You probably know people living debt-free lives. Whether it’s a friend, family member, or coworker, they likely share similar qualities with other debt-free people.
In this blog, we’ll look at the top ten characteristics of debt-free people and why emulating them could pay off in the long run.
1. They Pay Attention to Details
Let’s say you have a gym membership, a subscription to a premium streaming service, or another recurring payment automatically removed from your bank account or credit card every month. You won’t notice them draining your money if you’re not tracking those fees with an app that manages your subscriptions or checking statements regularly.
People without debt monitor their finances closely and are less likely to waste money.
You can do this, too; the key is just getting started.
- Review all your credit card statements every month.
- Monitor all of your spending.
- Add up your income.
- Compare the two and see where you could cut back.
- Revisit this budget a few times a year to stay on track.
2. They Know Their Stuff
Debt-free people do their research. They might have an accountant, but they don’t send over paperwork or sign their taxes without first looking them over.
If you want control over your finances, you must learn about them. It might seem overwhelming initially, but the sense of security you’ll feel understanding what’s happening with your money will outweigh the cost.
A great place to start is knowing your credit scores. You can get up to three free credit reports once a year. These scores will give you a breakdown of your credit profile from the three leading reporting agencies.
3. They Pretend They Make Less
You can take control of your finances even if you are deep in debt. How? Try imagining you make ten, twenty, or even fifty percent less than you actually do. Then make a budget based on that reduced income. It may seem impossible at first – but try to find cuts you can make.
Debt-free people live on less than they make. This allows them to put money aside for significant expenditures, like purchasing a home, retirement savings, or a simple emergency fund.
By living on the belief that you make less than you do, you’ll enjoy financial independence with more future options.
4. They Think Long-Term
You can make smarter decisions when the focus isn’t on immediate gratification. Sure, having this season’s hottest shoes or the latest gaming console would be nice, but how will they help your long-term financial goals?
Thinking long-term doesn’t mean you can never buy shoes or the system. It just means you have to save up before you buy them.
People without debt take the time to consider the financial consequences of impulse buying. They make informed decisions about purchasing items that aren’t necessities.
5. They Aren’t Afraid to Ask
Debt-free people make mistakes, need help, and more. But where they differ is when it comes to having the fortitude to ask for help. They ask for lower interest rates, forgiveness for a missed or late payment, and help with understanding financial matters.
They take control of their finances and aren’t bashful about it.
Here’s a task: if you know someone who’s met a financial milestone (saved $1 million for retirement, bought a new car with cash, etc.), don’t be afraid to ask them how they did it.
6. They Save
Consider paying yourself first if you got a significant bonus or a $25 check from Grandma. Open a savings account and deposit something each time you receive money – from your paycheck to the ten dollars you found in an old winter coat. Make it a regular habit as paying your rent or sending that car payment.
Automatic deposits are an excellent tool offered by your bank. Take advantage of all the perks they have to offer.
It doesn’t matter how much; the point is to make it a regular habit. That’s what debt-free people do – add large or small amounts every time and expand their future financial freedom.
7. They Set Goals
You’ll find it easier to set money aside if you have a firm goal you want to achieve, whether that’s saving for a new home, retirement, or those shoes you want so badly.
Debt-free people set specific goals for themselves so they know what and why they’re saving. It helps them stay on track.
Young people have a more challenging time setting long-term goals than short-term ones. But having those long-term goals, like traveling the world or owning a vacation home in the tropics, helps to add the vision necessary to start saving now.
8. They Say NO!
You may be tempted to go to lunch several days a week with coworkers or out to dinner with friends. You can afford it, but you know you’d be better off saving the money.
Don’t be afraid to tell them no.
Debt-free people know that turning down these more minor expenses will, over time, add up to significant savings.
That doesn’t mean you can’t have any fun. Why not host a pot-luck dinner or pack a delicious lunch? Meet friends in the park for a walk or run instead of taking that expensive exercise class.
9. They Know the Value of Cash
Debt-free people know the value of a dollar because they see it. It’s easier to overspend when you don’t visually see the money changing hands. Having to part with some cash can remind you the transaction you’re making is real.
And if you have a finite amount of cash, when it’s gone, it’s gone. Try using only physical money for a while and see how it changes your perception of purchasing.
10. They Value Experiences Over “Stuff”
Debt-free people aren’t focused on things. They value experiences far greater.
If you ask the average person what they value, family and friends are usually high on the list. But look at their financial choices and see what they truly value.
Here’s an example: if you’re working extra hours to pay off a fancy meal with the family, think about the tradeoff. Wouldn’t you be better off having meals at home with your family on time?
To become debt-free, you must shed bad habits and take on constructive ones. It may take work at first. The best things in life seldom are. But take a look at the people living free from financial burden.
Let them inspire you to live debt-free. If they can do it, so can you.
The Best Time to Start is NOW!
Regardless of age, job status, or debt-level, the first step is the hardest but the most critical for your financial freedom. Mercer Savings Bank is proud to be part of a thriving community and for building relationships that free people from mounds of debt.
Check out the different savings account options we offer to gain an idea of what’s available to you. There, you’ll discover how to start preparing for a debt-free life.
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