If you've ever looked at a debt-free friend or family member and wondered what their secret was, you might be surprised to know there isn't one. In fact, most debt-free people share a common set of habits that help them achieve and maintain their financial freedom. Let's take a look at seven habits of debt-free people.
Following a Budget
It might sound like the most exciting thing, but following a budget is the cornerstone of effective money management. Keeping track of all the money you have coming in and going out and knowing exactly where it's going allows you to make smarter choices and focus on saving for the future. Be sure your budget is comprehensive and includes fixed, variable, and periodic expenses.
Paying Attention to Details
Missing a service charge here or an annual fee there may not seem like a big deal. But one of the habits of debt-free people is paying attention to all the details of their finances. They review all statements and financial documents carefully and look for hidden or unplanned charges. Once you really start to pay attention, you'll be surprised by how much you didn't even realize you were spending.
Setting Goals
Wanting to get out of debt and live a debt-free life is one thing. Actually doing it is another. Debt-free people know there's no way to reach their financial destination without a set of goals in place and a plan to meet them. If you're not sure where to start, start small. Make a pledge to not use credit cards for a day, then a week, then a month, and so on. Once you've stopped charging, you can formulate a plan to start paying off the debt.
Paying Cash
Those who achieve and maintain a debt-free lifestyle know that if they can't pay for it in cash, they're not buying it until they can. They understand the long-term stress of paying off a credit card bill and the added finance charges isn't worth the short-term satisfaction of making a purchase on a credit card. For people who are committed to living a debt-free lifestyle, cash is king.
Speaking Up & Asking Questions
Another one of the habits of debt-free people is they aren't afraid to speak up and advocate for themselves and their money. They will always inquire about how to receive a discount, lower price, or better deal, because they know the less they spend, the more they can put away in savings to use for other things.
Saving for Emergencies
If you've always thought you had plenty of time to save for emergencies, the pandemic has shown us how drastically things can change, literally overnight. Debt-free people are ready for the unexpected with fully funded emergency savings accounts that keep them from having to rely on credit cards to pay for unexpected expenses. If you're new to saving for emergencies, set an initial goal of $500, which is enough to cover a minor emergency expense, like a car repair. Once you hit that, steadily work your way toward having 6 months of living expenses saved.
Saying "No"
Achieving and maintaining freedom from debt means learning to say "no" more than you're probably accustomed to. When following a budget and planning your spending, you'll need to start saying no to things like impromptu lunches or happy hours with co-workers, or spur-of-the-moment weekend road trips with friends. It might feel uncomfortable at first, but you'll learn to appreciate that saying no to certain things means saying yet to a secure, debt-free future.
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