Many people work hard to get out of a financial slump. They recover from crippling debt, manage to put some money aside and are able to finally breathe when it comes to finances.
The problem? Some of them still hold on to some bad, bad money habits.
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According to experts, this is exactly what could derail a hard-won financial recovery. Read on for a list of bad money habits that could hinder a financial recovery.
Also see seven surprisingly easy-to-learn money habits that could help you save.
Unchecked Spending Habits That Sabotage Financial Goals
“One of the most common disruptors I’ve seen in clients’ financial plans is unchecked spending tendencies,” said Shirley Mueller, finance expert and founder of VA Loans Texas.
She said emotional spending, which includes buying things out of boredom, stress or peer influence, can quickly derail progress, even if the individual has the best intentions.
“Purchasing items outside of one’s price range, whether it’s a luxury car or an extravagant vacation, puts undue strain on finances and can lead to a cycle of debt,” she said. “In my experience, those who fail to create and stick to a realistic budget are often surprised at how much small, unnecessary purchases add up over time.”
She noted that a lack of awareness about where money is going is the foundation of many financial setbacks.
Kevin Shahnazari, founder and CEO of FinlyWealth, noted the same. “Making emotional purchases during stressful times derails budgets,” he said. “I’ve seen customers rack up thousands in credit card debt during difficult life events. Creating a 24-hour rule for nonessential purchases helps prevent impulsive spending decisions.”
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Failure To Track Daily Expenses
Along the same line as the above, Shahnazari highlighted that not tracking daily expenses can lead to financial blindness.
“Many of my clients don’t realize they spend $15-$20 daily on coffee and lunch until we analyze their transaction data,” he explained. “That daily coffee habit often amounts to $300-plus monthly that could go toward debt repayment or savings.”
Credit and Loan Mismanagement
Misusing credit cards and loans is another habit Mueller said frequently undermines financial improvement.
“Carrying high credit card balances not only increases interest payments but also harms credit utilization ratios, a key factor in maintaining a strong credit score,” she said. “I’ve worked with individuals who only pay the minimum balance, unaware of how this practice causes debt to balloon over time.”
Additionally, she said not fully understanding loan terms — whether it’s a high-interest payday loan or a car loan with hidden fees — leads to financial stress.
“It’s necessary to treat credit as a tool, not an extension of income, and to approach all borrowing decisions with careful analysis and foresight,” she explained.
Shahnazari agreed. “Treating credit cards like extra income creates a dangerous debt spiral,” he said.
Shahnazari has seen many bad credit habits firsthand. “When I review customer data at FinlyWealth, I notice people often use credit cards to maintain lifestyles they can’t afford. This habit typically leads to carrying balances and paying hundreds in interest charges monthly,” he said. “The most dangerous financial habit I see is using credit cards as a lifestyle subsidy rather than a payment tool — it creates a false sense of affordability that inevitably leads to crushing debt.”
Lifestyle Inflation and Inadequate Savings
“Lifestyle inflation, or increasing spending as income grows, is one of the stealthiest threats to financial stability,” Mueller said.
She’s often seen clients achieve significant pay raises, only to find themselves in the same precarious financial situation due to upgraded homes, cars and lifestyle choices.
“Meanwhile, neglecting to save, whether for emergencies, retirement or specific goals, leaves people vulnerable to financial crises and unprepared for the future,” she explained. “I always emphasize the importance of building a safety net before pursuing lifestyle upgrades.”
She said avoiding these habits and prioritizing consistent saving, mindful spending and responsible borrowing are essential to achieving lasting financial growth.
“Failing to build an emergency fund makes people vulnerable to debt,” Shahnazari said. “Without savings, my customers often resort to high-interest credit cards or predatory loans when unexpected expenses arise. I recommend saving at least three months of living expenses, even if it means starting with just $50 per month.”
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This article originally appeared on GOBankingRates.com: 4 Bad Money Habits That Will Derail Your Financial Recovery
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