How to break unhealthy spending patterns

Budgeting for essential expenses, paying bills on time, and living within one’s means are the hallmarks of healthy spending. But many adults in the UK do the opposite, making a habit of bad spending — purchasing non-essential goods. It’s one of the reasons why more and more UK residents face personal debt, collectively owing over £1,852 billion in 2024.¹

What are bad spending habits?

An unhealthy spending habit is more than the occasional overspending on a luxury. It means there is a regular tendency to make impulse purchases, to rely on credit, and to indulge in extras instead of paying for essentials.

In 2023, one-third of shoppers surveyed said their impulse purchases happened mostly when shopping in-store, while 36% of shoppers said it happened when they were browsing online.²

How can you spot the signs of bad spending habits?

While personal finances look different for everyone, there are common signs of overspending that point to bad spending habits. They may include:

• Spending more than you have. This means regularly exceeding the budget on non-essentials.
• Having maxed-out credit cards. Reaching or exceeding the credit card limit may be accompanied by difficulties in paying back the balance each month as well as high interest charges.

• Receiving late payment fees. Impulse purchases may lead to overextending. This, in turn, can lead to unpaid bills and monthly payments with late payment fees on credit cards.

• Not checking the account balance or transaction history. This can be a sign of overspending since impulse purchases can quickly get out of control.

Strategies to break bad spending patterns

It’s never too late to take control of personal finances and form better spending and saving habits. Strategies such as sticking to a budget, saving towards financial goals, and finding ways to limit impulsive buys provide a good start.

Create a budget

One of the most important ways to break unhealthy spending habits is to learn how to create a budget and, perhaps more importantly, how to stick to it.

Step 1. Make a list of all income and expenses, such as household bills, living costs, transport costs, insurance and loan repayments, gifts, and leisure.

Step 2. Track spending and determine how much should be spent in each category.

Step 3. Use money management tools, such as budget planners or financial apps, to create a balanced budget (where income covers the expenses).

The budget must be realistic and allow you to live comfortably within your means. It should be reviewed and adjusted regularly to reflect any financial changes. And it's a good idea to strive to identify areas where money can be saved. Financial products, like credit cards that offer rewards or Buy Now Pay Later like PayPal’s Pay in 3*, can also be included in the budget to split the cost of purchases of pay over time— but they should be used responsibly.

Pay in 3 is an unregulated credit agreement, so you will have fewer protections under this agreement than you would under a regulated credit agreement. Carefully consider whether the purchase is affordable and how you will make the repayments. Be aware of the possible impact of using Pay in 3 and of missing payments, including making other borrowing more difficult or more expensive.

Set financial goals

When working towards financial independence, it’s important to stick to a budget and start saving by setting short-term, intermediate, and long-term goals. But what are financial goals exactly?

A financial goal is a desired financial outcome for the future. And there are different types:⁴

• Short-term goals. Examples include paying off a credit card balance and saving for an emergency fund.

• Medium-term goals. Examples include paying off student loans, and saving up for renovations.

• Long-term goals. Examples are saving for retirement and paying off a mortgage.

Learning how to set financial goals can help you stay on track and break bad spending habits. It doesn’t have to be complicated. If the goal is to reduce money spent on food, for example, make it a habit to plan meals, write a grocery list, and stick to the list when shopping.

Limit impulse purchases

Those who want to break unhealthy spending patterns often must learn how to stop impulse buying, which might be easier with the following tips:

• Wait for 24 hours. As the name implies, impulse spending usually happens on the spur of the moment. Before purchasing any non-essential items, stop and reevaluate after 24 hours — or longer. Ask why you want it, if you need it, and if you can afford it. It may become clear that an item is not really needed or that it is cheaper elsewhere.

• Make the buying process more difficult. Many online shops offer to store payment information to speed up the checkout process. Removing this stored information adds an extra step that can give impulse shoppers the time they need to question the purchase.

• Avoid temptation. Unsubscribe from promotional emails and alerts and shop only for items that are truly needed.

• Stick to the budget. Proper money management using spending limits and expense tracking makes it easier to curb impulse buying.

Utilising PayPal features for healthy spending

Breaking unhealthy spending habits is not easy, but using the right tools can help. Financial platforms like PayPal can support responsible money management in various ways, including:

• Keeping track of income and expenses. Having all payment methods and accounts linked in one place can help shed light on your financial situation and lead to better decision-making.

• Paying bills on time. It’s possible to set up automatic payments through PayPal, to help manage recurring bills and avoid late payment fees.

• Becoming money savvy. Learn more about financial empowerment and making hard-earned money go further with PayPal’s Spend Smarter Guide.

• Linking bank accounts and adding payment methods in PayPal helps to get an overview of personal finances. It’s important to keep enough money in the linked current accounts when using PayPal to purchase carefully considered goods or services.

Empowering your financial future

Unhealthy spending habits may be characterised by a heavy reliance on credit, neglecting essential payments, and making impulse purchases. Left unchecked, these negative habits can impact a person’s financial future and cause anxiety.

Being aware of poor spending habits and taking steps towards responsible money management, like budgeting and setting financial goals, can lead to better financial health. Breaking bad spending habits can result in long-term benefits such as increased savings, a sense of pride in the ability to achieve personal financial goals, and less financial stress.

Start taking control of personal finances today. Learn more about money management and how other tools can help cut costs.