20 Bad Money Habits to Break in 2021

Often, financial habits develop by default, which can end up being very damaging. Unfortunately, you may not even realize you're making the wrong choices with your money just because you've done things a certain way for so long.

To avoid falling into harmful ruts, the start of a new year can be a great time to take stock and see what behavioral patterns are worth changing up. In fact, there are 20 bad money habits you should think about leaving behind for good in 2020.

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As long as you pay them off each month, credit cards are a no-brainer for savvy Americans. They protect against fraud far better than debit cards, help raise your credit score, and can put hundreds (or thousands!) of dollars in rewards back in your pocket each year.

But with so many cards out there, you need to choose wisely. This top-rated card offers the ability to pay 0% interest on purchases until late 2021, has some of the most generous cash back rewards we’ve ever seen (up to 5%!), and somehow still sports a $0 annual fee.

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When you spend without a plan, you don't get the most value from your money -- and it can be hard to determine if you're overspending. Unfortunately, for far too many Americans, living without a budget is one of their worst financial habits.

It's one you should definitely leave behind in 2021. Whether you make a detailed budget or opt for a simple 50/30/20 approach, next year should be the year you say goodbye to unplanned spending for good.

ALSO READ: 4 Tips for Setting Up Your 2021 Budget

Do you always buy your lunch out every day? Or stop at a certain coffee shop on the way home? Or buy brand new cars every four years?

Far too often, financial indulgences come to be seen as necessities over time, rather than as luxuries that could be cut to accomplish financial goals.

When you make a budget, track your spending first to identify these problem areas -- big and small -- and look at the numbers with a fresh eye so you can give careful consideration to whether a particular expense actually makes sense.

Impulse buying is another damaging habit, and it's one that many people indulge in without even thinking about it. In fact, you may not even notice when you throw a few extra items in the grocery cart or respond to an email ad by clicking through and buying.

There's a few ways you could put an end to this habit. You could commit to shopping only from a list of things you need that you make in advance or you could institute a 24-hour rule and put off purchases until you've considered them for a full day.

Once you take either approach and cut these impulse items, you'll probably be surprised to find just how much extra money you actually free up.

Convenience shopping is another bad habit that's probably robbing you of your hard-earned dollars. This happens when you pay more just for a little bit of extra convenience -- like when you use a ridesharing service instead of walking or you grab a snack from the vending machine instead of bringing one.

Committing to writing down every purchase for a period of time can be a good way to reduce this since you'll start to see how much convenience shopping is actually costing you. You can identify areas where you're overspending because it's easy. Then you can make changes -- like buying your snacks in bulk so you don't have to hit the snack cart when you get hungry every afternoon.

For far too many people, spending expands as income increases until you're spending every dollar -- and then some. Unfortunately, if you spend more than you earn, it's impossible to ever accomplish any financial goals -- and it's really likely you'll end up in a lot of debt.

If your entire paycheck is disappearing as you earn it, this is a habit you must break in 2021. Making a budget will help you do that, but depending on your earnings and expenditures, you may need to make some big changes such as switching to a less expensive car or getting a roommate.

Our credit card expert uses this card, and it could earn you $1,148 (seriously)
As long as you pay them off each month, credit cards are a no-brainer for savvy Americans. They protect against fraud far better than debit cards, help raise your credit score, and can put hundreds (or thousands!) of dollars in rewards back in your pocket each year.

But with so many cards out there, you need to choose wisely. This top-rated card offers the ability to pay 0% interest on purchases until late 2021, has some of the most generous cash back rewards we’ve ever seen (up to 5%!), and somehow still sports a $0 annual fee.

That’s why our expert – who has reviewed hundreds of cards – signed up for this one personally. Click here to get free access to our expert’s top pick.

Do you find yourself counting the days to your next paycheck so you can cover the bills because your bank account is empty? This is a high-risk way to live because a paycheck delay or a sudden reduction in income could mean you don't have enough to get by.

Living the paycheck-to-paycheck lifestyle is a habit that's definitely worth breaking. You can do it either by reducing spending or increasing income -- or both -- so you can ideally get ahead and develop a financial cushion in your bank account.

ALSO READ: I'm Living Paycheck to Paycheck During the Pandemic. What Should I Do?

You should have an emergency fund with enough cash in a savings account to cover three to six months of living expenses. This is more important now than ever as the coronavirus continues to cause economic uncertainty.

Unfortunately, many Americans are going unprotected against surprise expenses or a job loss. If you're one of them, break that habit in 2021 by starting to set aside funds for a rainy day. You can start small, adding a little bit to your emergency fund each week, and build it over time.

Paying a bill late can have damaging consequences. You could hurt your credit score, get hit with late fees, and potentially see your interest rate rise if you're hit with a penalty rate.

It's something you should aim to avoid, whether it happens because you forget to pay or because you don't have the cash. Setting up autopay can help you avoid this problem, as can making sure you've worked your debt payments into your budget.

Paying more interest than necessary is an especially bad habit since you're enriching your creditors for no reason. The good news is, you should be able to easily change this one if you qualify for a refinance loan.

Mortgage rates have repeatedly hit record lows in recent months, so refinancing your mortgage could be a great way to reduce total interest you're paying. If you have high-interest credit card debt, you may also want to look into using a balance transfer card or personal loan to lower your rate.

ALSO READ: Should You Refinance Your Mortgage in 2021?

Fees don't have to be a fact of life, and paying them when you can avoid them is a habit you should leave behind.

To identify any unnecessary fees you may be paying, take a close look at your credit card and bank statements. If you're being charged by your bank for not maintaining a minimum balance, paying fees for services you no longer use, or incurring other other avoidable fees, act quickly by switching banks or canceling services.

Our credit card expert uses this card, and it could earn you $1,148 (seriously)
As long as you pay them off each month, credit cards are a no-brainer for savvy Americans. They protect against fraud far better than debit cards, help raise your credit score, and can put hundreds (or thousands!) of dollars in rewards back in your pocket each year.

But with so many cards out there, you need to choose wisely. This top-rated card offers the ability to pay 0% interest on purchases until late 2021, has some of the most generous cash back rewards we’ve ever seen (up to 5%!), and somehow still sports a $0 annual fee.

That’s why our expert – who has reviewed hundreds of cards – signed up for this one personally. Click here to get free access to our expert’s top pick.

Carrying a balance on a credit card is just asking for financial trouble.

Minimum payments are designed to be low enough to keep you in debt forever, and interest costs are way higher than on most types of debt. The interest charges on your card will also dwarf the value of any rewards that you may be receiving.

If you've got a balance on your card, commit to making a payoff plan and to no longer charging more than you can cover starting in 2021.

Far too many people stick with their current credit card out of habit and not because it's the right one for them.

Your card should have a low APR if you tend to carry a balance on it. If you don't, then your first priority should be to find a card that rewards you for the spending you do the most. You'll also want to make sure the rewards you can earn are exciting to you so you'll be inspired to redeem them.

If your card has an annual fee, you'll want to review its perks to make sure it's worth paying for. A lot has changed in 2020, and if you're no longer taking advantage of the benefits that made your card worth paying for, it could be time to downgrade.

ALSO READ: 44% of Americans Could Be Carrying the Wrong Type of Credit Card

When you buy something online or in a store, do you check for coupons first? If your habit is simply to pay the asking price without making sure there are no bargains available, you could be missing out on tons of savings.

There are apps and browser extensions you could use to help you identify any discount codes -- which could make breaking this bad habit easier.

If you aren't taking advantage of the opportunities available to claim tax credits, that's a bad habit that you should leave behind in 2020.

In particular, you'll want to make sure you're coming as close as you can to maxing out your 401(k), IRA, and HSA (if you're eligible for one). Otherwise, you're giving up government subsidies that can help you build a better future.

If you've got your savings parked in an account where it's earning very little interest, your habit of depositing your money in a bank that's not worthy of it could come at a big cost.

Don't just stick with your current savings account out of default -- compare what different banks are offering and find an account where you can get the most bang for your buck.

Our credit card expert uses this card, and it could earn you $1,148 (seriously)
As long as you pay them off each month, credit cards are a no-brainer for savvy Americans. They protect against fraud far better than debit cards, help raise your credit score, and can put hundreds (or thousands!) of dollars in rewards back in your pocket each year.

But with so many cards out there, you need to choose wisely. This top-rated card offers the ability to pay 0% interest on purchases until late 2021, has some of the most generous cash back rewards we’ve ever seen (up to 5%!), and somehow still sports a $0 annual fee.

That’s why our expert – who has reviewed hundreds of cards – signed up for this one personally. Click here to get free access to our expert’s top pick.

Many people also pick their brokerage and choose their investments out of habit, without taking the time to consider if they're overpaying. If you're still using a broker that charges commission, for example, you may want to seriously reconsider that move in 2021.

If you're investing all your spare money in your 401(k) and you're limited to buying funds with high fees -- or your account itself is charging a costly management fee -- then you may want to change that habit and devote some of your cash to an IRA after you've contributed enough to max out your employer match.

When was the last time you checked to make sure you had the right asset allocation? If you're like many people, you probably can't remember. Unfortunately, this could be a big problem.

Even if you invested appropriately for your age and risk tolerance when you first put money into the market, your situation may have changed. Some of your investments may also have increased in value much more than others, giving you a portfolio that's no longer balanced.

Living with more (or less) risk than you should be can cost you over time, so break the habit of complacency and give your accounts a good once-over.

If your bank, brokerage firm, mortgage company, or other financial institution is charging you more than it should or is providing you with substandard customer service, you don't have to just live with this subpar treatment forever.

Break the habit of doing business with a company that doesn't deserve your dollars, and research options to find a better alternative.

Do you have the habit of setting a goal and giving up on it when the going gets tough? This is an especially big issue with New Year's resolutions, which many people make and few follow through on.

To make sure you don't leave behind a string of failed promises to yourself, be smarter about how you set your objectives in 2021. Take the time to make your goals specific, to set concrete deadlines, and to establish metrics for success so you can track your progress and change course if you get off track.

Have you grown complacent about your credit score? Do you have the habit of simply going about your life without ever checking your credit report? If so, this could be a costly mistake. You need to keep tabs on this important number as it can affect everything from whether you can borrow to how much your car insurance costs will be.

In 2021, resolve to check your score and report at least once a month. This will let you spot signs of identity theft early and make it easier to track your financial progress.

ALSO READ: How to Check Your Credit in 6 Easy Steps

2021 is a new year, and it will hopefully be a better one. As you look forward to a bright tomorrow, make a commitment to leave these bad money habits behind in 2020. You'll be very glad you did when you find yourself in a much better position when 2022 rolls around.

Our credit card expert uses this card, and it could earn you $1,148 (seriously)
As long as you pay them off each month, credit cards are a no-brainer for savvy Americans. They protect against fraud far better than debit cards, help raise your credit score, and can put hundreds (or thousands!) of dollars in rewards back in your pocket each year.

But with so many cards out there, you need to choose wisely. This top-rated card offers the ability to pay 0% interest on purchases until late 2021, has some of the most generous cash back rewards we’ve ever seen (up to 5%!), and somehow still sports a $0 annual fee.

That’s why our expert – who has reviewed hundreds of cards – signed up for this one personally. Click here to get free access to our expert’s top pick.