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3 Secrets To Successful Habit Change

Habits are difficult to change. Understanding the psychology keeping us stuck in our ways can make it easier.During more than six years blogging about money, I have become increasingly interested in learning more about what role habits — both good and bad — play in financial success.

Additionally: Where do our habits come from? Why are bad habits so difficult to break? And how can we change them?

Recently, I asked my focus group what bad habits they have or had when it comes to money. Not surprisingly, nearly everybody mentioned overspending in one way or another: racking up balances on credit cards, overdrawing checking accounts, or simply failing to save a percentage of their income.

Today, I want to explain a bit about why changing your habits is so difficult and offer 3 secrets that will help you permanently change bad habits for good. (Although we’ll focus on financial habits because this is a money blog, these tactics work just as well for changing other habits, too).

Money Diets Don’t Work, Either

I’ve often equated cutting back on spending to dieting: a fad diet can help you shed pounds in a few weeks, but unless you address your bad eating habits permanently, the pounds come back. The same is true with money: Forcing yourself to resist your urges to spend may work for a few weeks, but a single large purchase can wipe out weeks of brown bag lunches and sacrificed lattes.

I know this because I spent years trying to rein in my spending and get out of credit card debt. Misguided attempts to change my ingrained desire to spend failed. Ultimately, what worked was:

  • Finding ways to reduce my biggest expenses like rent. (Focusing on things that mattered.)
  • Canceling my credit cards. (Creating barriers to spending.)
  • Putting myself on a forced debt repayment plan. (Making good behaviors automatic.)
  • Turning my efforts towards earning more money. (Earning more helped me make progress faster and gave me the strength to persist even after occasional slips.)

It was a long and difficult road to discovering this combination of tools that finally reversed my finances. In fact, I think it was easier to quit smoking!

It’s Easier To Quit Smoking Than Cut Back Spending

I was a smoker for eight years. I picked up the habit gradually during college, and by my mid-twenties was hooked at nearly a pack a day. It’s no secret that nicotine is addictive and quitting smoking is insanely difficult. It took me half a dozen attempts over two years to finally kick the habit.

If you’re addicted to something – nicotine or alcohol, for example – the recommended solution is to give up the habit altogether. You don’t hear doctors saying “it’s okay to have a puff once in a while.”

Sure, the health hazards of an occasional cigarette may be insignificant compared to a pack-a-day habit over 20 years, but all it takes is one puff to slip back into old habits.

Now consider bad financial habits like chronically overspending, binging on things you can’t afford, forgetting to pay bills, or neglecting to save.

If you’re an over-spender, you can’t simply stop spending. Money – earning it, saving it, and spending it – is a necessary part of everyday life. So you need to learn to spend safely. There is no such thing as abstinence for someone with a spending problem.

I asked readers what they had done to try to change their habits that had NOT been successful. There were two biggies: budgets and willpower. Here’s what some of you said:

“I would set budgets and then blow them, or divert money into savings for a while and then cash it out.”

“I have tried making budgets and I just can’t follow them…I have tried saving an emergency fund, but once i tap into that money it is gone and I forget to re-save it again.

“I set budgets that were too low, therefore it left me feeling restricted.”

“I initially made a sort of arbitrary budget that didn’t really align with my spending habits.”

“I told myself that I would never make binge purchases on clothes and would ONLY buy when I needed to. However, shopping was a social event for me and my friends, and they started to stop calling me because I turned into a grouch because it wasn’t fun anymore when I couldn’t leave with something.”

The 3 Secrets: Why Changing Habits Is So Difficult

In order make habit change easier, it’s helpful to understand some of the psychological forces working against us – and ways to overcome them.

1. We’re influenced by our environment way more than we admit.

We are social creatures by nature, and other people and societal norms influence us in ways that we don’t even realize. We hate to admit that we’re susceptible to this kind of influence, but if it didn’t work, advertisers wouldn’t spend billions of dollars each year.

For example, we eat more when we’re out to dinner with a group of friends than if we’re eating alone or just one other person. There are exceptions, of course; if we’re on a first date or job interview, we may be self-conscious and eat less. But most often, we subconsciously mirror the behaviors of those around us, and as long as somebody we’re with is eating, we’re more likely to keep on stuffing face.

What does this mean for our financial habits?

For one, like the reader who spends when she’s out with friends, if we’re going out with people who love to spend money at the mall or at the bars, we may be more likely to ignore our budgets and spend more than we should.

What can you do?

The key is to take control of our environment. If going out Friday night with spendy friends blows our budget, we may have to take some nights off or suggest alternative activities.

A good way to take control of your environment is to create barriers to prevent bad financial habits. Ramit Sethi of is a prominent advocate of using psychology in personal finance; he explains barriers here. 

Barriers can be bad (for example, the five blocks between you and the gym), but they can also be good, like if you put the candy away in the pantry instead of in a clear bowl on your desk.

Cutting up credit cards (or at least leaving them at home) is old school financial advice, but it’s the perfect example of creating a barrier between you and overspending.

Although I don’t think giving up credit cards is for everybody – they provide a convenient way to track spending and get rewards – if you’re struggling with overspending and credit card debt I do suggest you cut them up or even close them out. Ultimately, this step helped me pay off the last of my credit card debt. I cut up or cancelled all of my cards save an American Express charge card, which I used for monthly expenses safely because I had to pay the bill in full each month.

2. Willpower isn’t enough.

If you rely on willpower alone, the odds are against you. I won’t say it’s impossible to change a habit by sheer will – there are times when a powerful emotional conviction to change is enough to make a new habit stick — but it’s unusual.

We’re human. Despite our desires to adapt certain behaviors for long-term gain, we often give in to short-term temptation. We procrastinate. It’s the same reason we watch YouTube videos instead of finishing that term paper or have had Schindler’s List on our Netflix queue for the last two years but never watched it.

Psychologists sometimes call this the present bias. If we get a $2,000 holiday bonus, we know we should really sock it in an IRA, but we also really want a new MacBook. For many of us, the MacBook will win (but we’ll tell ourselves that we will definitely open the IRA next year).

What can you do?

Automate, automate, automate.

Just as you want to remove things from your environment that will sabotage your desired behaviors, you want to put good financial habits on autopilot.

This means putting your bills on autopay, signing up for 401(k) contributions at work, and automatically transferring money to a savings account at a separate bank.

3. Failures are inevitable; persistance is optional.

I’ve read at least a dozen blog posts claiming it takes 21 or 30 days to change a habit, but I don’t have a confirmed scientific source (let me know if you do). It’s safe to say, however, that habit change takes time. Maybe 30 days, maybe longer.

The good news is that once a habit sticks, it’s just that – a habit. How often do you forget to brush your teeth? Exactly.

Of course, as any ex-smoker can tell you, there will be slips. Failure is inevitable. The difference between succeeding and failing at permanently changing a habit, however, is whether you let one fall stop you or you pick yourself up and keep going. Persistance is optional!

What can you do?

If you’re trying to spend less, stop overdrawing your checking account, or cut back on credit card borrowing, you will probably “slip” from time to time. Don’t let that be an excuse to open a new credit card and buy up everything on your Amazon wishlist in one weekend.

Secondly, focus on one habit at a time. There is research to suggest that spreading our self-control too thing is a set up for failure. So if you’re working on the spending – cut yourself a break on the dieting. Of course, cooking at home instead of eating out will probably help both your wallet and your waistline.

Habit Change: What Works

I’ve already offered some tips for breaking bad financial habits and creating new, better ones:

  1. Change things in your environment that trigger spending; create barriers to make it more difficult to overspend.
  2. Don’t rely on willpower; automate good financial behaviors. Make doing the right thing the default, not a difficult choice you have to make over and over again.
  3. Focus on one thing at a time, and be relentless. Don’t equate one slip with failure. Choose to persist.

In addition, I asked members of my focus group what, if anything, has worked to help them break bad financial habits. If you’re skeptical of my summary of leading psychological and economic research, just listen to what these actual readers said helped them change:

“Making payments automatic, leaving cards at home, and the big one – making more money.”

“Automatic [debt] payments set up for two to three times the minimum payment helped. As for the retirement, investing 10 percent in a mix of tax-deferred 401K and Roth is easy when it comes out of my paycheck before I even see it.”

“Using a “grace period” in deciding whether or not a purchase was necessary. After deciding that I want/need something, I will wait 24 hours before purchasing it. If the purchase is above [a certain amount], I’ll wait 48 hours.” (Good example of a barrier.)

If you want to learn more, the popular blog Zen Habits has done a superb job aggregating 29 other tips to make habit change easier.

What about you? Have you successfully overcome a bad financial habit or created a good one? How did you do it? What, specifically, made it possible? Share your experience in a comment.

Photo credit: Rennett Stowe.

Published or updated on August 15, 2012

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About David Weliver

David Weliver is the founding editor of Money Under 30. He's a cited authority on personal finance and the unique money issues we face during our first two decades as adults. He lives in Maine with his wife and two children.


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  1. Donald says:

    I can’t count the times that my will power failed me. Turning an action into a habit is indeed difficult but as long as we keep track of our progress and remember our goals, things will get easier.

    I especially love your advice on controlling our environment instead of it controlling us. I will remember to be always aware of this and do what is needed when the time comes.

  2. So true. It is a hard addiction to break unless you change your thinking, not just behaviour.

  3. Great blog post! I’ve recently discovered ReadyForZero to help me track and tackle my (small) amount of debt. They give me tips and suggestions personalize to me to help me stay on track. Definitely recommend it. Plus, I use Adaptu to make sure I pay my bills on time and don’t over draw an account.

  4. Kellie says:

    Thanks David. I cut my clothes shopping out of my life in early July. I have been doing great and paid off two credit cards since. But I don’t seem to have that extra money I’m not spending. It seems to go somewhere else. I really need to automate my savings!

  5. Couldn’t agree more with this post! Especially the part about being influenced by our environment. Having been a marketer for several years, I know first-hand how companies can subconsciously trick us into buying things we really don’t need. Beating it isn’t a matter of sheer willpower, it’s more about recognizing and interrupting our bad habits.

  6. Tom says:

    Interesting post. I find that I am exactly opposite. I have to force myself to spend money on things that I deem “unnecessary”, such as purchases outside of food, a place to live, a car and a gym membership. I might be the only person in America that has never owned an ipod. It’s not something of which I am proud. I am afraid that life will pass me by and I won’t be able to enjoy myself because of my fear of spending money. It’s difficult to find a good life balance.

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