In a perfect world you can afford foamy lattes on your daily way to work, vacations with sandy beaches, ‘Keep them coming’-Piña Coladas, shopping sprees and mortgage repayments.

Sounds like a nice daydream, doesn’t it?

The good news is that you don’t have to choose between “needs” and “wants” in your budget. By quitting a few bad spending habits, you can get right back on track and turn that daydream into a reality. Making a few good money decisions over time will enable you to afford more of what makes you happy.

But how do you get started?

We talked to Ellen Katrine Nyhus, who’s a professor at the University of Agder. Ellen is a true expert when it comes to financial psychology and consumer behavior.

Let’s hear what she said.

What are the main reasons for developing bad spending habits?

"Bad spending habits can be caused by a lack of consideration of future consequences.

People who are short-sighted and do not plan for the future can easily be in a situation where they have spent too much money too fast.

People who are thinking about the future, on the other hand, are more likely to save some of their money for a rainy day so they can handle both foreseen and unforeseen expenses. Future-oriented people typically have less debt and more savings.

Another factor that can cause bad spending habits is the lack of self-control. Self-control can be trained, but some research suggests that self-control is a limited resource: it can be depleted with use, just as a muscle gets tired from exertion. So if you have days where you have many difficult tasks to cope with, your self-control may be depleted during the day making it harder to resist temptations”.

How do I replace a bad spending habit with a good one?

"Bad spending habits may be difficult to change because they are habits - things we do without thinking about why we do them. They’re our default behaviour. When changing a habit like a daily visit to the fancy coffee shop, it’s important to have thought about a cheaper alternative to do instead.

It’s also important to focus on the reason why you want to change the habit. For example, you could calculate how much the daily cup of to-go coffee cost you every year and then think about all the alternative ways you could spend that money.

Maybe this will make you think that the coffee is not worth the money because other things are more important to you. If you still miss the social aspect of the coffee house visits, you could allow yourself a visit once a week".

What tools can be helpful to get healthy spending habits?

"It is important to have a good overview of the expenses you have to pay on a regular basis, and also to set aside sufficient money for more irregular expenses like vacations or Christmas.

There are many excellent money management tools to use for this purpose. Once you have a good overview of your income and your expenses, it’s easier to prevent yourself from overspending. You can create new accounts that are not linked to your debit card. If, for example, you get your salary once a month, you can set up automatic transfers from your current account to the other "card-less" account the same day as you get your salary. The transferred amount should cover all your necessary expenses, such as rent, mortgage and electricity.

You could also create other accounts for things you would like to be able to buy in the future, for example, a car, furniture or a vacation. In this way, you’ll not be able to use your card to pay for things with money you have to use on necessities."

What do I do if I fall back into old spending patterns?

"Spending is fun, and we are constantly given the opportunity to buy something. With the Internet, the market place is in our homes, and shops are open 24/7. From time to time, most people get tempted to do a but of impulse shopping. If such impulse shopping causes situations where you have to borrow money to cover necessary expenses, you should try to pay back this loan as soon as possible since these loans often have a very high interest.

Use a money management tool to remind yourself about the things that are important for you to be able to pay for. If the budget is very tight and it will always be hard to stick to, you could consider finding a part-time job so that you increase your income".

Are you ready to turn all of those dreams into reality? Making a few good decisions over and over will set you up for long-term success, and hopefully, this article will help you in doing exactly that 🤩