7 Habits that Will Change Your Relationship with Money

7 Habits that Will Change Your Relationship with Money

One of my favorite podcasts is So Money by Farnoosh Torabi. She interviews industry leaders and financial experts, exploring their successes and failures with money.

Toward the end of every interview, she asks a series of questions — everything from what you would do if you won $100 million in the lottery to what your first money memory was.

My favorite is her question about money habits. Each guest shares one thing they do daily, or at least regularly, to improve their relationship with money.

Every time Farnoosh asks this question, I turn into that crazy Jeopardy watcher, shouting out the answers from her couch at home.

Yesterday, when this happened for the umpteenth time, I decided to actually answer this question in writing — rather than just continuing to talk to myself. Here is not one, but seven, essential money habits that I’ve adopted over the last several years.

When people ask me how we got out of debt, and have stayed out of debt for all these years, I point to these seven habits. They have changed my relationship with money — and I am confident that they can do the same for you.

#1. Track Expenses Daily

At the beginning of every money class I teach, I say the following: “You can’t spend LESS unLESS you know how much you’re spending.”

Mindfulness is the key to changing your behavior with money. That’s why I like to track my expenses daily. This habit makes the connection between my spending and my bank account balance infinitely more tangible.

Some people look over their credit card statements once a month, and while this is a good practice, I don’t think it will change your life. By the end of the month, too much time has passed since you incurred the expenses to correct course.

I track my expenses with YNAB (You Need a Budget — my favorite budgeting software, which I reviewed here), but that’s certainly not the only way to track them. You can use Mint.com (it’s free), you can use a pencil and paper, or you can use Excel. There is no perfect “system” for tracking your expenses — the key is to pick the system you are most likely to use consistently.

#2. Take a Breather Before Spending

I’m a recovering ostrich spender. Ostrich spending = Swipe card, freak out for a second, then quickly bury head back in sand.

Working crazy hard to get out of debt cured me of about 90% of these tendencies. Every now and again, however, that stubborn 10% rears its head. Usually after a really cruddy day. Next thing I know, I’ve navigated to Amazon and am about to add something to my cart.

In order to nip that impulse in the bud, I’ve learned to impose a “breather” between me and my spending. I tell myself that if I still want said-unplanned-item in 2 hours, I can get it. But 2 hours is usually enough to cool my heels – or at the very least, check the budget to see if I’ve got the cash to cover the costs.

The amount of time you set for the breather is almost irrelevant; just having a cooling-off period will allow you to regroup and reevaluate, once you’re out from under the spell of the urge.

(Read more: 7 Strategies to Stop Impulse Spending)

#3. Tweak the Budget Every Single Month

Budgets are great, but if you’re not doing them the right way, they won’t work.

A budget isn’t a static document. And it isn’t an aspirational document. It’s a nitty-gritty, nuts and bolts plan for your money right now.

Not theoretically if everything goes according to plan (because it won’t). Not hopefully when you make more money. Or pay off debt. Or have fewer expenses.

That’s why I tweak my budget every month to come up with a specific plan for the next 30 days. If we’ve got three family birthday parties to host in October, we’re going to need to increase our budget for food, gifts, and maybe even entertainment. If my husband or I landed a new job, we would probably need to add some money to the clothing budget to spiff up our wardrobe.

Plenty of categories in my budget are “static” — my mortgage is the same amount every month, for example — but each and every one of the variable categories gets a monthly once over.

#4. Shop with a List

According to a 2013 report by the National Resources Defense Council, Americans throw out the equivalent of $165 billion in food each year. That’s money going straight in the garbage.

That’s why I sketch out a basic meal plan before I head to the store. Then I write a quick shopping list based on the plan. This way, I know that the food I’m buying has an intended purpose — a meal, rather that just, “Hey that bok choy looks good.”

Because when I use the “that looks good” method of shopping, I usually end up tossing $5 worth of rotting bok choy in the trash three weeks later.

#5. Pay My Credit Card Bill More Often than Required

After we paid off $30,000 of consumer debt, it was very tempting to cut up our credit cards and use cash exclusively. We considered it, but ultimately decided that cash-only wasn’t going to work for our family. My husband and I both appreciate the convenience and security of credit cards — and the points aren’t bad, either.

That said, I am all too aware of how easy it is to overspend when paying with plastic. That’s why I pay my credit card bill more often than required. If I have put a lot of expenses on my card, I pay it weekly or bi-monthly.

The budget sets the boundary for our spending; weekly payoffs provide an extra fence around our intentions. It’s the closest we can come to cash-only spending, without giving up the security, convenience and points of a credit card.

#6. Set Savings Goals Annually; Evaluate Them Monthly

Budgeting is making a plan for your money this month. Goal-setting charts the course for the future of your finances.

We try to balance long-term and short-term goals, especially since we’ve learned that short-term goals are really good at motivating us to stay disciplined.

In order to give ourselves the best shot of achieving our goals, we break down our target number into monthly, bite-size pieces. For example: Let’s say we need $10,000 for a Bar Mitzvah in 2 years, and we don’t have any money saved yet. That means we need to set aside $417 a month for the next twenty-four months.

That number goes into our monthly budget. Since we have variable income rather than a steady paycheck, we can’t always meet our savings goals. That’s why monthly evaluations are so critical. Maybe we can up our game the next month; or maybe we will have to reduce that target number altogether.

#7. Talk Often & Openly with My Children About Money

By the time I graduated from college, I had learned two things about money: 1. There was never going to be enough, so spend what you have now; and 2. Talking about money meant fighting about it, so better just not to bring it up.

Fast forward fifteen years, and my husband and I were — no shocker — $30,000 in debt. The pit of anxiety I felt about the situation was nearly as deep. That’s when I had an incredible epiphany: I am in charge of my money. The same person who got me into this mess is the only one who can get me out of it.

I was 35 years old when I realized this, which is why financial literacy is so important to me as a mom. I want my children to really get that they are in charge of their money. That’s why I discuss finances with them so explicitly. There’s nothing taboo — everything from income to expenses, credit card debt to car leases (and why I’m against then) — is fair game.

What are your personal finance habits? Are they serving you well? Or undercutting your relationship with money? 


  1. What do you think about the new YNAB? Update YNAB 4 and now a charge. ?


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