7 Habits of Debt-Free People

As an indebted individual I always admire those that live a completely debt-free lifestyle. My in-debtedness is for the most part to what most consider “good” debt; a mortgage and a few outstanding medical bills. My goal is to set up a payment plan for them and pay them all off by this time next year.

I cut credit card debt out of my life in my late twenty’s only using credit cards to my advantage and paying the balances in full each month. Living debt free is a lifestyle choice that requires hard work and an affirmation for saying “no” when you need to; whether it is to your family, friends or yourself. Discovering debt freedom is a passion for many and here are some of the necessary skills to have in your arsenal on your journey to debt freedom.

1.  Attention to detail

Missing due dates, fraudulent credit card charges and even the can of soup scanned twice at the grocery check out can sink you into debt. Paying close attention to the details of your financial life is an essential skill those that are debt free have.

  • Create and stick to a budget. A cornerstone of debt freedom is the adherence to a budget and knowing where all of you money goes.
  • Track expenses. By seeing where you are spending your money on a daily basis you can gain the useful insight debt free people have-a window to spending habits.

2.   Stress-free lifestyle

Those of us that have been in debt at one point in another in our lives know the stress that comes with it. Worrying about bills, creditors calling and keeping it a secret from family can be overwhelming. Every trip to the mailbox, phone call, and invite to dinner seems like a death sentence. The stress causes you to lose sleep, become depressed and in some cases fall ill.

Being debt free equals being stress free at least when it comes to financial matters.

3.  Budget for everything

If you ask anyone that is currently debt free I am 99% positive they will tell you they have a budget. This is because people who budget know when there are a couple of extra dollars available for something not in the budget. One of my favorite personal finance experts, Paula Pant says you can afford anything, just not everything.

People that are debt free still indulge every now and then; the difference is that they know when they can and when they can’t! 

4.  Cash Only 

As a society we have become accustomed to credit and being able to have the things we want when we want them. Don’t have the $50 for the pair of jeans you want, no worries, you can charge them. Debt free people often use cash as their sole form of payment. Many will argue that it is impossible to live a cash only life but is that really true? 

5.  Know the system 

Credit can be tricky to master. For instance you have to build credit in order to have credit. If you have too much credit it can hurt you, you get the idea. Debt free people understand how credit works and either use it responsibly or not at all. 

6.  Don’t have to keep up with the Jones’s

My dad is a completely debt free person and has been his whole life. He paid cash for his house (this was a long time ago), always pays cash for his cars and most importantly does not feel the need to keep up with others. Growing up all my friends had cable and we didn’t, it made me so mad! Now as an adult I realize my dad’s logic behind the no cable ruling. We couldn’t afford it and he didn’t feel the need to go into debt to have what everyone else did. 

7.  Patience 

Debt-free people make the hard decisions. If they can’t afford something, they either wait until they can or choose to do without. 

It’s funny how much I wish I was like those that are completely debt free, owing nothing to anyone, the freedom to do what you want with your money and your life. 

When you become debt free how will you feel and what advice would you give to others? 

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About Suzanne Cramer

24 Responses to “7 Habits of Debt-Free People”

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  1. Travis says:

    It’s interesting how as the closer I get to the end of my debt management program, and the better Vonnie and I get at managing our finances, the more of these 7 habits we develop. This is literally the third article I’ve read and commented on this morning that has me really thinking about how our perspective and behaviors have dramatically changed (even very recently), and how it’s going to feel when that last payment is made and we have this rather large chunk of money back in our pockets. It’s going to be liberating financially…..we need to prepare ourselves to concentrate on maintaining what we’ve learned and keeping these 7 habits in the forefront of our minds.

    As always, thanks for the wise words to help us keep our heads on straight! 🙂

    • @Travis I think many people struggle with the “behavior” part of getting out of debt. Just like dieting or exercising to lose weight their are certain health habits you can develop for your finances. By making the things you are doing now while trying to get out of debt a habit you can continue to build a healthy financial lifestyle long after the debt is gone 🙂

    • It’s easy to maintain the habits once you’re debt free because your behaviours have changed for quite some time. The key is to always have financial goals, even after being debt free.

  2. I think this is a great list. A key precursor is simple, but important: RESOLVE to become debt-free. Getting there takes a lot of commitment and work! Everyone complains about their debts, but few actually resolve to do what it takes to get it all paid off. And you’ve got to maintain this resolve over many years–a lifetime actually, to stay debt free.

  3. Andi says:

    This is a great list! These are largely the steps I am working on to become debt free. The patience is the hardest for me. Some days… MOST days it feels like I will never see the end of it! Though, little by little, progress is being made and it really is like Kurt said, it’s about resolving to become debt-free.

    I am really proud of being frugal, but it was really hard to find the balance between punishing myself with zero spending and feeling guilty about over spending. I felt like I couldn’t spend any money with my student loans hanging over my head, but at the same time I wanted to enjoy life and enjoy some of the money that I’m earning. It really took finding a balance between the list above to find the budget that lets me pay down my debt, save money for the future, and have a little left over for fun spending.

    • @Andi It sounds like you have definitely developed some of these habits already, congratulations! Depriving yourself of everything won’t do you any good; the balance you suggest is key and sometimes this is the hardest habit to grasp 🙂

    • JMK says:

      I don’t disagree with anything you’ve said, but one comment did strike me a little funny. “Punishing myself with zero spending”. I’m assuming you bought groceries and weren’t living on the street or a friends’ sofa. and you meant no non-essential spending. Funny how our perspective on things is a sign of our times. Cutting out cable and skipping designer coffee is now considered punishment. It’s funny how living as our grandparents did is now considered abnormal, ultra frugal, and at times “punishment”. We’ve come to feel almost like we are entitled to every appealing product or service offered as something we should have, and to do without is suffering.
      Maybe when we start to feel like we’re the only ones doing without, we should instead remember that saying no today means preventing suffering tomorrow. Keep your eye on what comes after the debt is gone. Travel, early retirement, sports cars, or whatever it is that makes your heart sing. 99.9% of the time I feel no temptation to spend on a dime that’s not on our spending plan for the year. Every cent not scheduled for essentials is going to extra mortgage payments and our retirement funds, with the exception of one trip annually. At this point I’d feel far worse spending on something nonessential than any joy I’d get. In my mind I’d be doing the calculations…that’s dinner was the equivalent of admission to the Louvre, or a gondola ride in Venice, or results in a one day delay in retirement. If you’ve worked out exactly what your dream will cost it makes skipping the crap today soooo much easier! It doesn’t feel like a punishment at all when you know what you’ll be getting in exchange.

  4. Monica says:

    I love the list!! As I am getting closer to being credit card debt free and have been working on how to handle this. The list shows that I am on the right track. Now implementing it will be the test of all tests. Thank you for sharing this. I really needed it!

    • @Monica Congratulations on your almost debt freedom, this is a huge accomplishment that should be celebrated with the knowledge that you can do it and staying debt free should be easy once you continue the habits that helped you get debt free 🙂

  5. Wow, I only agree with about half of these! I am not yet debt free, but I anticipate never going all-cash or keeping a budget — but I am looking forward to less stress in my life.

    • @Kathleen I am surprised to hear you say no to budgets. I would love to hear more about why you feel this way 🙂

      • I have goals, not budgets — targets for savings, then using the credit card to help budget for next month, and always paying full balance when the card comes due.

      • guest says:

        I don’t formally budget either. I transfer all my savings to their appropriate accounts on payday, then I mentally put aside all the money for bills that I will need for the next 2 weeks, then what is left is left. Some weeks we are scrounging for groceries, and some weeks we can get pizza on Friday night. I evaluate all my goals (pay off mortgage asap, put money aside for car repairs, make sure i have enough money for kids activities in the next season, etc) each payday and see the best I can do with the next paycheck, while still being about to pay my bills and have a bit of a life….

        I find budgets too restricting for me. I know I have enough to a pay all my bills and contribute to my goal saving accounts, but whatever is left tends to be spent as we want.

        I have no cc debt, just a mortgage on house and one for a cottage.

  6. JMK says:

    I know everyone has a really different take on the pitfalls and merits of using credit cards for the benefits you can earn. I personally don’t have an issue paying off the balance and do it weekly simply because I find it much easier to verify a short list of items rather than a month of them. Buying EVERYTHING on our card also means we earn enough flight miles for our family vacation to Europe every summer. We have a system that we are working to our advantage but I realize it wouldn’t work for everyone. On the issue of credit causing spontaneous purchases, yes that happens. But 99% of the time they are actually money saving purchases – last week I budgetted an amount for week’s groceries as usual. At the store I found an unadvertised sale on cheese and pork tenderloins. Had I only brought cash I wouldn’t have been able to take advantage of the sale without a return trip to the store (20 miles round trip plus time). Instead I’ll just reduce the meat purchased this week. I’ll either come in under budget as a result of the savings, or we’ll just eat better for the same price. We plan out every cent we expect to spend for the entire year and plug in our pay deposits as well. This gives us the total amount of excess we should have at the end of the year if we follow the plan precisely. Of course life happens and there are unplanned expenses or things that happen so infrequently that we just cover them from that week’s excess, but I keep a running list of all the unscheduled items (over $20) I had to add to the spreadsheet through the year so I can determine if they should be part of next years starting plan, or if they were really one time events. At the end of the year the total spent on unplanned items plus all the extra mortgage payments and retirement savings should add up to the predicted excess for the year.

    • @JMK I agree with your take on using credit cards–responsible use is ok; that includes paying off the balance each month.It sound like you have a budget and stick to it even when something comes up.
      Love the idea for the list of unplanned expenses over $20 I think this is a great way for people to see just how many “surprises” there are throughout the year 🙂

  7. It will be a big fulfillment for us when we become debt-free. I would only say one thing and I only hold on to this philosophy, “If others can do, why can’t I?”

  8. Bucksprout says:

    Consistency is the most habit of a debt-free person. All the habits are great but if a person cannot be consistent with all the habits listed in the post they will find themselves in debt again.

  9. Every time I read the next step I nodded my head saying yes we do that, etc etc right to the end. We are in our 30’s and are debt free including the mortgage although we still have to pay the bloody thing off but have the money. This just recently happened but we have never carried any other debts except the mortgage and pay cash for everything. We scan everything, read receipts, save up for what we want and know how to say “no we are on a budget”. I think if we would have started to budget earlier we would be that much far ahead but we don’t look back we always look forward. Budgeting takes time, paying off debts take time, but most of all it takes a dedication to want to get rid of the debts. I can’t make anyone budget or make the changes necessary in order for them to sleep better at night but I can share what has helped us get to the place we are at and that is debt free. That is what I hope to share with my fans.. just trying to make a difference. Excellent Post. Mr.CBB

  10. Kevin Mzansi says:

    Looking forward to #2: Stress-free lifestyle…Just thinking about all the work that needs to be done to clear the debt is a major stressor! Great list…

  11. Louise says:

    We have been debt free including our mortgage for several years BUT one thing that really helped me not to buy more “things” is that we have started dejunking our house and shed. Once you get used to less things and more order, it makes you not want to bring more junk in.

    • Travis says:

      I agree Louise, having less stuff and clutter is addicting. My wife and I actually have a garage sale every spring and fall – and everything that doesn’t sell gets donated immediately. I LOVE having less stuff!

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