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12 Habits of Debt-Free People – Becoming debt-free is a huge accomplishment! The feeling of freedom that follows is monumental. It’s something to be celebrated! And it should be – you just freed yourself from a lifetime under the black cloud.
But for most people, becoming debt-free seems like just a dream. This unobtainable thing that they can never have. They wonder how others did it and if there’s some secret to becoming debt-free. While there isn’t a magical button you can push, debt-free people tend to display many similar habits. And no, these habits aren’t just by chance. So, let’s go over 12 of them so you can start on your debt-free journey!
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1. They Live Below Their Means
People who are debt-free realize they need to live beneath their means; not above them, and not at them.
Take 10-20% of your paycheck and set it aside in savings. Buckle down and live off of what’s left. If you’re able to put back more, do it.
2. They Do Their Research
Those free of debt don’t get to where they are by accident. They learn early on not to open their wallet to just anywhere. They work hard for their money and know they can probably get a better price elsewhere.
If you’re in debt, one of the best things you can do to help yourself get out of it is to do your homework before you buy anything. Clothes, groceries, a new computer – even a car – can be overvalued at one merchandiser while on sale elsewhere. Take the time to price compare as many different places as you can.
3. They Have An Emergency Fund
If an unexpected expense were to pop up, could you afford it? Or would you have to borrow money to pay it? Debt-free people build up an emergency fund for just such occasions.
Take another 10% from your paycheck and use it to start up an emergency fund, because, things happen. Don’t allow your finances to suffer because you don’t have backup funds in place.
4. They Follow A Budget
People who are debt-free realize that in order to get ahead, they need to have a budget. And not just have one – implement it and stick to it. They make sure the budget they set is realistic and reflects a ‘below-the-means’ status.
If you don’t already have a budget, create one that works for you. Your budget will not be exactly the same as anyone else’s. And that’s OK. Be honest and practical so you don’t set yourself up for failure. Remember, you can always make changes to your budget later if you need to. It isn’t written in stone. What’s important is that you get your budget up and running and you follow it closely.
5. They Stay On Top Of Their Bank Accounts
Many people lose money simply because they neglect their bank accounts. But this isn’t the case for those who are debt-free. They are the first to know if they are mistakenly charged for something, and are quick to fix it.
Be diligent and check all your bank accounts carefully at least once a week. Be on the lookout for any unusual activity (possible fraud) and make sure to look at each individual item. If it’s been a while since you’ve checked, you could have all kinds of charges that you weren’t aware of.
6. They Set Financial Goals
Those who aren’t in debt paint a clear picture of what they want to accomplish financially. They give themselves a specific time-frame to meet these goals. They know precisely where they want to be with their finances by the end of the year, next year, and beyond.
Set your own fiscal goals. Where do you want to be this time next year? In five years? Come up with a plan and make it happen.
7. They Automate Payments
Debt-free people don’t pay late fees. That’s why they set up automatic payments on anything they can. We’re talking mortgage payment, insurance, cell phone, electric, car, you name it.
Take a few minutes to automate your payments. It will make your life easier and keep you from getting hit with late payments.
8. They Appreciate What They Have
Someone who is debt-free feels grateful for what they already have. They don’t feel the need to buy things to keep up with others or to fill a void in their life. They realize that what they have is already enough.
If you have feelings that you’re missing out or don’t value what you have in front of you, take a step back. Take the time to really appreciate what you’ve been blessed with. It can be hard at times, but focus on what you do have rather than what you don’t.
9. They Rely On Cash
People who are debt-free use credit cards very sparingly, if at all. They almost always use cash and only use a credit card when there’s a need. If they do use a credit card, they pay it off immediately.
Try going cash only with this system. You will never get ahead financially if you’re living off borrowed money you can’t afford. The situation is just compounded by all the interest you’re paying. If you can’t afford your credit card, stop using it altogether. Go cash only and focus on getting your current credit card debt paid off as quickly as possible.
10. They Have Multiple Streams Of Income
People who aren’t in debt don’t get all their money from just one place. They know that they need to diversify. Some earn passive income with investments in stock. Or they own a rental property or have a second job.
The idea is to set yourself up so that you have money coming in from more than just one place. If something would happen to one of your sources of revenue, you would still be OK.
If investments and such aren’t in the cards, try a side hustle from home.
11. They Don’t Put Much Emphasis On Things
Debt-free people value relationships and experiences over materialistic items. It’s more important to them to spend time together with their family than to take off for a remote 2-week cruise.
If you find yourself frequently buying things just to buy them, change your perspective. Things aren’t going to keep you happy. It’s those around you and your experiences with them that will. Make these your focus and your finances will be better off for it.
12. They Demonstrate Patience
Waiting it out is nothing new to people who are debt-free. They don’t mind waiting to have something, especially if their patience means paying less.
We live in a society of instant gratification, but do you really need that new TV or game system right now? Or could you wait a few months and get it when it’s less?
Getting your debt paid off can change your life. It’s such a small price to pay to implement these 12 habits. Isn’t your freedom worth setting financial goals and putting away the credit cards? Sticking to a budget and living below your means for a while? You don’t have to live under a rock or go without. I promise you. Just be reasonable with your spending so that you can make becoming debt-free a reality.
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