Tens of millions of people in the United States are living in debt. Some are trying to pay off mortgages, student loans, or even credit card debt. But despite this, there are people who live debt-free. They don’t have to worry about paying off any debt at all for the rest of their lives, which enables them to focus on building and sustaining their personal finances.
In this post, you will learn about the habits of debt free people and how they have been able to stay out of debt completely. Hopefully, after applying the same strategies to your financial situation, you will be able to clear up your outstanding debt and be financially free.
What Does It Mean To Be Debt Free?
Being debt-free means you are no longer obliged to pay off any loan or credit card debts. It means you don’t owe any financial institution or bank a penny, and you can spend your income freely.
You don’t have to be rich to be debt free. All you need to do is live below your means and drastically cut down on your expenses.
Benefits Of Living A Debt Free Life
If you have never thought of the possibility of living without owing debts, you should start seeing things in a positive direction now. Living debt free is absolutely possible, and here are the benefits of maintaining such a lifestyle:
- Improved Credit Score
Paying off your debt has a good impact on your credit score. This happens when you successfully repay your loans on time rather than miss the due dates. Once your credit score gets better, you can easily apply for loans with favorable interest rates in the future.
More importantly, you will be desirable to landlords and employers who use credit scores as a yardstick to determine one’s reliability.
- Less Financial Stress
Living without knowing if you’d ever be free from debt is a torment. It’s like a heavy weight on your shoulder that pulls you down and causes financial stress. Being debt free will certainly bring peace of mind and alleviate any trace of financial stress. You will stop worrying about money and bugging your mind concerning how to pay your bills.
- Earlier Retirement
Paying off your debt completely at the early stage of your life means you don’t have to retire at an old age. This is because you have enough time to free up extra cash for your retirement savings.
For example, someone who makes regular monthly debt payments will find it difficult or impossible to be able to contribute to a retirement fund. But without having to pay debt, it’s so much easier to build a safe future after retirement.
- More Income Is Available
This is one of the obvious benefits of developing and practicing the habits of debt free people. Not having debt payments to make means you always have extra cash available in your checking account (except if you’re a reckless spender). You can speed up your savings goals by making additional payments to your savings accounts.
A good financial situation like this makes reaching some of your short-term and long-term financial goals easier.
- Less Financial Risk
If you are struggling to pay off debt and you don’t have an emergency fund to fall back on, you are simply walking on eggshells.
If you suffer a job loss or if another covid-19 pandemic hits the globe, you will be in big trouble because you don’t have any financial defense. But a life without debt gives your budget room to build a financial safety net. Being debt free also means you won’t worry about paying bills late during a drastic financial situation.
- Improved Mental Health
The thought of having to make debt payments every month can be disturbing. It can distort your mind and affect your mental health. This is because you constantly worry about your financial situation, which can lead to physical and mental stress.
You may encounter health issues such as high blood pressure, insomnia, headache, and other related physiological problems. However, becoming debt free will reduce anxiety, stabilize your mind, and ultimately improve your mental health.
12 Habits Of Debt Free People You Need To Copy
If you want to have a debt-free life, here are the quality habits of debt free people you need to emulate:
1. They Don’t Concur With The Culture
Society encourages us to rely on credit cards to get by. Society doesn’t see anything wrong in taking student loans and spending the next 30 years paying them off. However, debt-free people try as much as they can to live contrary to some societal standards, especially the one related to personal finances.
2. They Have Self-Control
This is one of the major characteristics of debt free people. People with the willpower to prevent debt have an outstanding level of self-control. They don’t desire what everyone wants to buy. They don’t go to places everyone wants to go.
For example, anyone who’s intentional about living a debt-free life won’t indulge in impulse buying by purchasing items aimlessly. They visit the grocery store with a shopping list, and they sometimes shop with only physical cash to control their spending.
3. They Have Confidence
When it comes to preventing debt, confidence is important. You need to trust the process and be confident in your financial plan. Debt-free people don’t care what others think of their financial situation. They believe in moving at their own pace.
For example, they don’t mind driving an old car rather than taking a car loan. They don’t fancy a glamorous lifestyle. They have built a sense of self-discipline that compels them to be content with whatever they can afford. This is an essential quality you need to possess if you must avoid or get out of debt.
4. They Know When To Say No
The ability to say no when others are saying yes is one of the everyday habits debt free people. It’s hard to avoid unnecessary expenses when you constantly accept the social opportunity that is brought to you. Whether it’s a group shopping, vacation, or eating out with friends, it’s important to decline when you have to.
As long as you have a budget and a spending limit, don’t be afraid to say no to certain offers. Otherwise, you will begin to live above your means, and that’s one of the quickest paths to incurring debt.
5. They Are Patient
Patience is key when trying to avoid debt. If you are too quick to buy the latest device or home appliance, you won’t be able to live within your means. If a new product is launched, you can get it at a lower price after waiting weeks or months later. If you join the rush, you would have to pay a larger amount.
Besides, exercising patience before making a purchase is important because you may eventually realize you don’t need to buy that item. It’s just like impulse buying. People make impulse purchases sometimes because they are impatient, and over time, they realize they never needed the items they spent money on.
6. They Make Sacrifices
How much sacrifice are you willing to make to stay out of debt completely? The moment you become intentional about avoiding debt, there are certain habits and practices you would have to give up.
For example, eating out, going to the movies, attending paid events, partying, and paying for the premium cable TV package are pleasurable things you need to sacrifice to reduce your spending.
If you have a budget, you must learn to stick to it. Making sacrifices at the right time is one of the crucial habits of debt free people you should adopt.
7. They Budget
This is one of the essential traits of people who are debt free. They always budget their income, whether they are salary earners or not.
Creating a budget is not as difficult as many people presume. In fact, budgeting your money can be very easy, especially due to the free budgeting apps that are available. You can get an instrumental budgeting app on PlayStore or the Apple Store. It makes everything easier and less complicated.
When you build a monthly budget, you are organizing your spending and preventing impulse buying. Although you may be compelled to break your budget during emergencies, it’s still an effective way to curb your spending.
If you haven’t budgeted your money before, here’s a post that will teach you how to build a budget in 5 steps.
8. They Have An Emergency Fund
The covid-19 pandemic taught everyone the importance of being financially prepared for the unexpected. You never can tell when you’d lose your good-paying job, have an accident, or fall ill. If you aren’t prepared for times like these, you will have no choice but to incur debt.
A good way to build a financial wall around your income is by creating an emergency fund. This should be done in a separate savings account, where you will regularly contribute small amounts of money weekly or monthly.
An emergency fund is expected to cover 3-6 months of your expenses, and it might take you a few years before saving enough money to cover your expenses for this period of time. But remember, the end justifies the means.
9. They Don’t Compare
This is one of the habits of people who are debt free. They don’t compare their financial situation to that of others. They trust their own journey and are satisfied with the state of their finances.
You should never be desperate to impress the people around you or social media. You may not be earning a ton of money every month, but as long as you can pay your bills on time, you are doing just fine. With time, you will make more money and improve your cash flow. If you try comparing yourself to others, you will lose your peace of mind. Learn to be content always.
10. They Don’t Eat Out Every Time
If you are too lazy to prepare your own meals at home, chances are that you are wasting money eating out every day. As someone who wants to exhibit the habits of debt free people, you must avoid eating out all the time. It’s much cheaper when you make your own meals.
If you are a lousy cook, you can find some of the best recipes on YouTube. There are thousands of cook videos that will teach you how to prepare your favorite delicacies without anyone’s help. Simple and easy.
11. They Live Below Their Means
Living below one’s means is undoubtedly one of the most important habits of people who are never in debt. They are never compelled to live beyond their means. To live below your means, you must be frugal. This means you must constantly find ways to cut down your living costs.
Reducing your fixed expenses should be difficult, but you can always minimize other regular expenses like groceries, cable, transportation, recreation, etc. Adopting a frugal lifestyle frees up more money for you to save in your emergency fund or retirement account.
If you are interested in discovering more ways to live below your means, here are 25 frugal living tips that will save you a ton of money.
12. They Save Regularly
You can never save too much money. One of the major habits of debt free people is their willingness to save every extra money that shows up in their checking account.
For someone who isn’t making a lot of money, you should always prioritize your savings goals. That’s the only way you can reach your money goals without soliciting loans. No matter how difficult it gets, be committed to saving a fraction of your take-home pay every month.
Final Words On Habits Of Debt Free People
The moment you decide to be debt-free, you must be intentional about it. Be willing to make sacrifices and do things differently than you used to. Besides, since you are now acquainted with the habits of debt free people, you should know the effective strategies that will help you prevent debt.
Even if you are currently struggling to pay off debt, applying these strategies will help you break free.
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