Common Bad Money Habits and How to Break Them

We all develop our own money habits over time — some are helpful, while others can be harmful. From impulse buying to putting off savings, even the smallest behaviours can quietly shape your financial health over time. 

When we talk about money “habits,” we’re not talking about good or bad traits. A habit is simply an acquired behaviour you repeat until it feels automatic. Understanding your habits is the first step toward changing them, and it often begins with awareness, rather than relying solely on willpower.

Real change can often begin with a sudden flash of insight or solution — an “aha” moment. Most of us have experienced this at some point in time — a moment where there is a noticeable shift in our perception. When this happens, the part of our brain related to our internal reward system gets activated. This process reinforces motivation, which can help make positive behavioural changes stick. As part of our Financial Literacy Month campaign, we’re helping Canadians find those "lightbulb" moments that make money feel more manageable and put confidence back within reach.

Why Bad Money Habits Are So Hard to Break

If you’ve ever promised yourself you’d stop overspending, only to swipe your card again a few days later, you’re not alone. Money habits are deeply tied to our emotions, beliefs, and even our sense of identity.

On top of that, credit cards, buy-now-pay-later offers, and convenient digital payments all encourage us toward instant gratification, while social media makes it easy for us to compare our lives to others. Add in rising living costs and limited financial education, and it’s easy to see why so many Canadians feel stuck.

Many of our spending habits don’t come from conscious choice. Some come from our families or social groups, much like other patterned behaviours we absorb without realizing. For example, we often adopt the same eating habits or patterns we grew up with. Other habits can come from a lack of understanding, like not knowing a single late payment can impact your credit score. When you look at your habits with curiosity instead of judgment, it can be much easier to change them for the better.

One helpful way to understand any habit is through the MAP model: Motivation + Ability + Prompt = Habit.

• Motivation is the “why” behind an action.
• Ability is having the capacity or tools to do it.
• Prompt is the cue that triggers the behaviour.

For example, if you want to check in on your budget more often, placing a small reminder on your phone every Friday (a new prompt) can be enough to help the habit take hold, even if nothing else in your routine changes.

The key is understanding that when you remove one of the elements that make up a habit — your motivation, ability, or prompt — you essentially break or remove the habit. Knowing this makes breaking unhelpful habits and building new ones much more achievable than you might think.

10 Bad Money Habits That Keep You Stuck (and How to Break Them)

1. Ignoring Your Budget

It’s tempting to assume you’ll remember where your money goes each month, but it’s surprisingly easy to underestimate your spending by a wide margin. Without a clear budget, small daily expenses — a quick coffee, a new app subscription, takeout meals — can quietly and quickly erode your savings.

The first step forward here is simply to pay attention and actively track your spending for a month. There are plenty of free mobile apps that help you do this. You could also use our free budget planner, or you could even use a notebook to jot things down on the go. Once you see where your money is actually going, from there you’ll have the awareness needed to control your spending and make more intentional money choices.

Even a small change in your prompt, such as checking your balance every Sunday, can make this habit easier to improve.

Another aspect to keep in mind is that a clear and sustainable budget should empower you, not limit you. Living within your means is a fundamental principle of personal finance, and it's a habit you can build. We recommend following the sustainable spending budget method, an approach focused on creating a long-term plan for effective money management, rather than just addressing short-term financial needs. 

The approach has three phases: Analyze, Brainstorm and Change — or A-B-C. Using this method, you analyze your income and expenses, brainstorm ways to improve cash flow, and commit to making positive changes to improve your spending habits, no matter how “small” they may seem.

2. Relying on Credit Cards for Everyday Purchases

Credit cards can be convenient, but using them for groceries, gas, and other everyday expenses often leads to balance creep — a slow build-up of debt that becomes harder to manage over time.

The problem isn’t the card itself; it’s the disconnect between spending now and paying later. When purchases don’t immediately leave your bank account, it’s much easier to lose track of your total spending. 

Instead, consider using debit or cash for your daily expenses and reserving your credit card for mostly planned, budgeted purchases. If you rely on credit to make ends meet, it might be time to re-evaluate your budget or speak to a certfified Credit Counsellor about your options.

3. Paying Only the Minimum Balance

Paying the minimum amount on your credit card each month keeps your account in good standing, but it barely makes a dent in the principal loan. Before you know it, the compounding interest can make a modest balance balloon into thousands of dollars. 

Even a small balance can take several years to clear if you’re only paying the minimum monthly payment, because most of your payment goes toward interest rather than the debt itself.

The flipside is that even small extra payments can make a big difference. Adding just $25 or $50 above the minimum monthly payment can help reduce interest and keep your repayment schedule manageable. 

Depending on your situation, you can also consider using the avalanche or snowball method for debt repayment. The debt avalanche method involves focusing on paying off the debt with the highest interest rate first, while maintaining the minimum payments on all other debts. The debt snowball method focuses on paying off the debt with the smallest balance first to build momentum — again, while maintaining your minimum payments on all other debts. If you still can’t find success with either of these methods, you can always reach out to a certified Credit Counsellor for professional advice on how to tackle your debt.

The key here is consistency. You can make small, focused steps toward paying more each month to help you regain control and rebuild confidence.

4. Not Saving for Emergencies

We’ve all heard that an emergency fund is vital. But it might still sound like a luxury until the day comes when you really need it. The reality is that an emergency fund is your financial safety net. Without it, even a minor emergency expense, like a car repair or dental bill, can tip your manageable debt over the edge.

If you feel like an emergency fund is out of reach, remember that you don’t need thousands to start. You can aim to build an initial $500 fund, for example, stored in a dedicated savings account. Once you hit that first goal, you’ll have the momentum you need to continue building gradually toward a truly stable financial cushion.

Automating your transfers acts as a built-in prompt, removing the need for motivation and helping the habit stick naturally. Even $25 a week adds up to $1,300 a year — a cushion that can make all the difference when life throws a curveball.

5. Emotional or Impulse Spending

We’ve all felt the pull to spend impulsively from time to time, but emotional spending often leads to regret once the rush wears off. That’s why recognizing your triggers — boredom, stress, social pressure — is the best defence against impulse spending. 

If this is a challenge for you, consider introducing a 24-hour rule: when you want to buy something that wasn’t originally in your budget, try to wait a full day before buying it. Creating a small pause between the urge and the purchase interrupts the prompt, which weakens the habit loop and gives you space to choose differently. 

You can also set personal challenges, like a “spend-free weekend” or an “essentials-only month” to help reset your habits and build more sustainable money habits. 

Over time, you’ll start associating spending with intention instead of impulse, which can have a surprisingly positive effect on your sense of control and willpower.

6. Avoiding Financial Conversations

Many people avoid talking about money — even (or especially) with partners and family — because it feels uncomfortable or shameful. But ignoring bills, debt notices, or overblown budgets won’t make them go away, even if it temporarily eases our anxiety.

If talking about money feels intimidating, try starting with something simple, like asking a partner what financial goal matters most to them right now. Beginning with shared hopes rather than problems can make the conversation feel more supportive.

And if you feel too overwhelmed to even begin, reaching out to a certified Credit Counsellor can help. Conversations about money don’t have to be stressful — they can be empowering when handled with support.

7. Living Paycheque to Paycheque

More and more Canadians report living paycheque to paycheque, leaving little room for savings or emergencies. Getting caught in this kind of cycle creates a constant sense of pressure, not to mention the limits it puts on your long-term planning.

Breaking that cycle starts with automation. For example, you might set up a small automatic transfer to your savings account right after each payday — even if it’s just $20 or $50. Gradually increase it if and when your budget allows, and be sure to review your regular expenses for subscriptions or services you no longer really need, want, or use.

Living within your means might feel restrictive, especially if it’s not your norm, but if you can see it as a way of creating breathing room, that perspective shift can make a real impact. You may just find that the peace of mind that comes with even a small financial buffer can be life-changing.

8. Not Setting Financial Goals

Without clear goals, it’s all too easy for your money to disappear without purpose. Having some direction, whether it’s paying off debt, saving for a trip, or building an emergency fund, helps you stay motivated and disciplined with your budget.

One way to make a change is to try setting SMART goals: specific, measurable, achievable, relevant, and time-bound. For example, instead of simply wanting to “save more money”, try setting a specific target, such as, “I’ll save $100 a month for a new laptop by next summer.”

Clarifying your “why” strengthens motivation, which is one of the most powerful drivers behind forming any new financial habit. To explore what really drives your financial choices, check out our 'Purpose of Money’ video and quiz — it’s a quick way to find your own “aha” moment and make new habits easier to stick with.

Focused, realistic goals give your financial journey meaning. They help turn saving and spending from vague, uninspiring concepts into real action that builds confidence and momentum.

9. Ignoring Your Credit Score

Your credit score influences everything from loan approvals to housing applications, yet many Canadians rarely check theirs. Without awareness, you might not notice errors or negative marks until they’ve already cost you money.

You can check your credit report for free, from both Equifax Canada and TransUnion, at least once a year. When doing so, look closely for outdated or incorrect information and dispute any inaccuracies. Scheduling an annual reminder gives you a simple prompt that keeps the habit of checking your credit score on track.

Paying bills on time, keeping credit use below 30% of your limit, and avoiding frequent new applications are the best ways to build a healthier credit profile. Understanding your credit score isn’t about judgment — it’s about taking ownership of your financial story.

10. Thinking Debt is "Normal"

With so much access to credit, it’s easy to feel like debt is just a part of life. From car payments, credit cards, and mortgages, debt is so common that many people forget it doesn’t necessarily have to be relied on. 

The aim here isn’t to feel guilty for borrowing, but instead to try and use credit intentionally. Taking on debt for education or a home renovation can be a positive step if it’s planned and responsibly managed. Problems arise when debt becomes routine or when the repayment process starts to feel endless.

Shifting that mindset starts with one belief: being debt-free is possible. With the right strategy and the right support, you can reduce debt, regain stability, and build a healthier relationship with money.

Replace Bad Money Habits with Healthy Ones

Bad money habits don’t have to define your future. Awareness and small, consistent changes can make the difference. And while building better habits does take time, making the decision to move toward more positive habits can be done instantly.

Changing even one part of the MAP equation — your motivation, your ability, or your prompts — can gently nudge your habits in a better direction. Celebrate the small wins and remind yourself that progress, not perfection, is the goal.

If you feel stuck or uncertain, Credit Canada’s counsellors are here to help. Our non-profit team offers free, confidential and non-judgmental guidance to help you understand your finances and take back control — one good habit at a time.