What would it be like to live debt-free? Can you imagine the positive feelings of freedom and financial well-being? Unfortunately, only 25% of Americans are living in this reality right now. If you want to start down the path toward a debt-free life, try borrowing a page from people who have already found success. Check out these 10 habits of debt-free people that you can adopt. These tried-and-true behaviors can help you move several steps closer to being on top of your finances.
Maintain a solid budget
It’s hard to overstate the importance of a budget. Financial experts widely identify budgeting as the cornerstone of a healthy financial life—and debt-free people take that advice to heart. At its core, a budget identifies dollars coming in (income) and dollars going out (expenses). Debt-free people know a budget is a crucial tool for living within their means and serves as a safeguard against spending money they don’t have. A budget also helps them identify areas where they tend to overspend and find expenses that would be easy to trim. Debt-free people also recognize that budgeting doesn’t have to be painful. Many take advantage of online options—like budget calculators and Google Sheets—to streamline the process and take the stress out of number-crunching. Others stick with pen and paper; they know a budget doesn’t have to be fancy as long as it’s thorough and accurate.
Track their progress
While it’s great to create a budget, debt-free people understand it’s equally important to continually track their progress. This means staying on top of your income and carefully recording all expenses. Debt-free people who stay on top of their budget and track their progress know where every penny is coming from and exactly where it’s going.
Debt-free people recognize the value in setting short-term and long-term financial goals. Whether it’s saving up for a new car, taking a dream vacation, retiring, or buying the kids new back-to-school clothes, they zero in on a specific target and steadily move toward it. They constantly remind themselves of these goals, even employing little tricks like putting a Post-It note on the refrigerator door. When their goals are top-of-mind, debt-free people know it’s easier to stay disciplined and avoid overspending—then eventually enjoy the rewards.
Commit to saving
Debt-free people love putting money in their savings accounts and do it consistently. They build savings into their budget and are dedicated to following through each month, often using automated transfers to make it even easier.In addition to saving up for long-term goals, debt-free people also know it’s important to have a dedicated emergency fund. They’re careful about maintaining their emergency fund—usually with enough money to cover three to six months’ worth of expenses—so they don’t have to rely on high-interest rate credit cards to pay for a trip to the hospital or unexpected car repair.
Do tons of research
Debt-free people realize that knowledge empowers them with more control over their finances. They research important finance concepts, ask questions ,and dig into the details of any financial transaction to make sure they understand any fees or obligations. They look closely at all their bills and aren’t afraid to follow up about charges they don’t understand. Debt-free people also take advantage of online educational resources, such as the “Consumer Tools” provided by the Consumer Financial Protection Bureau.
Make thoughtful purchases
Debt-free people know when to say “no”. They work hard to stick to their budgets and avoid impulse purchases by taking small but meaningful actions—like erasing stored credit card information from shopping websites, staying out of malls and enforcing a “cooling off” period before buying a big-ticket item, like a new appliance or TV.Thoughtful spending also applies to eating out: Debt-free people are choosy about when and where they’ll dine out because they know cooking at home can save hundreds of dollars. And when they’re planning for a large expense, like a wedding or fertility treatments, debt-free people sharpen their pencils and work hard to identify the most efficient way to spend their hard-earned money.
Sure, credit cards can be convenient—and yes, if you pay off the balance in full each month, you won’t be charged interest. But credit cards can be expensive , and debt-free people know this. They choose to rely on cash and debit cards; they only spend the money they have now, instead of making a purchase and having to pay it off later.
Talk about their financial situation
Debt-free people are great communicators. When it comes to their finances, they recognize the importance of having honest discussions with their family, including spouses, partners and children. Debt-free folks openly and frequently talk about income, expenses and future plans.
Maximize their income
Debt-free people are all about multiple sources of income. You can often find them working a side hustle—like selling unused items on Ebay or driving for Uber—or picking up shifts that offer overtime pay. They know that bringing in more money equals more progress toward their financial goals.
Exercise lots of patience
Whether it’s staying focused on long-term goals or working to eliminate existing debt, people who are now debt-free are masters of patience. They embrace financial well-being as an ongoing journey and have learned to enjoy the process.
People who are currently debt-free know there may be a situation in the future where taking on debt might make sense—for example, using a mortgage to buy a home or a personal loan to cover a large purchase or necessary expense. They’re strategic about when and how they approach debt and aim for loans with low, fixed rates and clear, predictable terms.