10 Habits of Debt-Free People You Can Start Now

If you want to start down the path toward debt-free living, try borrowing a page from people who have already found success. Check out these ten habits of people who made debt-free living a reality. 

1. Create a budget 

Budgeting isn’t a task many of us look forward to, but it serves a purpose. A budget is a plan for how you’ll spend (or save) your income, and this money plan can help you pay down debt and avoid incurring new debt balances. 

Creating a budget starts with writing down your income and current expenses. You can do this on a piece of paper or using a digital spreadsheet. Many budgeting apps can even connect to your bank account and categorize your spending to give you a headstart.  

Once you have your expenses written down, see where you can make budget cuts since the money saved could go toward tackling debt balances. For example, you could negotiate savings on recurring bills like insurance, wireless and cable every year. Reducing non-essential expenses like entertainment could also provide funds you can use for debt repayment.  

2. Track your spending  

A debt-free life means carefully keeping track of account transactions and your balances, so you’re mindful of where your money is going throughout the month. 

This way, if you can’t afford to pay for something in cash, you can strategically decide to wait on the purchase. And if you go over budget in a spending category like groceries or gas, you can adjust your budget in another area to compensate for the overage.  

3. Increase your income 

Money can only stretch so far. Sometimes, you have to earn more to make ends meet, especially when inflation is high. Leveling up your skills to apply for higher-paying roles at your company or a new company could increase your income.  

Hustling on the side by starting your own business or signing up to be a gig worker on a rideshare or task app is another way to earn more money to pay off debt so you can lead a debt-free life.  

4. Save consistently  

Debt-free people build savings into their budget and are dedicated to following through each month, often using automated transfers to make it even easier. Money in savings provides a financial cushion to fall back on, so you don’t have to rely on high-interest-rate credit cards for emergencies, like a hospital stay or unexpected car repair.  

Read more: How to Handle Unexpected Expenses

Aside from emergencies, debt-free people recognize the value of putting away money consistently for long-term goals. Whether it’s setting a goal to buy a new car, taking a dream vacation or buying the kids new back-to-school clothes, deciding how much you need to save and working towards stashing that amount can help you avoid relying on credit.  

5. Use credit cards wisely 

Credit cards aren’t all bad—they can come with rewards, perks, and benefits like travel and rental car protections when you go on vacation.  

However, when not used responsibly, credit cards can leave you with more debt. The key is using them within reason and with a plan for how to pay the debt off.

6. Limit “Buy Now, Pay Later” usage  

Buy Now, Pay Later (BNPL) services are an alternative to credit cards that spread payments for purchases into several installments. Although payment plans are often interest-free, using BNPL services still technically incurs debt, and overuse can lead to a vicious debt cycle.

Living debt-free means establishing a “cash-only” rule where you only spend the money you have. If you’re already a user of a BNPL service, you could consider deleting the apps or deactivating your account to minimize their use in the future.  

7. Avoid impulse purchases  

Learning how to say “no” to purchases can be hard in a society where we’re constantly bombarded with product marketing campaigns online and offline.  

Checking your budget before spending and taking meaningful actions—like erasing stored credit card information from shop websites, enforcing a “cooling off” period before buying a big-ticket item and taking a break from social media can help you avoid impulse buys.  

Thoughtful spending also applies to eating out: Check menus for the price point before making reservations and try new recipes at home to save money.  

8. Figure out your “why” and set realistic goals 

If you’re used to instant gratification, delaying purchases can take some time to get used to. Determining the reason why you want to become debt-free can keep you motivated along your debt payoff journey.

Maybe you want to take a gap year from work, or you want to retire early. Envisioning the lifestyle you want to lead can drive you to reach money goals and avoid overspending. 

9. Talk about finances with your family 

Money management isn’t a solo effort unless you live alone, so get the entire household involved. When it comes to your finances, recognize the importance of having honest discussions with your family about your household income, expenses and goal to be debt-free.  

Ultimately, the road to becoming debt-free will be easier if others understand why you’re maintaining a budget and spending less money.  

10. Exercise lots of patience 

Whether 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 learn to enjoy the process leading up to the final destination.  

When does it make sense to borrow money? 

People who are currently debt-free know there may be a situation where taking on debt might make sense—for example, a home is an asset, and using a mortgage to buy one can increase your net worth if the home appreciates in value.  

Personal loans are another type of debt vehicle that can help you pay for large necessary expenses, like car repairs or medical bills. If you need to borrow money, be strategic about when and how you approach debt and aim for loans with low, fixed rates and clear, predictable terms. 

Written by Taylor Medine | Edited by Rose Wheeler

Taylor Medine is a writer who’s covered personal financial topics from budgeting and saving to paying down debt for more than eight years. She got her start demystifying intimidating money topics for the everyday consumer on a personal blog, and has since been published on Experian, Forbes Advisor, Credit Karma, and more.

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