A Financial Educator's Best Tips For Breaking Unwise Spending Habits
Whether you believe money can buy happiness or that it's the root of all evil, one thing's certain: Money is important. What we have stashed in our bank accounts helps determine the kind of lives we'll live. It can mean the difference between buying or renting, continuing your education or working full time, and relaxing at a wellness retreat or having a staycation.
Though there are ways to boost your earnings — asking for a raise at work or adding a new stream of income are two common options — it can take time to see substantial increases. Instead of waiting to receive a big promotion or for your side hustle to take off, you can start getting a handle on your finances by revamping your spending habits.
And, FYI, if you struggle to stay on top of your money and where it flows, you're not alone: A 2023 survey conducted by NerdWallet and The Harris Poll found that 83% of Americans overspend and 84% of people who've created a monthly budget fail to follow it. To find out how to break bad spending habits once and for all, Glam reached out to Melissa Jean-Baptiste, financial educator, founder of Millennial in Debt, and author of "So This Is Why I'm Broke: Money Lessons on Financial Literacy, Passive Income, and Generational Wealth." Here are her exclusive, easy-to-follow tips.
Make space to be financially vulnerable
"Vulnerability" may be a word you'd typically associate with a therapy session or an intimate talk with your significant other, but tackling your finances can be a vulnerable practice, too. You may have grown up with a destructive money story that you're still untangling today, or you might notice that your spending habits trigger feelings of guilt or shame (for example, if you've engaged in financial infidelity). That's why Melissa Jean-Baptiste suggests making space — literally — to be financially vulnerable. "Choose a physical space that brings you comfort and minimal distraction," the wealth expert exclusively told Glam. "That can be your bedroom, office, living room, park, library, etc. Wherever you choose, make sure you're 100[%] comfortable unpacking your finances in that space."
If a partner or roommate is near, let them know you'll need quiet time alone for a while to focus. Additionally, snooze any notifications on your devices and turn on your phone's airplane mode so you don't get sidetracked. If you avoided facing your finances until now, it can take just one disruption to pull you out of the moment and back into procrastination mode.
Have easy access to your financial documents
Not sure where your money goes each month? Thankfully, you don't have to be a detective to figure it out — there's a convenient paper trail behind each of your transactions, said Melissa Jean-Baptiste. "Every institution that gives you money or takes money from you is going to provide a record of that exchange. So that means things like your monthly bank statements, credit card bills, and student loan documents," she explained.
If your purchases are mostly digital or if you've opted for paperless bank statements, you might have fallen into an "out of sight, out of mind" approach to spending. But, to start taking control of your finances, you'll need to keep track of receipts and other documents. "Pull up a copy of each and keep them in one organized space that you can quickly and easily access," urged Jean-Baptiste. That way, you can manage your expenses and stay on top of important payments.
Get to know your numbers
Making sense of your spending habits can be overwhelming, especially when it feels like you're drowning in a sea of numbers. Take a deep breath, and then divide your cash flow into a few manageable categories. "Focus on four buckets: income, savings/investing, housing, and food," Melissa Jean-Baptiste explained. "These four expense categories are the big key players in your budget, followed by health care, transportation, personal and family care, and debt expenses."
An expense-tracking app can make this process a breeze and help you see exactly where your money goes, often with useful pie charts and other visuals. Many apps even synchronize with your bank account so you don't have to lift a finger each time you swipe your credit card or pay a bill. "Whatever expense tracker you choose to use, make sure it gives you the opportunity to fill in all the aspects of your finances," noted Jean-Baptiste.
Set goals you can track and monitor
You've started organizing your finances and pinpointing where all that cash is leaking. Now what? If you're not happy with what you've discovered, determine financial goals that reflect the kind of spending habits you want to adopt (because, even if you've grown accustomed to overspending during girls' nights or mindlessly shopping online when you're bored, it's always possible to change old patterns!).
Melissa Jean-Baptiste told us, "I love SMART (specific, measurable, achievable, relevant, and time-bound) goals. The concept of SMART goals was created to make those large scary life-changing goals achievable. They are rooted in practicality to increase your likelihood of success and help you stick to an organized timeline. The more successful you are in achieving your goals the more likely you are to continue the behavior patterns associated with those exact goals." Start with one small SMART goal to gain tailwind before moving on to other more challenging goals. Need some inspiration? Try saving $5 every day for one month, increasing your student loan payments by 20% for six months, or cutting costs to grow your emergency fund by $1,000 within a year.
Choose a budget to follow for 30 days
A highly effective way to break your worst spending habits and reach your financial goals is to create a budget. Unfortunately, budgets have earned a bad rap, and many people struggle to follow them (remember the stat we mentioned earlier?). But, as Melissa Jean-Baptiste said, "If you've ever said or thought you hate budgeting, budgeting doesn't work for you, or you can't stick to a budget, chances are you're doing it wrong."
She exclusively told Glam that there's a budget style for everyone — "traditional budgets, 50/30/20, 70/20/10, zero-based budgeting, or even the envelope system" — and if you're struggling to follow one, it might be time to swap it for another. "You want your budget to be an experience that allows for a healthy balance between doing the things you want to do and doing the things you have to do," added Jean-Baptiste. "If your budget isn't supporting your SMART goals or helping you reach your vision of financial independence, choose a different one. If that one doesn't work either, try another. No one will fight you about it. I promise."