katleho Seisa/ E+/ Getty Images

Debt Management

5 mental money traps to avoid


Turning your finances around is never easy, and these five mental money traps can keep you from making much progress.

The content on this page is accurate as of the posting date; however, some of our partner offers may have expired. Please review our list of best credit cards, or use our CardMatch™ tool to find cards matched to your needs.

Turning your finances around is never easy — but mental money traps can keep you mired in money woes.

Whether you’re trying to get out of debt, improve your credit score or build your savings, experts highlight five common money mindsets that can hinder your progress.

Mental money trap No. 1 — All-or-nothing thinking

“All-or-nothing thinking is an absolute — either I do everything perfectly, or I’m just going to give up,” says Mary Gresham, an Atlanta-based psychologist who specializes in financial issues. All-or-nothing thinking is especially common when it comes to creating — and sticking to — a spending plan, according to Gresham. “People can get pretty perfectionistic about this,” Gresham says.

How to free yourself from the trap: To break away from all-or-nothing thinking, Gresham recommends thinking of your goal as a target to aim for — if you get close, or even if you miss by a lot, you’re better off than if you hadn’t tried at all.

Consider this spending plan example. “Say you plan to spend $100 each month on clothes, but then you go and spend $200,” Gresham says. “Instead of throwing out your entire plan, just say, ‘I’ll work on hitting that target over time,’ or ‘I’ll work on hitting my grocery target this month.'”

Mental money trap No. 2 — Unexamined spending

If you’re trying to fix your finances, you’ve probably looked at your spending — but have you really looked at it? Many people spend a lot on things that don’t really add much to their lives, says Dan Ariely, professor of psychology and behavioral economics at Duke University and author of “Predictably Irrational: the Hidden Forces That Shape Our Decisions.”

That’s partly because people tend to compare similar things — such as an expensive bottle of wine to cheaper bottle of wine — rather than coming up with other items they could buy for the cost of a bottle of wine, Ariely says. Also, people tend to have trouble predicting how doing without things will actually make them feel.

How to free yourself from the trap: Scrutinize your spending. Ariely recommends using dividing cash in envelopes designated for specific expenses (groceries, gas, entertainment, etc.) to make spending feel more concrete. He also suggests that before making a purchase, you ask yourself what else you could buy with the same amount of money. And, finally, test out your options. “People should experiment — try different things and see what works,” Ariely says. “Cut your cable bill and see how you feel for the next few months. Switch from an expensive smart phone to a cheap phone and see how that works for you,” Ariely says.

Mental money trap No. 3 — Fixating on the future

Do you dream of the day you’ll get your life back — after you fix all your problems with money? Money issues can seem overwhelming if you get too far ahead of yourself, according to Gresham. “Some people start thinking too far into the future, and they end up thinking a goal is too hard, too big or will take too long,” Gresham says. “This is particularly true with credit card debt — you might start thinking, ‘It will take me five years to pay this off.'”

How to free yourself from the trap: “You want to get a plan, stay in the present and work your plan every day,” Gresham says. Also, don’t wait for tomorrow to start enjoying life, says Larry Winget, author of “You’re Broke Because You Want to Be: How to Stop Getting By and Start Getting Ahead.” Winget says: “Still have a life — still enjoy what you have even if what you have is not very much. Figure out how to enjoy where you are.”

Mental money trap No. 4 — Avoiding money

Do you shove unopened bills in a drawer, put off looking at your bank statements and never get around to asking for a raise? If so, you might be practicing money avoidance — a money belief pattern that was found, in a study published this year in the Journal of Financial Therapy, to be associated with lower income and net worth. “It’s sort of a combination of a couple of attitudes — one that money is bad, two that rich people are evil, greedy, shallow, the list goes on,” says study researcher Brad Klontz, who is a psychologist and co-author of the book “Mind Over Money.”

Money avoiders, according to Klontz, tend to sabotage themselves and believe they don’t deserve money. Klontz says: “The irony is that people who hold this belief will often tell you they wish they had more money.”

How to free yourself from the trap: Klontz recommends taking a look at your past and even your family history to find experiences that might have led to the unconscious belief that money is bad. “Become aware of your beliefs — and just that awareness applied to your current situation can help you,” Klontz says.

Mental money trap No. 5 — Punishing yourself

If you’ve gone through your budget and slashed every latte and lunch out, you might be using money to punish yourself, says Amanda Clayman, a New York-based psychotherapist who specializes in financial wellness.

“Some people automatically eliminate everything they classify as frivolous — but that I would classify as self-care — and they say, ‘I’m not going to eat in any more restaurants. I’m not going to go on any more vacations,'” Clayman says.

How to free yourself from the trap: To approach money less punitively, Clayman says she pushes her clients to get past shame over money problems, and use money in ways that make them feel good.

On a practical level, that might mean finding ways to trim monthly spending on big-ticket items such as housing and car payments. Clayman says: “These higher fixed costs can actually be a bigger problem for a budget than the small things we think of as treating ourselves.”

In order to extricate yourself from any of these mental money traps, it’s important to try to change your thinking — and even seek help if necessary, experts say. Klontz says you need to be able to tweak ways of thinking that are keeping you from shaping up your finances. “The key to money health is having flexibility in your thinking,” he says.

See related: Is it time to consider financial therapy?

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

What’s up next?

In Debt Management

Finding frugal-friendly family fun

A tight budget doesn’t mean giving up all the things that make life enjoyable. You just have to find inexpensive ones

See more stories
Credit Card Rate Report Updated: September 16th, 2020
Cash Back

Questions or comments?

Contact us

Editorial corrections policies

Learn more

Join the Discussion

We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

The editorial content on is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company’s business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.