Creating Healthy Spending Habits

In this topic, we cover:

  • Wants versus needs.
  • How to create a monthly budget.
  • How to recognize the warning signs that your spending has become a problem.


Other than the size of your paycheck, nothing has a greater impact on your finances than how you choose to spend your money. Billions of dollars are spent per year to help encourage you to spend your paycheck on everything from new cars to expensive shampoos, so it’s extremely important to develop healthy spending habits as soon as possible – like now. Even millionaires can go broke by spending beyond their means, so an important first step is to figure out what you need versus what you want. The best way to do this is to create a simple monthly budget and to track your spending over time.

A budget is a spending plan that is based on your expenses and income. A written plan helps you stay on track, day to day and month to month, for meeting your financial plans. When creating a budget, some people try to minimize expenses so much that their budget is set up for failure from the start. The key to successful budgeting is to be realistic but not irresponsible. You work hard and deserve an occasional treat. Going out for a meal or movie is fine, but not if it’s at the expense of managing existing debts or reaching your long-term goals (like saving for retirement).

The first thing you'll need to do is figure out approximately how much money you'll have each month. Total all sources of income, including both full-time and part-time jobs. Next, calculate your expenses, including both fixed expenses (like rent or student loan payments) and variable expenses (like entertainment or food). By subtracting your expenses from your income, you’ll see your cash flow - the amount of money you are making or losing per month. If you come up with a negative number, your cash flow is negative and you’ll want to make adjustments in your spending habits or earn additional income. If your cash flow is positive, then you’ll want to determine your savings or debt-reduction priorities.

A budget is not something you do just once – you’ll need to continually adjust your spending plan by comparing it with how you actually spend your money. Financial Literacy 101 offers a Budget Tracking Tool that can help you manage your budget from month to month. We encourage you to try it for at least a couple of months – you may be surprised at what you learn!

Dealing With Financial Challenges

Including education loan payments, credit card debt, and new financial responsibilities, individuals just starting out in the workplace can find balancing their budgets challenging. While managing your budget should help you stay on track, there are times when you might feel financially overwhelmed. Some common feelings and situations that may alert you to a problem with debt include:

  • Your credit card balances get bigger every month.
  • You’re charged fees or the interest rates on credit accounts are raised because of missed payments.
  • You're charged penalty fees because of bounced checks.
  • You rely on credit cards to pay for food, laundry, and other necessities.
  • Financial problems interfere with your school, work, or relationships.
  • Over one-fourth of your income goes towards paying your debts.
  • You take out card cash advances on your credit card or use alternative services (like payday loans or check cashing services) for cash.
  • You can only afford to pay the minimum payments on credit card bills.
  • You experience feelings of anxiety whenever you use credit cards or have trouble sleeping because of worry.

If you experience any of these feelings or situations, it is important to get help right away. You don’t want the situation to get worse and bad financial situations rarely go away on their own. Curing chronic debt is never painless, but the process is simple. It's called a "debt reduction plan" and it takes into account your debts, income, and expenses. Please review our fact sheet on "Creating a Debt Reduction Plan" for more information.

Library Managing Student Loan Debt