6 Types of Toxic Money Behaviors

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Unhealthy money behaviors can really cause serious problems in your life and particularly in your marriage.  Some of them are bad enough that they would be considered toxic money behaviors.  They can really wreck your life unless you find a way to get them under control.  Let’s see if any of these behaviors look familiar:

One – Overspending vs. Underearning

It doesn’t really matter which of these toxic money behaviors gets to you, the main problem is lack of money.  Let’s face it, even with the most clever and disciplined budgeting, it takes a certain amount of money to provide basic food, shelter, healthcare, transportation, etc.  And if you are spending the grocery money on fripperies, you’re going to be just as broke as if you never earned that money in the first place.

Let’s look at some of the pitfalls and what you can do about it.

Not Controlling your Discretionary Spending

We all have a basic cycle – you get paid – weekly, bi-weekly, monthly, or even in spurts.  That’s all ya got and if you are spending even five cents more than that amount, you are playing with IMAGINARY MONEY.

It’s very common – I would venture to say that probably half of us are in the habit of doing this regularly.  And it doesn’t matter WHAT you are spending the money on – clothes, fancy coffees, cars, crafts, collectables, dining out, toys for the kiddos, etc.  It’s still pretend money you’re spending and it’s damaging your financial life.

Not Paying your Bills FIRST

I am embarrassed to say how many YEARS it took me to learn this lesson!  My husband, if I’m being honest, has NEVER learned it.  He just doesn’t get the concept.  But it’s a primary strategy for managing your money.  Otherwise, you just end up spending the bill money on your wants and don’t have enough left at the end of the payday to cover all the bills.  Ooops!

These days, the first thing I do every two weeks on the dot, is to sit down and pay every bill in my online bill pay. 

Alternatively, my daughter-in-law has a different strategy.  She pays her bills all throughout the payday according to due date.  She says she doesn’t believe in paying them one minute before they are due.  However, she’s an excellent budgeter, so she always has the money on hand to cover all the bills.  It depends on which method you think you can manage consistently.

Living the Luxury Lifestyle

This type of toxic spending isn’t an issue of mine, but I’ve got plenty of friends who are extremely brand-conscious and won’t buy something unless they can afford the top-of-the-line version.  It’s a dangerous habit.  Remember that your paycheck is a finite amount so it’s basically the old standby about champagne taste on a beer budget.

Here’s my thought on luxury-level spending:

  • If you have that kind of money (without creating debt) – go for it, although you might be coming up short in other areas of saving or investing.
  • If you’re willing to cut back drastically in other areas to afford the higher price tag on certain items – go for it.
  • If you’re willing to be broke and in a ruinous amount of debt – maybe go for it.  But WHY?

I’m never sure what people are doing when they feel like they need the Coach purses or the fancy shoes, or the Tesla cars.  It feels like it’s covering up an insecurity of some kind. As I said, it’s not my thing.  I’m fine with driving an older car, living in a less fancy house, not buying designer clothes, not having the latest iPhone whatever.

Even spending thousands on a college education – now that’s a splurge these days.  I went to Community College and you know, I did just fine.  In fact, I just retired 7 years early.  Not that I don’t splurge on things sometimes, but I try to balance an occasional splurge with good savings habits, good bill-paying habits, and spending less on other items.

My best advice – Think.  Plan.  Save.  Decide why you need the luxury item.  Maybe you don’t need it?  If you do, think about what you could do without to get it.  How could you save for it? See if you could get it used, or slightly scratch ‘n dent.  Be smart and realistic about your wants AND your budget. 

Here’s a good one – make yourself pay CASH to get the shiny object.  Then you’ll think twice, I promise you.

Here’s a few posts for this topic:

Why Paying with CASH Hurts – It’s a Good Thing!

How to Negotiate the Best Deal on a Car

The Secret to Paying for College with All Cash

Two – Not Having a Good Savings Plan

Now here is a great strategy.  If my parents ever did anything for me, they convinced me that saving was the way to go.  I worked a traditional job for more than 40 years and I saved a portion from every_single_paycheck during my entire working life.  I also participated in 401K programs from my early 20’s.

And it’s saved my BUTT soooooo many times.  Job loss happens, car accidents happen, pregnancies happen, the transmission goes out right before Christmas – just LIFE happens.  It’s exactly the way life is supposed to be. 

And every time, we had a nice juicy savings account sitting there to cushion the fall.  We pretty much never had to borrow money from friends, relatives, payday loans, etc.  Well OK, I did have to borrow some money from our parents a couple of times for some of the really prolonged rainy days, BUT we paid it back every time, even if it was $25 bucks per month.  If we hadn’t had a savings account – would’ve been a very different story….

Here’s the most common objection to saving – I don’t have enough money.  Think about THIS payday.  Did you manage to cover all the taxes they take out?  All the mysterious FICO and the other deductions?  I guarantee you did – because they were taken out before you ever knew they were there. 

What if you set up your savings account the same way?  If the money is already safely in your savings when you first look at your paycheck, you don’t miss it. Give it a shot.  Try $50 per check for a couple of months. It’s exactly what worked for me for 40 years, so I’d have to say it’s a winning strategy.

Having an Emergency Fund for the Rainy Days

Make it a goal to have at least $1,000 set aside in an emergency fund.  Even if you have to pick up a bit of extra work on the side to save up that much, I promise you it is absolutely worth it, just for the peace of mind.  And just having that goal in mind will help negate the effects of some of your more toxic money behaviors.  It’s sort of a positive thinking thing – once you’re making progress in one area, other areas of your life seem to shape up a little bit magically.

Here are some posts:

Trick Yourself into Saving MORE with Stealth Savings

5 Reasons Why You NEED a Side Hustle

Three – Making a Habit of Borrowing Money or Using Credit Cards to fill the Gaps

This is a huge toxic money behavior.  When your finances aren’t being managed properly, life has a way of spinning out of your control.  Especially if you don’t have that emergency fund we talked about because emergencies are GOING to happen.  The water heater is going to go out, the car is going to break down, or you may have a medical or dental emergency come up.  These things can cost hundreds or even thousands of dollars.

There are several sources to go to if you are forced to borrow money to cover an emergency situation.  All of them are bad in one way or another:

  • Borrowing from family members or friends
  • Requesting payroll advances from your employer
  • Putting the expenses on a credit card or a home equity loan
  • Taking money from a retirement fund or 401K plan
  • Borrowing against your car title or other collateral – like from a pawn shop
  • Payday type loans

Borrowing from family members or friends is pretty common and it’s probably the easiest to swing – the first time you do it.  If you set up a good plan ahead of time and work diligently to pay them back quickly, it’s not a bad option.  But, if you don’t pay it back that first time (and that’s sadly very common), then it’s a lot harder to tap that source a second time.  There’s a lot of natural resentment if you take someone’s money and don’t pay it back, even if they are a close family member.

Payroll advances, 401K loans, and home equity loans can really shackle your financial future.  You are tying up equity that you may well NEED in the near or distant future and the long-term penalties for these types of loans can be pretty severe. My policy was that I would NEVER touch our 401K unless we were literally going hungry or homeless. We never touched it and I haven’t touched it much since retirement either. I want it simmering on a back burner for when I NEED it.

Credit cards are one way to spread out a big chunk of debt over a longer period of time, but you are paying a high rate of interest on the loan and most people aren’t smart about paying off their credit card bills quickly.  I have a great post on the topic – minimum payments are for SUCKERS.  They are very carefully designed to keep you in debt to the credit card companies for as long as humanly possible and get the maximum amount of interest out of your pocket!

Payday loans are probably the worst type of loan to get into.  The ads make them sound very attractive and easy to get, and they ARE easy to get – for a reason.  The system is rigged against the borrower and the interest rates are set so high, it is very difficult to get them paid off.  For instance, if you borrow $100 from a payday lender, your interest cost could be as much as $36 per month.  That’s 1/3rd of the loan amount and it resets every month.

You are probably better off going to a pawn shop with whatever valuables you have.  You can always re-purchase the items or reclaim them once the emergency is past.

But really, the SMART money behavior is to set up the emergency fund and borrow from yourself as needed and then diligently pay yourself back to rebuild the fund for the next emergency.

Four – Not Maintaining a Good Credit Score

I think this is a very common sign of toxic money behaviors.  Everyone knows that your credit score is important, but not everyone goes to the trouble to make sure that credit score stays clean.  But, it’s definitely worth the effort.  Having a poor credit score can limit your ability to get a good job.  Yes, I agree that it SHOULD be illegal for them to look at your credit score when you are applying for a job, but many employers are able to do so.

A poor credit score can also prevent you from getting into a nice apartment or house, even if you’re earning a good chunk of money.  And if you’re buying a vehicle or other high-dollar purchase, it can put you into a much higher interest rate.  That could cost you some cold, hard cash there.  It’s just not worth the risk as your credit history stays with you for up to 7 years.  That’s a very long time, especially for a couple just starting out.

How to maintain a good credit rating?  Pay your bills on TIME – every time.  Don’t open more credit cards or lines of credit than you actually NEED.  It’s a big red flag to have a lot of unused credit sitting out there.  You can contact your credit cards and have them actually lower your credit line if you feel you may be tempted to use it.  Or freeze cards that aren’t being used or just shut them down.  Here’s a great post on how paying CASH for everything can change your view of money very drastically.

Why Paying with CASH Hurts – It’s a Good Thing!

Here’s another post on how to develop good bill paying habits.  It’s an important skill that your parents or your school may not have taught you and it will pay off hugely over the course of your life.

Organize Your Bill Paying System

Five – Poor Daily Spending Habits

This is a quieter toxic money behavior and one that is more easy to justify.  A lot of it is centered around food and drink, and we need those things to live, right?

So sometimes it seems OK to buy your lunch at work every day, treat yourself to an expensive coffee drink on the way to work, or grab a pizza when everyone is hungry after soccer practice.  And sometimes, these things can be OK – in moderation, and if your budget allows for them.  But you could be spending that imaginary money again if you really don’t have that money available in your “extra money” budget.

Personally, I think you need to build in a balance for things like this.  Maybe it’s OK to allow for two lunches out per week or one fast food meal per week.  Maybe a yummy coffee can be your special “hump day” treat.  You do want to enjoy your life and not feel deprived all the time, but the moderation is the key.

If you’re making unnecessary Target runs because you’re bored and want to get out of the house, that’s a problem that can build up into the hundreds real fast.  Try making a new friend, taking a class, or getting out and getting some exercise.  Those are much better boredom busters than shopping!

Six – Sticking Your Head in the Sand When You KNOW You’re in Financial Trouble

I am hugely guilty of this toxic money behavior.  It’s just human nature.  No one wants to admit that they’ve been careless or gotten in over their head.  But facts are facts.  If you’ve been coasting along with your toxic money behaviors and they are causing problems in your marriage or in your financial life, it’s time to face the facts.

Even if it’s painful, gather together ALL your bills and really look at them.  Add up the total due and put it on a big sticky note on the bathroom mirror.  Then promise yourself that this number is the highest it’s EVER going to be.  Now get to work.  Calculate the monthly payments and figure out a way that you can cover them all.  You may have to take on some extra work, cut your excess spending waaaaay back for a while, and create a solid plan to deal with the problem.

I’m a huge fan of Dave Ramsey and his debt snowball plan.  I actually bought three copies of his book – one for each of my kids.  Then I taped a $20 bill to the back of each copy and handed them to my kids.  They couldn’t spend the $20 until they finished reading the book!

Other Resources for You to Look Into

Check out my freebie page. I have a video that will show you exactly how to pay off $500 worth of debt within 30 days with some easy tweaks. I also have a handy guide to help you control your impulse spending on Amazon, Target, and other places where you frequently overspend.

Check out my debt-free coaching page. I've helped hundreds of people save thousands of dollars in excess interest charges using simple Dave Ramsey-like strategies. It's simple, affordable and personalized to your unique financial situation.

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