Five signs you've got bad financial habits '“ and how to quit them

October is often dubbed 'Stoptober', when smokers up and down the country are encouraged to quit the habit for good.

Trusting to luck is the surest way to squander your assets. Photograph: Thinkstock/PA

But whether or not you’re a smoker, why not consider quitting any nasty financial habits you’ve picked up?

“This Stoptober is a great opportunity to stub out your worst financial habits,” says Sarah Coles, a personal finance analyst at Hargreaves Lansdown.

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Some of those habits might have become so ingrained that you don’t even realise you have them, notes Coles. So what are the warning signs, and how can you quit bad financial habits for good? Here are some of Coles’ expert insights and advice to cure you.

Symptom 1: Casually dipping into debt

You don’t have to go terribly overdrawn for particularly long for this to start making a big dent in your finances.

The cure to this habit lies in drawing up a household budget and identifying the regular costs you can cut. This may mean shopping around on essential bills and groceries, or cutting out those things you don’t get much value from, such as a seldom-used gym membership or expensive media packages. If you’re a repeat offender, consider setting up text alerts in online banking which will be sent if you’re running the risk of going overdrawn.

Symptom 2: Only paying back the minimum amount on your borrowing

The minimum payment required on your credit card can easily lull you into a false sense of security. By paying the debt down at a snail’s pace, you could be racking up shocking interest charges.

If you have expensive debts like credit cards, it’s essential to pay them off as quickly as possible. If you have a significant balance, it may be worth switching in order to cut interest payments in the interim. However, if you switch, it’s vital to see this purely as a mechanism for debt repayment. If you’re tempted to rack up more borrowing, you’ll end up in an even more expensive position.

Symptom 3: Forgetting about your savings

According to a 2015 study, about 80 per cent of easy access savings accounts hadn’t been switched in the previous three years. Neglecting savings is an expensive habit to fall into because, over time, the rates on these accounts are likely to have become less competitive – especially if a bonus was applied at the outset.

Even in this era of low interest rates, it pays to make a date to regularly check what you are earning on your savings, and if the rate is no longer competitive, make a switch.

Symptom 4: Not making the most of tax shelters

Are you making the most of the tax advantages offered by pensions and Isas, for example?

At the start of each tax year, it’s worth taking stock of your savings and investments, and asking yourself whether you really need to be paying tax on them.

Symptom 5: Putting off plans

Long-term goals like retirement may seem far away in the future, but every day you save makes a big difference. It’s not just the years of contributions you will miss by putting things off, but the effect of compounding returns – which is jaw-dropping.

There are always too many demands on your money, but as a general rule, it pays to invest as much as you can afford for retirement as early as you can afford to do so.