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Ask HN: How to break the habit of bad financial management?

Author: desertraven

Score: 7

Comments: 12

Date: 2021-12-04 08:29:49

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WheelsAtLarge wrote at 2021-12-04 09:33:28:

-Define a budget

-Pay yourself first. Allocate your savings at the beginning. 10% of earnings is a good start.

-Use cash to allocate all your expenses when you get paid. Put your cash in envelopes so you can see where your money is going.

-Cancel all credit cards

-Don't borrow money unless it saves you or gives you money in the future.

-Get rid of all loans asap.

-Join a support group. It's a marathon to fix the problem. You can't fix it in a sprint even though you really wish you could.

pkrotich wrote at 2021-12-04 14:50:44:

Canceling credit cards is terrible idea if you care about credit - which has impact on managing your financials.

If reason for cancel is to avoid using them then I would say cut them, but keep credit. Not all credits are bad… using them unwisely is tho.

noahtallen wrote at 2021-12-04 19:07:15:

Yeah. If you have crippling credit card debt, maybe you need to not have credit cards to prevent overspending. But I doubt most people need that — they just need to treat credit cards as normal cash, where you automatically transfer money to cover all your credit card transactions each month. Lots of budgeting tools (like YNAB) do this automatically so you don’t even have to think about it.

adrianmsmith wrote at 2021-12-04 10:28:50:

If you're talking about personal finance, this blog, starting with this one blog post, helped me a lot:

https://www.mrmoneymustache.com/2013/02/22/getting-rich-from...

williamtwild wrote at 2021-12-04 11:27:16:

That blog has plenty of affiliate links and generic late night infomercial advice. Terrible.

ludicast wrote at 2021-12-04 11:15:32:

If at the beginning, Dave Ramsey. His baby steps helped us tremendously. You really only need a few watchings to get it, and he has a great presentation style.

I'm not a Christian, so the evangelical parts were odd. But they did get the passion across in a more memorable way.

_Microft wrote at 2021-12-04 09:33:44:

Maybe you could expand on what you mean by bad financial management. Are you gambling? Do you spend all you money on gadgets? Do you have an expensive hobby? Are you drinking? Does the money go away unnoticed, e.g. because you are spending a disproportionate amount on small things like a coffee here and a meal out there which then adds up?

Maybe you don't even know yet where all the money is going and should try to figure that out? Once you know you could try to break bad habits, e.g. regular meals out.

jaredsohn wrote at 2021-12-04 11:48:08:

https://www.reddit.com/r/personalfinance

including the wiki -

https://www.reddit.com/r/personalfinance/wiki/index

stuaxo wrote at 2021-12-04 09:57:18:

Not sure - but that doesn't sound a one bad habit, it sounds like you could develop some new ones.

drakonka wrote at 2021-12-04 11:36:03:

I am not sure exactly what bad financial management means to you, but to me it means a habit of impulse buying, so I'll focus on that here. This is always something I have struggled with, and it has required constant maintenance over the years. I have never been in a ton of debt purely because of my own anxiety about my spending habits. I didn't get a credit card until I was 30 for the same reason, knowing it was probably not a good idea for me. I now have a credit card for flight points and pay it off in full each month.

I still slip up _a lot_, but I do manage to save ~40-50% of my income most months. Here are some things that helped me keep my own impulse buying habits in check:

When I want to buy something expensive, make up a challenge to "earn" that thing and prove that I will actually use it. Before I got a Kenwood mixer, I set a goal to make 100 pies (or other baked goods that would otherwise use a mixer) by hand. I think I got to about 50 over the course of two years before a good deal popped up on a mixer and I went ahead and got it. I did not make it to my 100-pie goal, but I felt I had proven to myself enough that I would use the thing and went for it.
In the meantime, imagine what else you could buy with that same amount of money. "That $1000 mixer is a whole vacation! Imagine how much cat food I could get with that $1000! That could pay for an entire wardrobe!" "If I throw this in a low cost index fund I could have $x in a few years!"

It doesn't really matter what the things I come up with are, just coming up with what _else_ I could use that money for makes me reconsider if this mixer is really the top priority for me right now.

Order of money operations. As soon as I get paid, I first pay my rent, then my card bill, then put everything else into savings (or funds) and leave maybe $100- $500 each month in my checking account for any small emergencies (eg a place doesn't take my credit card or something)
If the impulse buy instinct flares up and I just really want something way too expensive on a whim, sometimes I let myself buy something _small_ instead. I want this extra nice pricey desk lamp? Budget for it over the next two months, and in the meantime buy a considerably less expensive new kitchen utensil or coffee beans or something. "Buy stuff to avoid buying other stuff" is not an ideal strategy, of course, but sometimes it helps in a pinch.
Open up your portfolio report and see how well your index funds are doing. This encourages me to maybe throw more of that money I was about to spend into funds instead.
Set a limit of how much I allow myself to spend on my card each month after paying the bills. I am currently struggling with this one. I managed to avoid lifestyle inflation for a year, but the last few months I've been spending more than my intended amount and it is causing some anxiety. Which leads me to:
Keep an eye on your own stress levels and mindset. I go through periods of doing really well and really badly with my spending. Some months I just buy random crap I do NOT need. This is one of those months. Yesterday I ordered a YoYo because I thought it might be relaxing and I liked playing with a YoYo as a kid. Why?! I KNOW this YoYo will probably sit in a drawer somewhere. But I want to _try_. So right now I _know_ I am in one of those spending modes and need to be more careful. At the same time, my financial anxiety flares up at these times because I know I'm doing badly. I'm now starting to set mini-goals for myself: "Don't spend anything for the next 3 days", or "Buy only groceries for the entire week", or "Only one takeout coffee per week this month". It does not always work and it's always a struggle, but sometimes it helps kick me out of the impulse buy loop.

Things I've tried that did not work for me:

YNAB. I tried it three times. I know many people _love_ this and I think it is worth trying for those who haven't yet, but for me it just did not work. Too much manual upkeep. Over the long term, setting an overall number limit on my card for me to keep in mind for the month instead of trying to break the spending down into categories has been more effective for me (although as you can see above it isn't foolproof).
Spreadsheet tracking and other forms of more granular budgeting. I can never stick with it and it ends up just making me feel worse because I'm not keeping up with the granular reporting.

notable_chuckle wrote at 2021-12-04 12:27:42:

Are you me (with a few differences in coping strategies)?

Stress levels certainly impact my urge to spend. Getting outside for a walk or hike is a good distraction.

I use YNAB. I probably look at the budget too much.

I force myself to sell things if it's reasonable to sell them when I want something new. I've sold many phones on Swappa and elsewhere.

I have multiple credit cards and usually pay them off more than once a month. Something about having low balances on cards and in my checking account helps me reduce impulse buying.

I have been trying to redirect the urge to buy something into putting the money into retirement accounts instead. Small purchases of things also helps me to avoid some big purchases.

I buy nice things when I want something in a category. That limits the need to buy an upgrade later.

drakonka wrote at 2021-12-04 12:57:13:

I should also try to sell things I don't need. I've never done this because it just seems like so much hassle to take photos of the stuff, post the ad, handle the shipping, answer any questions, etc. There are some resell services around here that just pick up the things you want to sell, put their own price on it, and give you a cut. I will probably get peanuts compared to selling the items myself, but maybe it's better than nothing if the stuff is going to sit there unused otherwise anyway.

Going outside for a walk or hike is a great idea. I have a forest just a few minutes' walk away and have not been going out there enough. The less I go out the harder it seems to be to drag myself out there even as I can tell it is impacting my mood (and by extension spending habits). I might try and make it a point to schedule a 30 minute forest walk every morning or lunch.