Some bad habits affect our physical health, like smoking, nail biting or eating too much junk food. But others take a toll on our financial health.
How do you know if you have unhealthy financial habits, and what can you do to build better ones? Take these three steps.
1. Dig into your relationship with money
Relationships with money are complex. It isn’t 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, neglecting to start an emergency fund and not saving for retirement.
Taking a financial health quiz can be a good first step toward detecting weak spots. However, our struggles don’t always reflect poor habits or decision-making. Many experts say it’s important to consider the role that systemic issues can play in shaping financial health.
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“Not being able to get a living wage, not having medical insurance, having student loans in a career that you can’t find a job. The fact that there’s nowhere in this country that someone who is living on minimum wage can rent a two-bedroom apartment . Those are all systemic issues,” says Saundra Davis , founder of Sage Financial Solutions, a San Francisco Bay Area-based organization focused on providing financial services for low-wealth communities.
If you’re dealing with these kinds of systemic problems, focus on finding support. United Way’s 211 service can connect you with resources if you’re struggling to pay bills or afford basic needs.
On the other hand, if your income should be enough to cover your expenses but doesn’t, that’s when you should look at your behavior, Davis says. What choices are you regularly making, and what do you have the power to control?
Look for patterns. Maybe you shop online when you’re bored or upset. Or you ignore your debt because it’s overwhelming. Maybe you tend to spend windfalls instead of using the money intentionally because your family didn’t emphasize the importance of saving growing up.
Emotions and experiences can have a major 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 their bills on time and has plenty of savings might still feel anxiety around spending or argue about money with a partner.
“Often there’s that history of financial …….