10 Habits of Debt-Free People You Can Start Now

Debt-free living sounds like a dream, doesn’t it? Most of us can only imagine the positive feelings of freedom and financial well-being. Unfortunately, few Americans are living in this reality right 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 10 habits of people who made debt-free living a reality.

debt-free living

1. Maintain a solid budget

It’s hard to overstate the importance of a budget. Financial experts agree that budgeting is 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. Regardless of how you manage your budget, having one in the first place is step one to debt-free living.

2. Record all expenses

While it’s great to create a budget, debt-free living means understanding that 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, which is at the core of living debt-free.

3. Set goals

Debt-free living means recognizing the value of setting both 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.

4. 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.

5. Do tons of research

To achieve debt-free living, you must understand that knowledge empowers you with more control over your finances. Take the time to research important finance concepts, ask questions, and dig into the details of any financial transaction to make sure you understand any fees or obligations. Debt-free people look closely at 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.

6. 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.

7. Use cash

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. Debt-free living means changing your typical spending habits and saving the credit card for necessary use only.

8. Talk about your 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.

9. Maximize your 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.

10. 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.

Bonus tip:

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.

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