The start of a new year can bring ambitious financial resolutions—saving more, spending less, and finally getting control of money habits that no longer serve us. But as the excitement of January fades, so can the motivation. Why is breaking a money habit so difficult, and what does it take to create lasting change? Drawing on insights from James Clear’s Atomic Habits, let’s explore the psychology behind breaking financial patterns and the strategies to replace them with healthier habits.
Understanding the power of money habits
Money habits are deeply ingrained behaviours shaped by years of conditioning (our thoughts and beliefs), emotional attachments, and subconscious routines which all make up your money blueprint. Whether it’s impulse spending, money hoarding, avoiding financial planning, or undercharging for your services, these habits often operate on autopilot. According to Clear, habits consist of four stages: cue, craving, response, and reward. Understanding these components can play an important role in breaking the cycle.
For example, if you habitually buy breakfast out every morning despite wanting to save money, the cue might be your morning routine, the craving is the comfort or energy boost, the response is purchasing the breakfast, and the reward is the satisfaction or social connection that comes with it.
breaking a money habit: strategic approach
- Identify the Habit Loop
Start by recognising the triggers. What cues your financial behaviour? Is it lack of time, stress, connection, or social pressure? Awareness is the first step to change.
- Make It Invisible
Explore removing the cue. If online shopping is your weakness, unsubscribe from promotional emails, delete shopping apps, or remove saved credit card details to add resistance to the process.
- Replace It with a New Identity-Based Habit
Instead of focusing on just quitting a habit, shift to who do you want to become. Language can play a big role in how we lead our life, so rather than saying, “I need to stop impulse spending,” consider “I am someone who makes intentional purchases.” This subtle mindset shift reinforces identity-driven behaviour change.
- Introduce Immediate Consequences
Bad financial habits persist because the rewards are immediate, while the consequences are delayed. To counteract this, create instant friction. For example, give yourself a 24-hour rule before any non-essential purchase, pay cash where you can, match the cost of the non-essential purchase and either invest that money or put it towards paying down debt, alternatively set up an accountability partner to check in on your spending.
- Leverage the Power of Environment
Your surroundings shape your behaviours. If you struggle with overspending, surround yourself with financial-savvy influences—follow or engage financial specialists such as money coaches, accountants, financial planners, join wealth-building communities, and curate a digital environment that supports mindful money habits. If you’re visual, consider creating pictures of what you are want to achieve (a vision board or similar can work wonders) and placing this in a high traffic area e.g. the fridge!
Overcoming the motivation dip
It’s common for financial resolutions to fade by February. Motivation can be short-lived, but habits thrive on systems, not willpower. Success isn’t about massive overhauls; it’s about small, consistent changes. Get clear on your money in and money out, automate savings, schedule monthly money check-ins, and reward yourself for financial wins to sustain momentum (these can be free or low cost rewards).
Transforming your financial behaviours isn’t about perfection—it’s about progress and consistency. The key is to identify negative habits one step at a time, bring awareness to the thoughts, feelings and emotions that you’re experiencing leading up to these and replace them with empowering alternatives. What’s one small change you can make today to break a money habit and build wealthier habits instead?
Suzanne X
Live your abundant life
The information above is general in nature and is to be used for education purposes only. Before acting on any information, you should consider the appropriateness of the information provided and how this may impact your personal needs, objectives, and financial situation which have not been taken into account. It is recommended that you seek guidance from a qualified financial specialist such as a financial adviser, accountant or tax agent before implementing.
The Money Mindset Reprogram can help you transform your relationship with money. Working with a financial coach can help you to gain clarity around making and managing money. If you would like to explore this further, please book in for a free 15 minute chat.