How to Break Bad Financial Habits

We discovered how habits are made. We learned how to build good habits. But how do we break bad financial habits? 

James Clear discusses this in Atomic Habits as well. We learned four laws of behavior change last week for building good habits. We can invert those laws to help us break bad habits. 

The four positive laws are:

We can invert those, and we get:

Let’s dive into each and look at how we might break the bad habit of a Daily Starbucks Drink and other bad financial habits.

Bad Financial Habits Law 1: Make it Invisible

Experiencing a cue is what starts off the habit loop. The cue causes the craving, requiring a response that reinforces repetition through reward. The easiest way to reduce or eliminate bad habits is to make the cues invisible. 

If you have a Daily Starbuck Drink habit, this is likely brought on by seeing Starbucks every day on the way to work. You can help break this habit by going a different way to work. Take a different exit. Drive past a turn and go in through the back. Whatever you need to do to avoid driving past the cue. When you don’t see it, you don’t do it. 

Or perhaps you have the habit of mindlessly shopping on Amazon. You check your phone, see the Amazon app, and tap on it. You scroll and buy some knickknack you didn’t know you wanted until you saw it. 

In some ways, seeing the item was a cue. You saw it (cue), which triggered a craving for that item. In the past, you have purchased items and gotten a reward in the form of momentary excitement when you opened the items and enjoyed the first experience. You now believe you’ll get the same reward if you act out the same response: 1-Click Ordering the item. 

But there was an earlier cue: seeing the Amazon app. What is one way to break an Amazon shopping habit? 

Delete the Amazon app from your phone. Make it invisible. This alone may not cure your bad habit, but it will curb it. We’ll come back to this. 

Bad Financial Habits Law 2: Make it Unattractive

You enjoy a delicious venti, extra hot, double cup, triple-shot, oat milk, no whip, extra crema, french vanilla latte. (Insert your drink of choice.) The mere thought of one makes your mouth water.  It sounds attractive to you. 

Make it unattractive. 

If you’re trying to break this habit with a hot drink, go twice more. Order a cup of ice on the side. Then dump a bunch of ice into your hot drink. Water it down and bring it to room temperature. Then drink it.

It’s not the same. No one likes lukewarm coffee. It must either be hot or iced. Not… blah. 

Make your drink gross. Do it two or three times. On purpose. And no sneaking a quick sip before you ruin it.

You are trying to ruin the memory of this bad habit. You are trying to make it unattractive. 

And yes, that is a waste of money, which is why you must do it. Wasting money should also be unattractive. But if you spend $15 wasting three drinks to save $100 a month on coffee, that’s an excellent return on investment. 

Pair that will bring a good cup of coffee from home. Take a few sips of a ruined $5.00 drink, then a few from a hot and tasty $0.50 drink. It’s all relative. And your home brew will now taste amazing in comparison. You’ll start a new good habit of brewing coffee for cheap at home. 

And you’ll save time. If you have time to swing through a drive-through, you have time to make it at home. 

Bad Financial Habits Law 3: Make it Difficult

Billions of dollars are spent every year by mega-corporations to make spending money with them as easy as possible. Let’s make it difficult instead.

Driving a different way makes getting a Starbucks drink difficult. Leaving your wallet at home and only bringing your driver’s license makes it difficult to impossible. (I don’t think they give it to you for free if you can’t pay.)

Make shopping on Amazon difficult. Remove the app. Block it on your phone’s internet browser so you can’t access it from your phone at all. Delete your Prime subscription so you can’t get items as easily. Block it on all your devices so that you need to have a friend order things for you and then go through the hassle of paying them back. 

Get creative. Almost every bad financial habit is partly because it is easy to do. Think of creative ways to make it difficult, and you can break the habit. 

Bad Financial Habits Law 4: Make it Unsatisfying

The reward at the end is what solidifies the habit. No reward, no habit. No one has a habit of poking themselves in the eye daily with a pencil. It’s not satisfying.

Bad habits have satisfying rewards; even if those rewards are always temporary, the consequences lasting. Drinking a 600-calorie drink daily is satisfying for the 10-20 minutes of the drink. The smaller wallet and larger waistline last far longer. 

We must make it unsatisfying. A lukewarm coffee makes the thought of it unattractive, but it also makes the actual drinking unsatisfying. Making cues invisible makes it easier. But you can’t always count on that. Making it unsatisfying will help when you still stumble across an old cue. 

A two-week delay in receiving an impulse purchase is not as satisfying as next-day delivery. Canceling your Prime subscription helps make shopping there less satisfying. 

You can also use accountability and public announcements to make it even less satisfying. Perhaps you commit to making a matching donation for any amount you spend on Amazon… to the opposite political party. Does it sound as satisfying to buy this phone case if I must also donate the same amount to the opposition? 

Conclusion

The concepts are not difficult to understand. The application is where it requires thought and intention.

I’d highly recommend you get the book Atomic Habits. You may be thinking, “I already know all the laws and main concepts of the book. Why do I need to get it?”

Because knowledge without belief will never lead to action, you have some surface-level knowledge of how habits work, how to make them, and how to break them. But reading or listening through the book will build on that knowledge and reinforce it until you believe it. Then you will take action, build good financial habits and break bad financial habits. Know, believe, act. 

This article is educational only and is not intended to be investment, legal, or tax advice or recommendations, whether direct or incidental. Again, this is not investment advice. Consult your financial, tax, and legal professionals for specific advice related to your specific situation. Never take investment advice from someone who doesn’t know you and your specific situation. All opinions expressed in this article are the opinions of the people expressing them. Any performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be directly invested in.