

On the flip side, if you grew up feeling the burden of financial stress or were taught that money was scarce, you may find yourself being overly frugal—even for things you really need. Financial austerity isn’t necessarily a good thing. Not only can too much focus on saving money cause anxiety, it may actually hurt your finances in the long run. For example, buying the cheapest product isn’t necessarily the best option if a more expensive one will work better and last three times as long.

Whether you’re a super spender, super saver, or somewhere in between, your spending habits were likely shaped before you were even aware of it. But that doesn’t mean you can’t change them. These five, practical steps can be taken right away and help you develop better overall financial wellness.

5 Steps to Change Your Spending Habits

1. Audit your spending.

Knowing where your money is going is a critical step in understanding your current spending habits.

A spending audit is simply a review of your recent purchases to help you spot trends. You can do this manually by reviewing your bank and credit card statements or use budgeting software that syncs with your online accounts. You don’t have to create or follow a budget to get the benefits at this stage. For now, focus on categorizing your past purchases and tracking your future purchases so you can see where your money is going.

2. Align spending with your values and goals.

Once you have an overview of where you’ve been spending money, consider how it compares with your goals and values. You won’t be able to afford everything, so what do you want to prioritize?

For example, if you value experiences over possessions, check to see if your spending aligns with that preference. If you’re spending too much on electronics and takeout to afford travel, then you know where to start cutting back.

3. Don’t go at it alone.

No matter what your spending challenges are, you’re not alone. Make it your mission to find like-minded people who can offer support and advice.

You could start with an accountability buddy—a friend or family member who can help you stick to your new habits. Or check out online communities that discuss personal finances and goals, such as paying down debt or saving for early retirement. If you’re really struggling to make changes, you might even consider a money coach or financial therapist.

4. Practice mindful spending.

For overspenders, being mindful of your spending triggers can be key to changing your habits.

For example, if online shopping is a habit you’d like to break, try to notice what else is happening when you feel the urge to buy something online. Are you feeling bored or stressed? Is there something else you can do instead of making that purchase? Make a list of those other things that can entertain you or calm you down, and keep it handy for any time you have the urge for an online splurge.

5. Reward yourself.

For the overly frugal, commit to treating yourself. Think about something you really want—whether that’s a night out, new gadget, or a long weekend away—and then set a financial goal that coincides with that desire. Once you hit that goal, give yourself permission to reward yourself.

6. Stay the course.

Turning a new practice into an actual habit takes time—and you’re bound to face setbacks along the way. If you slip up, don’t let it derail your progress. Every new situation is a chance to start again.

Spending Habits That Can Help You Save Money

In addition to your everyday habits, you may want to think about other financial patterns that can help support your money goals.

Monitor your credit.

Regularly checking your credit reports and scores can be important for your overall financial wellness.

Unusual activity could mean that someone has compromised one of your accounts or is fraudulently using your identity to take out credit in your name. Staying on top of your credit allows you to respond quickly and can help limit the damage.

On the other hand, good credit can open up new opportunities, like access to credit cards with promotional rates and low-interest personal loans.

Look for opportunities to refinance debt.

Refinancing your debt at a lower interest rate can reduce your monthly payments and save you money on interest. Keep an eye on your credit score and prevailing interest rates so you can jump on potential refinance opportunities. If your credit score has improved over time, you may qualify for a low rate debt consolidation loan. This could not only save you money,but it could improve your credit scores by lowering your utilization rate and adding variation to your credit mix.2

The same goes for mortgages and auto loans. If loan rates have come down since you first took out the loan, consider refinancing to save funds. Keeping track of financial trends and occasionally checking your loan offers will help you see if and when refinancing makes sense.

Review your accounts’ fees and features.

Make a habit of reviewing your financial accounts’ fees—and finding lower-cost alternatives—to help lock in savings for months or years to come. For example, you can:

  • Get new auto and home insurance quotes every six to 12 months.
  • Look for checking and savings accounts that have fewer fees and offer more interest.
  • Compare credit card annual fees or search for no-fee alternatives.
  • Review your subscription services to see what you can cancel.
  • Try to negotiate better rates for cable or internet services.

While you won’t save a ton of money right away, small changes can lead to long-term savings and help you reach your financial goals sooner.

Build an emergency fund.

Your emergency fund can help keep an unexpected expense from throwing you completely off course. Try to save three to six months’ worth of living expenses in a high-yield savings account and resist dipping into your savings for everyday purchases. You can even set up a monthly auto-transfer from your checking to savings to grow your emergency fund without having to think too much about it.

Tricks to Try for Habitual Overspenders

If you know you’re ready for a change, here are a few spending habits you can start to practice now:

Use cash to avoid overspending.

If you have a tendency to spend more than you planned when you’re out and about, consider bringing cash instead of a debit or credit card. From an iced coffee here to a magazine at the grocery checkout there, it’s easy to rack up expenses when you’re paying with plastic. Switching to cash can help you stick to a max spending limit.

Give yourself a day before making an impulse purchase.

Prone to impulse purchases? Try to wait at least a day before checking out. The downtime can help you determine if you really want to spend the money—or if you just got caught up in the moment. Some online merchants even email discount codes for abandoned carts, so waiting a day could have even more financial perks.

Consider opportunity costs.

Before spending money, consider what you’re giving up when you make the purchase. And, try to expand your comparison to unrelated products and experiences. For example, if you’re thinking about buying a new phone, you’ll probably compare models to find the best option and best price. But don’t stop there. Take time to consider how you could alternatively use that money to travel, eat out, pay down debt, or reach one of your financial goals. Even if you do end up buying the phone, getting into the habit of weighing opportunity costs can help prevent frivolous purchases.

Resist the urge to compare.

In the age of social media, it can seem like there’s always something new to buy and everyone is spending money on it. But new cars and vacation snapshots don’t tell the whole story. After all, people rarely post or talk about what they don’t buy—or how they had to save to afford these purchases.

If you find yourself stuck in a loop comparing your finances to the perceived finances of others, take a moment to take inventory of what you have. A little mindfulness and gratitude can go a long way—even when it comes to spending habits.

Tricks to Try for the Overly Frugal

If you have trouble spending any money, try to prioritize value over upfront costs. Being smart about purchases sometimes means spending more for higher quality. And giving yourself the occasional treat could do wonders for your mental health.

Consider the long-term value of a purchase.

Research items or brands that are known for their quality and durability, and calculate the per-month or per-year cost. You can be frugal, but allow yourself to spend money on the things you need. After all, a cheaper purchase that you’ll need to replace every few months can cost you more over time than the more expensive, higher quality item.

Pick up a new source of income.

Financial austerity sometimes happens when you feel constantly strapped for cash, or if you feel like your income isn’t secure. Picking up a side gig—even if it’s only a couple hours a week—could unlock the little extra security you need to feel better about your finances.

Focus on eliminating your debt (and then reward yourself).

If your frugality comes from too much debt, get smart about paying it off. These days, there are lots of creative ways to pay off debt. And taking the time to figure out which method works best for you, and then applying it to your life, can help set you up for financial freedom. A debt consolidation loan, for example, can help you gain more control over your bills while also saving money1.

You can check your rate for a debt consolidation loan for free without impacting your credit score.

The Bottom Line

Sticking to new spending habits can be particularly difficult when your identity and self-worth are tied to how you view and spend money. However, if you identify habits that are holding you back or patterns that don’t align with your values or goals, it’s time for a change.

Common FAQs

What are the best ways to improve your spending patterns?

Start by understanding why you spend money the way you do, then identify the habits you want to create and the ones you want to break. Track your progress and seek outside support or accountability to help you develop better spending habits.

Does monthly budgeting help your spending habits?

A monthly budget can help you align your spending habits with your goals. Even if you don’t set spending limits for yourself, you can use budgeting software to track your purchases and get valuable insight into your behaviors.

Which type of credit card helps with your spending habits?

The type of credit card is less important than how you use it. Tracking your purchases, knowing how much you’re spending, and not spending more than you can afford to repay can build a solid foundation for good spending habits.

Can personal loans help you pay off debt quicker?

You may be able to save money and pay down debt sooner with a personal loan. By rolling all your debt together and then using a personal loan to pay that off, some people find the payments easier to manage. And if the loan interest rates are lower, you might even save money. Check your rate to see if it’s an option for you.


1 Savings are not guaranteed and depend upon various factors, including but not limited to interest rates, fees, and loan term length.

2 Reducing debt and maintaining low credit balances may contribute to an improvement in your credit score, but results are not guaranteed. Individual results vary based on multiple factors, including but not limited to payment history and credit utilization.

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