Living a debt-free life is a goal most people strive for, and all for a good reason. No one wants the constant worry of rising debts or interests that you have to pay off each month. Living a debt-free life is possible with discipline and a concentrated effort from your side. Plus it doesn’t hurt to emulate the habits of other people that are already living debt-free lives. Here are the 10 most common characteristics of debt-free people that you can emulate and live within your means.
- They monitor their personal finances.
People without debt are thorough with their personal finances. They are less likely to make unnecessary payments on a missed due date or an overdraft fee because they notice every detail on their statements and keep track of it.
You too can be more mindful and thorough. Look at your next credit card statement. Start monitoring your expense for an entire month and then add up your income. Compare your monthly expenses with your income. See where you can cut back.
- They know the ins and outs of their finances.
Debt-free people understand and have control over their finances. They may have an accountant to do their taxes, but they don’t send over paperwork without looking them over. If you want to have control over your finances, it’s imperative that you understand what it is and how it works. You don’t have to be an expert, but a good understanding of what’s happening with your money will give you a sense of security you won’t get from allowing other people to manage your finances.
- They live on less than what they make.
Living on less than what they actually make allows debt-free people to set aside money for buying a house or a car, their retirement and emergency fund. This strategy affords financial independence that gives them options and leeway in the future.
Even in debt, you can start living below what you actually make just by shifting the way you think of your money. Pretend that you’re making 10, 20 or 25% of what you’re actually making and then make a budget based on that calculation. Do it in increments and sooner or later you’ll get used to the limits you’ve set on your expenses.
- They know the value of money.
It’s easy to overspend and lose some sense of the value of cash if you don’t use it, like when you use a credit card for your transactions. Debt-free people know the value of money because they use it and they only spend within their means.
Use cash as much as possible when purchasing. Having to part with real money will remind you how real your transaction is. Plus it helps to circumvent unnecessary spending because you’re forced to stay within the limits of your cash.
- They save
Debt-free people make saving a habit. They know that adding up even small amounts in the present will afford greater financial freedom in the future.
Treat your savings account as you would treat a mortgage or a credit statement—you know you have to pay it no matter what. So make it a habit to set aside 10 or 20% of your pay check and deposit it directly to your savings account.
- They know what they’re striving for.
People living without debt learn to set goal for themselves so they know what they’re saving for. Setting a goal keeps you on track plus you’ll find it easier to set aside money if you know what it’s going toward. Are you saving for the latest pair of basketball shoes, a vacation, or your retirement. If you have a hard time saving up for retirement because you feel it’s too far off, think of what’s appealing with retirement. Is it traveling? Is it setting up a small house in a tropical island somewhere? Think of all the places you’ll visit once you’re in retirement or the type of house you’ll want to retire in. Now the goal seems more specific.
- They say no to unnecessary spending.
You may get invitations for night outs and dinner with friends and co-workers. Don’t be embarrassed to decline their offer. Debt-free people know that little savings made from little expenses can add up to huge savings over time. Offer to host a potluck party instead of trying out the new restaurant downtown. Invite your co-workers for an early morning jog around the park instead of taking an aerobics class.
- They value experiences and relationships more than material stuff.
Debt-free people place higher value on experiences and nurturing relationships over having the latest gadget or the hottest stuff. Most people would place their family and friends among their top priorities, but are your actions reflecting these values? If you find yourself working overtime so your family could live in a fancy house, think of the tradeoffs you’re making. Perhaps you’d be better off having dinner on time with your family so you can have the time to appreciate and contemplate the real needs of your family.