Being debt-free is what most people aim for, especially if they are trying to get their finances in order. I despise debt and believe it burdens us so much that it affects our quality of life. Getting into debt is easy, but getting out of it – not so much. One way to get out, in my opinion, is to study the habits of people who are debt-free.
Being buried deep in debt is no fun. Large debt wrecks your credit and keeps your cash flow hostage. We’re all about living a fabulous life over here and being debt-free is one of the best ways to do it.
The Habits of People Who Are Debt-Free
Debt- Free People Live Beneath Their Means
Just because you make six figures, doesn’t mean you have to spend every cent you earn. Some of us are blessed with high salaries, but spending them because we can isn’t the smartest thing to do.
When I was in my twenties, I thought people with fancy cars and big houses were rich. Nowadays I understand that isn’t always the case.
I know people who are making $50,000 a year as a couple who are doing better than some of my single friends making $80,000 a year plus. You might think that’s crazy, but it’s true. The difference is that some of my friends are living paycheck to paycheck and are living above their means.
Debt-Free People Use Cash for Purchases
My cousin hates credit cards. In fact, he has one and uses it only for situations such as renting a car of reserving a hotel stay. Other than that, he’s cash all day every day.
I like using cash for most purchases because you can only spend what you have. If you see a handbag for $200 and you only have $100, you’re either going to buy a less expensive one or forgo the purchase altogether.
As a teenager working in retail, I used to think that all of the rich folks used their credit cards to pay for their purchases. As an adult, I now wonder how many of them cried every month after opening their credit cards statements.
If you are looking to get yourself out of debt, use cash and vow to put a name on every dollar you bring in.
Debt-Free People Sit on Big Purchases
People who are debt-free are a little more conscious of where they spend their money. Instead of running out to purchase a new appliance or hot new gadget, they ask themselves if this purchase is a need or a want.
Most of the time it’s a want and they will refuse to buy it or wait a bit longer to get a better price.
The next time you go out shopping and find an expensive item, wait. In fact, give yourself three days to figure out if you really want to buy it or not. If after the three days you still want it, by all means, go buy it (if you can afford to of course). However, I’m sure you’ll find the glamor of that Louis Vuitton has worn off.
Debt- Free People Create Budgets and Follow Them
People hate to budget, but do you know that even millionaires follow them? I mean if they didn’t follow a budget they would probably not be millionaires, am I right?
So if millionaires believe it’s important to create and follow a budget, you should too.
Many people hate budgets because they think they are restricting. They believe that having a budget means that they can’t enjoy life.
To be honest, the exact opposite is true.
Creating a budget and sticking to it ensures that you can enjoy your life to it’s fullest because you’ll have better control over your finances.
According to Lynnette Khalfani-Cox from Black Enterprise, a budget is “financial blueprint you’ll use to help you get where you want to go in life”.
Do you need help with creating a budget? Try a free online tool such as Every Dollar to get started.
Debt-Free People Use Credit Sparingly
According to Nerd Wallet, the average U.S. resident owes $16,061 in credit card debt. That’s a lot of money, especially when you consider how much in interest is paid towards balances carried from month to month.
You might purchase a Disney vacation for $2000, but if you don’t pay it off at the end of the month, it could end up costing you thousands of dollars more by the time you get finished paying for it.
People who are debt-free are careful with their credit cards. Either they don’t use them or they don’t use them very much. When they do hand over the plastic, they make it a point to pay it off at the end of the month.
They understand that the cost of using credit cards for purchases is too expensive and not worth racking up debt.
Debt-Free People Drive Their Cars Longer
Debt-free folks tend to drive their cars as long as humanly possible. Instead of getting a new car every two or three years, they’ll wait five or more years.
These people understand that their new car depreciates as soon as they drive it off the lot and they will only buy a new car if they have cash or can otherwise justify the purchase.
I have an adverse reaction to car payments, so I try to avoid one at all costs.
Can you imagine how much money you can save each month if you don’t have a car payment to make? I think you’re better off sometimes buying a certified used car or one from a private seller with cash.
You can always upgrade later when you have saved up the money. In fact, take a look at your life and determine if having a car is even necessary.
Public transportation may be available to you in your area. Ridesharing options such as Lyft and Uber are cheaper than maintaining a car. Need wheels for a longer trip or to run errands? Use Zipcar or Car2Go.
Debt-Free People Make Saving a Priority
As a home owner you already know that if something is going to break down, it most definitely will. Even if you don’t own a home, just living and breathing sets you up for something to go wrong eventually. That’s why having an emergency fund is so important for financial prosperity.
I recently heard that most of us are one surgery away from bankruptcy. Having savings helps you to avoid catastrophes or at the very least, soften the blow of them.
People who are debt-free understand this and make saving their number one priority. They know that their job is not guaranteed. They understand that a lack of savings puts them in a situation to have to use credit cards or loans which will put them further into debt.
They also understand that saving today helps them to prepare for the future as well. When you create your budget for the month, make sure you pay yourself first.
Debt-Free People Value Experiences Over Things
Let’s face it. Most people that work all the time are not the happiest people. I know a lot of people who say they wish they could cut back their hours to spend more time with family, go on vacation, or even start a business, but can’t because they have too many bills.
If you’re working long hours or multiple jobs to pay for your luxury car and McMansion, when do you have time to wind down and relax?
Debt-free folks understand the importance of living to enjoy their family and friends and not to pay for things. They’re happy people because instead of having to pay for that enormous car payment, they’re taking an impromptu cruise with the family or a drive into the country for the weekend.
They know the feeling of not having to choose between groceries or their light bill. If you are burdened with debt, that’s a choice you made, and you will need to figure out what’s really important to you in life.
If you are burdened with debt, that’s your choice, and you will need to figure out what’s really important to you in life.
Debt-Free People Have Multiple Streams of Income
It baffles me how in this day and age there are people who still rely on only one source of income. Being dependent on one source of income (usually your paycheck) is such a slippery slope.
Nothing, especially your job, is ever 100% guaranteed and people who are debt-free understand this. Being able to bring in money from different sources each month helps you to pay off debt and pay your bills during times of unemployment or illness.
Having multiple streams of income can have an enormous impact on your finances. Just having an additional $500 a month can help you to pay down debt and increase your savings or investments.
If you want to be debt-free work on getting a side hustle. Mine is blogging and if you want to start your very own blog, you can follow my step-by-step guide here. I also wrote a post on 25 Side Hustles to Start Now. You should probably start to consider investing and turning your hobby into profit.
Now living beneath your means doesn’t mean you have to live like a cheapskate. It just means you don’t have to spend every dime you make on things you can’t afford.
If you’re making $20 an hour, I don’t think paying $700 a month on a luxury vehicle is smart. Now, I’m not saying you don’t deserve to drive a nice car, but if you’re struggling to pay bills month after month, you have to admit to yourself that something needs to change.
Being debt-free is not only a lifestyle but also a mindset. If you can change the way you act and feel about money, you will change your entire life. You will begin to see more abundance in your finances and you will be able to attack debt head on. Start acting like debt-free folks and you will start living like them.
Some Tools You Could Use
Self Lender – If you’re looking to get your credit right, check out Self Lender. This is a great way to improve your credit score and save money as well. If you have no (or not-so-good) credit and want to increase your score, join Self Lender. They report to all credit reporting agencies and you’ll have money at the end of 12 months. Don’t know your score? Join Self Lender today.
Simple – Bank online and get a debit card with no fees. This is great for people who don’t like traditional checking accounts or need separate places to save for the holidays or an upcoming vacation. Sign up for your free Simple account.
Credible – If you have student loans you may want to consider refinancing them to make them more manageable. Check out Credible to see if they offer options for your situation.
Ebates – If you shop online, why not get cash back on your purchases? You can earn money from doing something you were going to do anyways. Sign up with Ebates for free and earn $10.
Swagbucks – One of my favorite companies to earn additional money each month. You can earn Swagbucks by completing surveys, watching tv, shopping and much more to convert to gift cards to use as you please. Get $5 for signing up for a free account with Swagbucks.
American Consumer Opinion – Earn money with surveys with American Consumer Opinion. One of my favorite companies which are reputable and fun to complete. Sign up with American Consumer Opinion for free here.
More resources here
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