Changing Your Spending Habits: A Guide

March 19, 2019 · 7 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

Changing Your Spending Habits: A Guide

Everyone has their own spending vices. Some people may buy groceries, but eat out instead or spend too much on shoes or gadgets.

We all have bad money habits. And within reason, having the occasional money splurge is totally okay. Everyone is allowed to treat themselves on occasion, and no spending is automatically “bad.”

It is when bad spending habits compound on top of one another or spiral out of control that it becomes a problem. Spending should be done reasonably and with a plan, in a way that doesn’t exceed income.

Almost no one can afford to buy everything that they want. Period. But exhibiting self-restraint and cultivating good spending habits is not as easy as it sounds. Frankly, humans aren’t very good at this.

If you are looking for ways to cut spending habits, let’s begin by taking a look at the way our brains make it hard for us to succeed in money. With this foundation of understanding our built-in biases, we can discuss ways to improve good spending habits while creating some barriers against the bad ones.

With a little hard work, accountability, automation, and dedication to ongoing education, changing bad spending habits might come easier than you think.

Breaking Bad Habits: Examine Your Biases

Behavioral economics is a field that studies the intersection of money, behavior, and psychology. Said another way, it looks at the ways that we are inclined to behave in certain ways with our money. As you can imagine, humans have a wide range of cognitive biases that play out in our money behaviors.

That’s right: Maybe some of our bad money tendencies aren’t because we lack willpower, but because our brains are hardwired or socially conditioned to behave in less than desirable ways. The only way to combat these biases is to identify and question these behaviors as they make themselves visible to us.

One such bias is called “herd mentality .” Humans are naturally herd creatures, and we assimilate to the behaviors of those around us. We also have the strong, innate desire to be an accepted member of a larger group.

The herd mentality manifests in our spending in plenty of ways, such as spending money on material possessions that we think will make us look cool to our peers or rushing to buy a “hot stock.”

Another mighty bias is called the “present bias ,” and it describes our natural attraction to instant gratification. Often, the desire for something right here and right now comes at the cost of saving money for the long-term. No surprise here, but this makes long-term financial planning extremely difficult.

Before you are about to spend money, take a moment to ask yourself a few questions about the purchase: “Am I trying to impress somebody with this purchase?” “Do I believe that this purchase is going to improve my life?” (In many cases, it won’t.) “Will I love this purchase in a year? In two years?” Slowing down to examine the reasons you want to buy something may alone be enough to stem some spending.

Ways to Cut Spending Habits

Track Your Spending

Changing spending habits can be difficult if you don’t know exactly what is coming in and what is going out. At the very least, you should use tracking software via an app, like Mint or You Need A Budget, or you can create your own excel sheet.

Some financial institutions also provide budget tracking and forecasting tools that you can access for free. SoFi Checking and Savings®, an online-only checking and savings account, has a built-in money tracker that provides weekly spending updates.

If you’ve never budgeted before, start by tracking your spending over the next two or three months. Tracking your cash inflows and outflows is the first step to building a realistic budget. It is very hard to set up budget categories if you don’t actually know how much money you’re spending in each category.

After tracking your spending for a few months, you might be shocked at what you find. A monthly cash flow report will help you to determine what categories you’ll want to pare back in.

Accountability Partner

People often grow shy when it comes to discussing money. That’s because there is a lot of shame surrounding money in our culture. If you have a friend that you feel comfortable talking money with, ask them if they would like to be accountability buddies .

Exactly how this looks can take a couple of different forms, but a weekly or monthly check-in online, in person, or over the phone could be just the inspiration you need to make better money decisions.

Not only does peer pressure help when tasks are complex and ambiguous, but repetition of education and action is a requisite to being good with money. Put a recurring time on a calendar with a friend to discuss ideas and to create achievable short-term and long-term goals. Oh and the more specific your goals, the better.

Automate Your Saving

Seriously, you’re so busy: Why leave saving up to chance?

Get that money out of the spending vortex that is the checking account. Automate your saving so money is whisked from your checking account and into your savings account immediately. The way it works is pretty simple: If the money isn’t there, we can’t spend it. The more you can systematize saving, the better.

There are two main ways you can automate your savings. The first is by using a retirement account that you have set up through work. This is the easiest way—you just chose a percentage of your salary and the money is taken straight from your paycheck.

The second option is to set up your own savings account to house your money. This can be a regular savings account at a commercial bank, online IRA, or an online-only account that offers a higher rate of interest.

Once you have that account set up, establish a transfer from your checking account to your savings account two or three days after payday (in case of a delay).

Of course, this strategy is only going to work if you are not at risk of overdrafting your account. To make sure you don’t overdraft, start with a small amount to be sent to your savings account each month.

Monitor your spending throughout the month to make sure that you aren’t cutting it too close. Once you’re comfortable with that routine, you can slowly increase the amount.

Waiting Period

Some bad spending habits can be curbed by something as simple as instituting a waiting period for all purchases. Whether online or in the store, always commit to waiting at least 24 hours before buying.

A week would be even better. After the initial “swoon” has worn off, you might be surprised to see how many potential purchases that you not only no longer want, but you think were terrible ideas in retrospect.

It is very easy to get caught up in the moment, and that desire for instant gratification takes over our reasoning capabilities. A waiting period helps us combat the desire for instant gratification.

Good Spending Habits Require Lifelong Work

A study by the Consumer Financial Protection Bureau found a common trait shared between people who have achieved “financial wellness”—they are all committed to ongoing education about money and personal finance.

For most people, learning about money is not a one-time thing, but is a practice that must be worked at over time. In this way, it is very similar to physical fitness or mental health.

There are many ways to do this. One easy way is to commit to reading articles, blogs, and books that focus on financial education. Another is to listen to financial podcasts. Follow financial educators on social media, and join communities of like-minded people.

For example, the #debtfreecommunity on Instagram provides a bounty of inspiration, education, and accountability for people actively getting out of debt. Surround yourself with as much positive encouragement as you do temptations to spend.

Being good with money requires both thought and action. Simply wishing to eliminate bad money habits will never be enough. But with a little practice and effort, you can help bust those bad money habits.

Ready to ditch those bad habits and start earning? Spend, save, and earn all in one place with SoFi Checking and Savings.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2022 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
SoFi Money® is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member
SoFi Securities LLC is an affiliate of SoFi Bank, N.A. SoFi Money Debit Card issued by The Bancorp Bank.
SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.


All your finances.
All in one app.

SoFi QR code, Download now, scan this with your phone’s camera

All your finances.
All in one app.

App Store rating

SoFi iOS App, Download on the App Store
SoFi Android App, Get it on Google Play

TLS 1.2 Encrypted
Equal Housing Lender