13 Smart Habits of Debt-free People You Should Adopt - Life's Little Pleasures and Struggles

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If you’re planning to get debt-free or trying to stay debt-free, it’s always good to be inspired. Look at people you know who are already living debt-free lives and enjoying financial freedom. Whether it’s a friend, family member, or co-worker, the person you’re thinking of probably shares similar qualities with other debt-free people. Debt-free people aren’t necessarily wealthy. They are the people who are willing to utilize the resources they have, financial or otherwise, to pay off debt or avoid it altogether.

If you want to be debt-free, you need to change your lifestyle and shift your mindset about money. It’s not going to be that easy, but once you become debt-free, you’ll be able to save more money, you’ll have the freedom to live the life you want, and you’ll be less stressed and happier, too.

Here are some key habits of people who are already living a debt-free life. People who have gained freedom from debt share these 13 common habits. By adopting these habits, you, too, can live within your means and build a more financially secure future.

1. Setting financial goals

Wanting to get out of debt and live a debt-free life is one thing, actually doing it is another. Debt-free people know there’s no way to attain financial freedom or security without a set of goals in place and a plan to meet them. You need to know what you want to accomplish with your money, how you want to achieve that, how much money you can save, how fast you can pay off your debt, and what things you need to do to reach those goals.

If you’re not sure where to start, start small. Make a pledge to not buy anything unnecessary for a week, then a month, and then a year if needed. Try to use cash instead of credit cards for a day, then a week, then a month, and so on. Once you get used to this new way of living and shopping, you can easily make a plan to start paying off your debt sooner than you think.

2. Living well below their means

All debt-free people not only live within their means, but also they live well below their means. So, this is one of the most important steps you can take in order to live a financially stable, debt-free life. Financial stress comes about when your lifestyle doesn’t match up with your income. You begin to finance your expenses using some form of debt, like high-interest credit card, a personal loan, or a home equity line of credit. Some of you might even tap into your long-term savings or retirement funds to pay your current bills.

Without living within your means and without making the most of what you have, you can’t really live a debt-free life for long. Living beyond your means is an all too common problem these days, and whenever you find yourself in this situation, it’s important to do the work to fix it. Overspending will always catch up in the form of neglected savings accounts and unpaid debts. Don’t let yourself become a victim of overspending. Be content with what you have, and focus on what is truly important and meaningful.

Pretend that your paycheck is at least 10% or 20% smaller than what it is right now. Create a realistic budget based on this smaller amount, and direct that extra money towards building your savings and paying off debt. Once you create a sustainable budget, stick to it. Spend less and save more. Embrace frugal living if necessary. When you will learn to live and manage well within your means, your life will get so much simpler and easier.

3. Having a realistic budget that aligns with their life’s priorities and goals

It might not sound like the most exciting thing, but following a budget is the cornerstone of effective money management. Keeping track of all the money you have coming in and going out and knowing exactly where it’s going allows you to make smarter choices and focus on saving for the future.

A budget helps you hold yourself accountable. Without a budget, even if you have a very good monthly income, instead of saving money, you will most likely overspend and end up being in debt. Because saving money has very little to do with the amount of money you earn. How you manage what goes through your fingers usually makes the difference.

Work on setting a budget you can reliably stick to — one that allows for paying your bills, working toward your financial goals, and still splurging every once in a while on the fun stuff. Without a realistic budget, you really can’t make your dollars stretch because you might not even know how much money you have to work with!

4. Not wasting money

You can’t get out of debt or stay out of debt if you waste your money. Debt-free people understand this very well. They spend their money on things that are necessary and that add real value to their lives. They understand that just because they love something doesn’t mean they have to buy it or own it.

Debt-free people avoid making unwise and unnecessary purchases, such as cars or homes they can’t afford, paying more than they have to on something, or spending too much on consumer items that lose their value soon.

Along with this, they have learned to squeeze every penny out of every dollar and have found ways to save where most people don’t think there is any room to save.

5. Saving religiously

People who are debt-free make saving a priority. They try to spend less and save more of their income for the things that add more meaning and value to their lives. These people always keep their life goals in mind, and save every dollar towards those goals such as retirement, emergency fund, kid’s college education, vacation, buying a home etc.

They love to pay themselves first and they make sure they do it. They save a specific amount of money each month religiously – at least 10%. Debt-free people know adding even small amounts now will give you more financial freedom later.

6. Having an emergency fund

Debt-free people are ready for the unexpected events with a fully funded emergency savings account that keeps them from having to rely on credit cards to pay for unexpected expenses and accumulate debts.

This is the real world, and it is full of things like job loss, sudden medical expenses, and family emergencies. Life happens, and in most cases, there is nothing you can do to prevent them. But you should prepare well to tackle them financially.

If you want to improve your financial situation, and set yourself up for success, you need an emergency fund big enough to pay at least 3 months of expenses; preferably 6 months. The more the better.

Start small. In the early days of saving, it’s all about consistency, not amount. Start putting something away now by trimming or cutting expenses like advanced meal planning, opting for generic brands, and cutting any monthly expenses you can live without, and build your fund over time. Whenever you receive a salary raise, tax refund, or bonus cash of any kind, use it to build up your emergency savings. You may also consider selling any unused items around the house to build up that cash as quickly as you can.

If you’re new to saving for emergencies, set an initial goal of $1,000, which is enough to cover a minor emergency expense, like a car repair or replacement of your broken washing machine. Once you hit that, steadily work your way toward having 6 months of living expenses saved.

Related post: An Emergency Fund and Your Peace of Mind

7. Saying “no” more often

One of the best financial habits of debt-free people you can adopt is saying “no” more often. Achieving and maintaining freedom from debt means learning to say “no” more than you’re probably accustomed to. When following a budget and planning your spending, you’ll need to start saying “no” to things like pedicures, lunches with co-workers, or dinners or weekend trips with friends or movie nights in the theater with your family. It might feel uncomfortable at first, but you’ll learn to appreciate that saying “no” to certain things now means saying “yes” to a secure, debt-free future.

Debt-free people know that saying no to smaller expenses can add up to big savings. This doesn’t mean you can’t have any fun if you want to get out of debt or stay debt-free. Host a potluck dinner at home instead of trying out a new, expensive restaurant. Meet up with friends in the park and have a picnic instead of taking an costly weekend trip together.

You also need to learn to say “no” to yourself and be patient. This is especially important when you’re shopping, or just out there in the mall for fun. This is really about getting control of impulse buying. Many people spend far too much of their hard earned money buying things at the last minute, without any prior plan.

This impulse buying can be difficult to overcome. You’re out somewhere, and you see some item you like, and you buy it because it doesn’t cost “that much”. Even worse is the ability to purchase things online nowadays and have it delivered straight to your doorstep in just a few days. If you do that several times a month, the spending can add up quickly – increasing your debt.

People who are debt-free know that they can’t do it all, so they choose what is most important and meaningful to them.

8. Not trying to keep up with the Joneses

Debt-free people never try to impress others for the wrong reason. They don’t spend their hard-earned money trying to keep up with the Joneses who don’t really matter. They live their life in a way that aligns with their values and priorities. They are not trying to keep up with everyone else by having the newest car or latest gadgets. Remember that just because someone appears to have it all, doesn’t always mean they are able to afford it. If you could peer inside the Joneses’ homes and bank accounts, you might not always get an enviable picture.

If you have debt now, ask yourself what behaviors or attitudes contributed to it. For example, if you took out a large car loan, was the motivation to purchase a reliable vehicle or to keep up with the Joneses? Looking at debt from a motivational perspective can help in making wiser decisions about when to borrow and when not to.

Do what gives you long term pleasures and what is right for your family. While making financial decisions, you have to do what is right for you and not be influenced by the many temptations that surround us. Don’t make your life harder trying to impress others whose approval or envy doesn’t matter at all. Make the best of your situation, and focus on what truly matters to you.

Related post: How to Be Content With What You Have

9. Buying things with cash

This is one of the important financial habits if you want to avoid getting into debts. Not only will this keep you from running up your credit card balances, but if you have to use cash or your debit card to make your purchases, there is a very good chance you will spend less money than you would if you’re shopping with a credit card, because you can’t just pay it off later at your convenience. It’s real money, and studies have shown that you spend less when you shop with cash. Researchers at MIT found people who were told to use a credit card instead of cash were willing to pay more for purchases.

Those who achieve and maintain a debt-free lifestyle know that if they can’t pay for something in cash, they’re not buying it until they can. They understand the long-term stress of paying off a credit card bill and the added finance charges isn’t worth the short-term satisfaction of making a purchase on a credit card. So, they delay that instant gratification and save up money to buy with cash. For people who are committed to living a debt-free lifestyle, cash is king.

10. Paying careful attention to details

People who are debt-free are watchful over their money, and they monitor their accounts and review their finances regularly so they know where they are. Debt-free people know that tracking their expenses is the first step in getting control of their finances. This allows them to see if there are any money leaks in their spending so they can eliminate unnecessary expenses.

They also notice if an incorrect or extra charge appears on their bill, and are less likely to miss a payment due date.

11. Learning about money and how to manage it well

One of the serious causes of personal debt is lack of financial knowledge, and debt-free people know this very well. Understanding your finances is important, and responsible money management needs you to educate yourself about how to budget, save, and build wealth.

Many people simply don’t have the financial education that is needed to make sound financial decisions. These people don’t think that learning about money management or personal finance is just as important as any other subjects. So, they end up making many big mistakes while handling their money, and eventually find themselves in debt.

If you want to become debt-free and financially stable, you will have to seek knowledge and advice from the financial gurus. Debt-free people never stop educating themselves, especially when it comes to personal finance.

12. Giving value to experiences over stuff

Debt-free people aren’t focused on material things. They don’t let possessions define them. Instead, they value relationships and experiences over things. They derive their happiness not from amassing stuff, but from experiences and from knowing they are financially secure. Adopting that same attitude can benefit your financial health overtime.

The average person will list family and friends high on what they value most. But are your choices reflecting that? If you’re working extra long hours to pay for a fancy meal with the family and having sleepless nights over your monthly bills, think about the trade-offs. Would you be better off not working late and having frequent meals at home with the family and spend quality time with them?

13. Communicating well with partners

Couples that are debt-free communicate well and they communicate often. Topics like money goals and dreams are important discussion points for debt-free spouses to talk about. They frequently have those bigger, important conversations about money.

There are no secrets when it comes to how money is being spent. They are the accountability partner when someone else wants to go on a splurge and spend all the money. Debt-free couples are completely honest with each other when it comes to earning and spending money. They set and reach their money goals together.

Final words

If you find yourself in debt, and are struggling financially, you should adopt some of these key habits of debt-free people! There have been where you are and now living debt-free lives.

Having debts can be extremely stressful, and not having the burden of debt is a wonderful feeling and a great relief! Give time and efforts, set your goals, create a realistic budget, live below your means, and learn to manage your money well. You can get to where you want to be.