The Seven Worst Bad Spending Habits and How to Break Them

Many consumers unknowingly practice bad spending habits that leave them deep in debt. Learning how to stop bad spending habits and how to stop overspending takes commitment, awareness and practice.*

Chief among bad spending habits is carrying too much debt. Although some level of debt is to be expected, carrying too much debt can result in dire outcomes.

A 2015 finding by the Pew Charitable Trusts summarizes the debt quandary facing many U.S. consumers:

“The growing use of credit among American households, particularly following the Great Recession, has different implications across generations. Although most households have more assets than debt, 80 percent hold some form of debt and that can signal economic opportunity and potential trouble. For example, accruing some debt at an early age can encourage wealth-building, but too much debt later in life can increase financial insecurity.” 

If consumers are seeking to establish financial security, a good place to start is to get serious about debt reduction. Begin by identifying bad spending habits, make adjustments to reduce cash outlays, and take steps to reduce debt.

The following list identifies some common bad spending habits as well as suggestions to help develop successful money management habits:

1. Failing to Budget

Failing to keep track of income and monthly expenses is a recipe for financial disaster. Consumers that “spend as they go” without planning for upcoming obligations run the risk of coming up short.

Solution: Set up a budget by compiling a list of all monthly expenses. Divide the list into two columns:
Necessary expenses (rent or mortgage, food, utilities, phone, car payment, insurance, etc.); and,
Discretionary Expenses (entertainment, clothing, club memberships, etc.)
Next, subtract the two amounts from income. The difference reveals positive or negative cash flow.

Cut expenses if overspending. Reduce discretionary expenses to increase available cash.

2. Impulse Buying

Retailers today are savvy when it comes to consumer buying habits. There is a reason goods are placed near the checkout, on the shelf at eye-level or are marked down. Retailers want consumers to buy and they understand buying triggers.

Solution: Try these tips to learn how to stop overspending and gain control of the shopping budget:
Shop with a list: If an item is not on the list, don’t buy it. Unplanned buying equals overspending.
Delay unplanned purchases: Take 24 hours to decide if the purchase is really necessary.
Shop without your kids: Kid-centric products are placed on shelves at a child’s-eye level to entice them to ask parents to buy their favorites.

3. Accruing Credit Card Debt

Credit cards can be life savers when emergencies arise, but using them to buy staples such as food, entertainment and day-to-day bills can result in balances that can quickly get out of control.

Solution: Limit credit card use to emergencies. Is the unplanned purchase an emergency? If not, don’t put it on a credit card.

Coach yourself with cash: Adopt an envelope system for a few months to track where the money is going. Label one envelope for each expense (“food”, “gas”, etc.) and put the necessary cash for each expense into specific envelopes. Train yourself to buy food with only the cash allocated to food, gas from the gas envelope, etc.

4. Overdrawing Accounts/Late Fees

Banks make big bucks from overdraft fees. (The three biggest banks earned more than $1 billion  in fees in a single quarter of 2015!) Financial institutions penalize consumers when they slip into an overdraft or make a late payment. Those fees can quickly drain an account.

Solution: Set up alerts from checking and credit card accounts that notify consumers by phone or email when minimum balances are met. Most banks and credit card issuers offer this service for free and even offer apps to make tracking balances easier.

5. Paying for Unused Services

One study determined  four-out-of-five gym memberships go unused. In most cases, even if club memberships go unused, consumers are expected to pay the monthly dues.

Solution: Review bank and credit card statements to determine which services are not being used and cancel these memberships. Apply this money toward paying down debt.

6. Emotional Spending

Shopping addiction is a common reaction to the pressures and stress of life. Giving in to temptation to ease that stress by buying a new outfit, eating out or impulsively purchasing a big-ticket item can result in a quick emotional “fix”, but buyer’s remorse and negative financial consequences can follow.

Solution: Stay focused on the financial goals set in the budget. Being aware that emotional behavior can contribute to overspending.

7. ATM Fees  

It may not seem like much, but $3 (or more) surcharge fees for ATM transactions can add up fast. There is no value to the consumer when he or she has to pay to access their own money.

Solution: Only use ATMs that are connected to your financial institution. Withdraw cash once or twice a month for personal spending. Eliminate multiple trips to the ATM.


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