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How Bad Financial Habits Can Help You Get Financial Benefits

  • Post author:Bob Haegele
  • Post last modified:March 18, 2024

Hey frugal people! I have a very special post today. This is actually the very first guest post I have ever had here on TFF! This post comes to us from Nelly of

In the post, Nelly discusses ways in which bad financial habits can actually benefit us. I think it goes without saying that we all have our financial pitfalls, but sometimes there can actually be positives that come along with them.

I hope you enjoy this post and thanks to Nelly for giving us some great new content!

We all have bad financial habits. But could some of those habits actually be helpful?

We, the humans, are merely creatures of habit, even if it comes to our financial matters. While some financial habits can create a smoother path to success and wealth, others may lead you to financial stress.

Good financial habits aren’t something that’ll start growing automatically. We have to develop those habits by devoting hard work and dedication. It’ll be possible for you to keep yourself and your family away from falling into debts; if you have your finances under control. You’ll be able to build a strong credit score, and you can create a fund to support your big purchases like a car or a home.

When people are having financial issues, it is normally because of the several bad decisions that create problems. If you want to become successful in your life and protect your financial future, you must identify those bad financial habits. You should follow the ways through which you might avoid making wrong decisions on a regular basis.

But having bad financial habits aren’t always bad. There are a few scenarios where bad financial habits may help you to improve your financial skills and financial life.

But before discussing them further, let’s recognize those bad financial habits.

How do people get bad financial habits?

The National Foundation for Credit Counseling (NFCC) conducted their Financial Literacy Survey in March 2014. The survey collected data from nearly two thousand US adults. The survey report says:
• About 61% of US adults are lacking a proper budget plan
• One-third of US adults carry an outstanding balance on their credit card
• Nearly 16% of US adults don’t have sufficient savings to meet emergency requirements
• 32% of US adults didn’t save any money for their retirement days from their present annual income
• 65% of US adults didn’t check their free credit reports for the last 12 months

Now you got the numbers, right? But what do we get from this statistics? These numbers reveal that people are:

1. Lacking a proper budgeting skill. As a result, they tend to overspend and incur debts.

2. People avoid saving money for long-term requirements or emergencies.

3. People usually forget about the credit card balances they’re accumulating when they submerge into impulse buying. As a result, they fall into credit card debt and pay more than what they need to.

4. People do not care about checking their credit reports. They want to increase their credit score but don’t know the importance of monitoring the credit reports regularly and dispute errors, if any.

Each of this behavior is a sign of bad financial habit. Practically, these bad habits may increase your expenses and push you towards debt problems. Apparently, you’ll have lesser money to manage your important expenses as well as the monthly debt payments.

Now let’s check out a few important bad financial habits that experts may suggest you avoid totally.

Bad financial habits that you should avoid totally

a. Neglecting your budget plan

Most of us find ourselves in deep trouble while dealing with the monthly bills. It is because people always get confused about how much they should spend each month. Apart from dealing with the necessary expenses like paying monthly bills and grocery shopping, they often engage in impulse buying and apparently fall into debt.

The root of this problem is nothing but a lack of a proper budget plan. People who do not follow a proper monthly budget may often find themselves in critical debt problems. So, neglecting your monthly budget is one of the biggest bad financial habits to get into.

#Solution – By Planning a good budget, you can easily categorize and monitor your monthly spending.

b. Overspending on luxury items

You might enjoy watching movies in theaters every weekend or eating out in an expensive restaurant often. But don’t you think these habits will make a big hole in your wallet? Too much spending on luxury items or services may increase your credit card bills and apparently ruin your monthly budget.

#Solution – Allocate a specific amount (maximum 30%) of your monthly budget for spending on luxuries.

c. Swiping credit cards to get reward points

Do not use your credit cards just for the sake of earning reward points. If you don’t change this habit, soon you’ll realize that the benefit is much lesser than what you’ve already paid to the creditor. Categorize your list and specify things that you need to buy with credit cards.

#Solution – Stop making purchases through credit cards and use cash instead.

d. Making minimum payments on credit card debt

If you start making only the minimum payments on your credit card every month, the increasing balance will soon convert into credit card debt.

You might be avoiding the late fees there, but the credit card company will charge a high interest on the outstanding balance.

#Solution – Try to pay off the entire balance every month and on time. This way you can reduce your credit card balance and credit utilization ratio, along with saving money on the interest payments.

f. Neglecting long-term planning for your retirement

Are you planning on retiring early? How much did you save for your life after retirement? Have you planned for your old days when you will no longer be able to earn money? Do you think that the income from your 401(k) plan or IRA plan will be sufficient for your retirement days?

If you don’t have answers to any of those questions, you are severely neglecting the long-term financial planning for your future. This is the most dangerous bad financial habit of all.

Contribution to your retirement fund blindly doesn’t make any sense. You must calculate how much contribution is enough to set up a decent income for your retirement.

#Solution – Consult a professional and plan your retirement savings.

g. Paying no attention to the credit score

You can’t ignore the importance of the credit score in your financial life. Every financial event in your life is recorded in the credit report history. Whatever financial step you take, at any point of time, may influence your credit report. So, if you do not give proper attention to increase your score, you’ll find difficulties in your future financial life.

Having a low or bad credit score may cost you a lot. Your loan applications might get rejected, you might be charged high interests in a car loan or home loan, you might have to pay higher premiums for your insurance policies, etc. Credit score may even create issues on your work life.

#Solution – Always check your credit report regularly. Check your credit score and avoid wrong financial steps that can damage your score. Dispute errors to the credit bureaus if you find any in your credit report.

e. Keeping the minimum balance in the account

You might need to withdraw money from your bank account if you need it desperately. But withdrawing money from there every now and then might end up having insufficient funds in the account. As a penalty, your bank may charge a fee for having an insufficient balance in your account. So, it’s a bad habit to keep only the minimum balance in the bank account, and withdrawing money without checking the remaining balance.

#Solution – You may easily avoid paying the insufficient fund penalty. All you have to do is to spend less. However, if you really need to withdraw money, try to keep the minimum balance intact every time.

Now, we are going to talk about the most interesting part of this entire discussion.

When having bad financial habits may help you?

There are a few instances When having bad financial habits may really make sense.

a. Using credit cards for too much shopping

The most common benefit you’ll get due to using credit cards for shopping is that you can shop as much as your card permits. You don’t have to pay through cash, so you don’t need to withdraw money from your bank account. Apart from that, using certain credit cards for shopping may get you good reward points that you can redeem and shop again. If you use your credit cards too much and also pay them on time, it can help you to build a good credit history.

b. Applying for new credit cards in a short span of time

If you have applied for too many new credit cards and get approved for most of them, it’ll give your credit score a boost. As we know :

Credit utilization ratio = (Total balances on all credit cards / Total credit limits on all cards) X 100

Having new credit cards will increase your total credit limit; so, as a result, your credit utilization ratio will be lowered. But make sure you don’t immediately reach your new credit card available limits.

c. Borrowing short-term loans from illegal lenders

Borrowing high-interest short-term loan is one of the worst financial habits you can imagine. But sometimes you may need to borrow them due to emergencies. But trust me, this bad financial habit may help you to save money.

In your state, if payday loans, tribal loans, or other high-interest cash loans are illegal, then you can borrow money from them. At the time of payment, you may need to pay only the principal amount, not the interest. It is because as they are illegal in your state they aren’t allowed to do money lending business over there. So, you can save the interest from your debt payment.

Don’t worry, the lenders can’t harm you legally as they are illegal lenders.

d. Borrowing personal loan from friends

Borrowing money from relatives and friends will get you an interest-free loan. You’ll have lots of time to pay it back. Your friends won’t disturb you that much as any lender might do. Even if you do not pay them back, they won’t sue you (probably).

But of course, your relationship with your relatives and friends might be at stake if you can’t pay off the loan at all.

e. Filing bankruptcy

Filing bankruptcy without thinking about the consequences is really a bad thing. Bankruptcy law allows you to maintain a gap of 7 to 8 years between two filings if your first submission was rejected. The bankruptcy will be added to your credit report for 7-10 years. All of your credit cards may get canceled due to bankruptcy.

But still, it is quite beneficial as bankruptcy filing may initiate the automatic stay, stop creditors from suing you, and prevent them to take away your property such as home, car, etc.

It is very unfortunate that such a bad financial habit is often seen in the higher elite class, mostly on celebrities or other famous people.

Once again, thank you to Nelly for writing this post for us. I hope you all enjoyed it!

Author Bio: Good Nelly analyzes financial happenings and writes articles to aware and help her readers plan for their financial future. She has been associated with Debt Consolidation Care for a long time. However, she has contributed her articles to other websites, too.


Hey there. My name is Bob Haegele and I'm a personal finance writer who has been freelancing since 2018. Since then, I've built a six-figure career as a freelance writer. My work has been featured in Business Insider, Forbes Advisor,, USA Today, and many other outlets. Interested in starting a blog of your own? Check out my post on starting a blog.

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