Have you ever wondered how debt-free people got that way? Or more importantly, how do they stay that way?
It’s not magic, and it’s not luck. Debt-free people develop and maintain a set of deliberate habits that put their financial health first. What’s more, they leverage tools and resources that make those habits easy.
These are the 7 habits of debt-free people and how to make them work for you.
1. Debt-Free People Monitor Their Money
Here’s the deal: debt-free people are engaged with their money. They know where it’s going and what it’s doing at all times. That means tracking their income, spending, and saving to make sure it aligns with their goals. It also means keeping an eye on their net worth. Net worth is the value of your assets minus your liabilities, and it is a powerful indicator of financial health.
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- Related: 7 Habits of Women Who Always Have Money
2. They Grow Their Money
Paying off debt is an accomplishment to be proud of, but the name of the game is to grow wealth. Paying off debt = growing wealth. People with savings stay debt-free because they never have to turn to credit when an unexpected expense comes up. They have at least three to six months of expenses in a savings account, ready to cushion any financial emergency. How do they do it? They spend less than they earn and save every month.
- Related: How to Invest With Little Money
3. They Don’t Waste Money
Debt-free people don’t waste money, full stop. That’s because they always know what’s going on in their financial picture and are in control of their spending. They know the value of money and aren’t willing to squander it. If they notice they’re spending money on something that doesn’t align with their values or priorities, they put on the brakes and make a change.
- Related: Ultimate Guide to Saving Money
4. They Are Not Cheap
Debt-free people don’t waste money, but they aren’t cheap, either. Being cheap happens when you’re not aware of your money. You don’t know what your money can afford, so all you buy is cheap stuff.
Be intentional with your money. Know exactly what you can and cannot afford. You won’t overspend which means you will become debt free. Debt-free people have learned not to afraid of buying high-quality items or experiences. If something they want is expensive, they create a savings plan to pay it. They buy everything they can afford. They enjoy their money.
- Related: How To Stop Living Paycheck To Paycheck: An Actionable Guide
5. They Are Patient
Debt-free people know that buying quality with cash takes time. They resist the desire for instant gratification. Watching a savings account earmarked for a special purchase or goal grow consistently can be more satisfying than settling for something inferior in the moment — not to mention it prevents you from taking on more debt. Be patient. Buy quality stuff, but don’t take on debt.
- Related: 9 Things to Stop Buying to Save Money Fast
6. They Set Financial Goals and Priorities
Debt-free people are clear about what’s important to them, and they use that clarity to set financial priorities and goals for their future. Whether it’s saving for a down payment, planning for retirement, or building an education fund for their kids, they always have a plan. No one reaches their financial goals (big or small) by winging it, and debt-free people don’t risk their futures to chance.
7. They Proactively Learn More About Money and How to Best Manage It
Financially woke people didn’t get that way by accident. Those who enjoy the debt-free life hone their money smarts by learning everything they can about how to manage their resources. That means reading personal finance books and blogs, listening to podcasts, and joining enlightened communities. In this digital age, almost everything you need to know is available for free online — there’s no excuse.
Save More Money! Read these next….
- 7 Habits of Women Who are Never Broke
- 43 Hacks to Live on One Income and Never be Poor
- 9 Essential Dave Ramsey Tips You’ll Wish You Knew Sooner
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FAQs
Use a debt consolidation loan
This allows you to make one monthly payment rather than paying multiple creditors. You may also get a better rate compared to your credit card APYs, saving you money in interest. A debt consolidation loan is especially useful if you are trying to pay off multiple credit cards.
How to pay off $20k in debt fast? ›
Use a debt consolidation loan
This allows you to make one monthly payment rather than paying multiple creditors. You may also get a better rate compared to your credit card APYs, saving you money in interest. A debt consolidation loan is especially useful if you are trying to pay off multiple credit cards.
At what age should I be debt-free? ›
“Shark Tank” investor Kevin O'Leary has said the ideal age to be debt-free is 45, especially if you want to retire by age 60. Being debt-free — including paying off your mortgage — by your mid-40s puts you on the early path toward success, O'Leary argued.
How did David Ramsey make his money? ›
He graduated from the University of Tennessee with a degree in finance and real estate. After getting married and moving back to Nashville, Ramsey began building wealth through buying and selling property. By 26 years old, he was rich — and had amassed a small real estate empire.
What is the most important thing a person should do to avoid debt? ›
Making careful choices about spending and borrowing can help you avoid debt altogether. Another way to avoid or get out of debt is to make a budget. A budget is a plan that you can use to track how much money you spend. With a budget, you can look for ways to spend less money.
How long will it take to pay off $2000 in credit card debt? ›
If you can pay $100 a month, it might take you 25 months to pay off the debt. If the card has the same APR but an annual fee of $100, it might take 29 months. And if you can pay $300 a month for a 20% APR card with a $100 annual fee, it might take you 8 months to pay off $2,000.
Is $1,000 dollars in debt bad? ›
While that certainly isn't a small amount of money, it's not as catastrophic as the amount of debt some people have. In fact, a $1,000 balance may not hurt your credit score all that much. And if you manage to pay it off quickly, you may not even accrue that much interest against it.
How much debt is normal at 55? ›
Between the ages of 55 and 64, many Americans start to think about retirement. But among heads of household who have debt and are in this age bracket, average debt levels stand at $145,740. They might have assets in excess of this debt, but they might have negative net worth.
How much debt is normal at 40? ›
According to the Experian 2020 State of Credit report, the average Gen X consumer has about $32,878 in non-mortgage debt, such as credit cards, student loans, car loans and/or personal loans. Gen X homeowners have an average mortgage balance of $245,127.
Is Dave Ramsey a billionaire? ›
Is Dave Ramsey a Billionaire? No. Recent estimates show that Dave Ramsey has a net worth of around $200 million.
When it comes to saving for retirement, money expert Dave Ramsey knows exactly how much you should be setting aside. Ramsey's recommendation, which he shared on his website Ramsey Solutions, is to invest 15% of your gross income into your 401(k) and IRA every month.
What is Suze Orman's worth? ›
When someone has a net worth of over $75 million thanks to financial advice, your ears should perk up when she talks. Suze Orman has amassed such an amazing net worth thanks to her career as a financial advisor, author, and podcast host.
Is being debt-free the new rich? ›
Myth 1: Being debt-free means being rich.
A common misconception is equating a lack of debt with wealth. Having debt simply means that you owe money to creditors. Being debt-free often indicates sound financial management, not necessarily an overflowing bank account.
What is the number one reason people don't get out of debt? ›
1. Lack of sufficient income to do so. A lot of people are making less money than they were just a few years ago. They were making more money when they incurred their debt, but now the lower income level has them in a trap where they have barely enough money to pay living expenses, let alone pay off debt.
What is your greatest tool to building wealth? ›
“Your most powerful wealth-building tool is your income. And when you spend your whole life sending loan payments to banks and credit card companies, you end up with less money to save and invest for your future.
How long should it take to pay off 20K? ›
It will take 47 months to pay off $20,000 with payments of $600 per month, assuming the average credit card APR of around 18%. The time it takes to repay a balance depends on how often you make payments, how big your payments are and what the interest rate charged by the lender is.
Is 20K in debt a lot? ›
$20,000 is a lot of credit card debt and it sounds like you're having trouble making progress,” says Rossman.
What is the minimum payment on a $20,000 credit card? ›
Let's say you have a balance of $20,000, and your credit card's APR is 20%, which is near the current average. If your card issuer uses the interest plus 1% calculation method, your minimum payment will be $533.33. That's quite a bit of money to pay for your credit card bill every month.
Which method is best to pay off debt the fastest? ›
The "snowball method," simply put, means paying off the smallest of all your loans as quickly as possible. Once that debt is paid, you take the money you were putting toward that payment and roll it onto the next-smallest debt owed. Ideally, this process would continue until all accounts are paid off.
