One of my most popular blog posts of all time is 10 Daily Habits of Frugal People and I totally understand why. I’m fascinated by the habits of people who are better at something than I am, so it’s important to learn these kinds of things!
Every person I know would love to someday be able to say they’re debt free because debt is a weight that holds so many people down from really achieving their dreams.
Being in debt is hard. If you were to develop even just a few of these habits of debt free people, you will see a serious change in your debt free journey!
1. Think Like They Make Less Money
A huge factor to being able to save money or pay off debt is to live on way less than you make and sometimes this can be really hard. A great way to do it? Convince your brain that you make way less than you do.
If you were able to think like you only made $3,000 a month but you really made $5,000 a month you could put an automatic payment to your savings with that extra $2,000 every month. That’s insane!
A lot of people who are debt free think like this because they had to live on less than they made for so long while paying off their debt and they just never inflated their lifestyle when they had more money available.
Even people who were never in mass amounts of debt are able to make this happen by not changing their lifestyle after they get a huge raise or a promotion! Convince yourself that you make less than you do.
2. They Stick to a Budget
Budgeting. Such a dirty word for so many people, but it doesn’t have to be. Having a budget is the best way to make sure you never end up in debt again.
When you have a detailed budget (I suggest you try out the Zero-Based Budget) you know exactly where your money goes and when it needs to go there! This means that there are no surprises and a much smaller chance that you’ll have to use an emergency credit card.
People who are debt free love a good budget because chances are that is exactly how they got out of debt in the first place! If you’re serious about budgeting, you could even grab a copy of our $5 Budgeting Binder!
3. Live Below Their Means
This goes right along with thinking like you make less money. The thing about debt free people is that they do both of these things.
So, let’s say Katie makes $5,000 take home each month, but she thinks like she makes $4,000 but she lives like she only makes $3,000.
This means that she’s able to save $2,000 a month for retirement, her kid’s college and to add more to her emergency fund. How awesome is that?
Living below your means is the most important thing you can do to become and stay debt free.
4. They Have an Emergency Fund
One of the best ways to get to the point of being debt free is to have a fully-funded emergency fund. Why? Because having emergency money ready and available makes it way less likely that you’ll decide to use credit when something bad happens.
Imagine this situation happens. You lose your job tomorrow. If you don’t have an emergency fund, you’ll have to buy groceries with a credit card or borrow money from friends and family until you can get a new job and get back on your feet.
Now, imagine this. You have 3+ months of money in a savings account ready to go. How good would that feel? The usual time it takes for a person to find a new job after job loss is around 3 months, so you’d be in a much better place if you just created your emergency fund!
5. They Meal Plan
One of the biggest budget killers is overspending at the grocery store which is a lot easier to do than most people realize. That’s why debt free people love to meal plan.
They understand that if they don’t have at least a general plan of what to do for dinner all week then they’ll end up eating out or buying a bunch of ingredients and just wasting money!
The best way to meal plan is to have someone else to do it for you! I’m a serious fan and every week user of a service called $5 Meal Plan. Never heard of them? I’m not surprised but I’m here to rock your darn world.
$5 Meal Plan will send you a meal plan and a detailed grocery list each week for only $5 a month. You can individualize your meal plan if you have some sort of allergy (like me, ugh I miss gluten & dairy).
6. They Shop Around
Shopping is one of my greatest pleasures, seriously. But I will never buy something without shopping around or trying to get a discount first. This is especially important when you’re making big purchases like appliances or furniture!
People who are debt free know how hard they’ve had to work to make sure they don’t accumulate mass amounts of debt, so they make sure to buy the best value instead of the fanciest or most expensive product!
A really great way to get a better deal is to use free services like Rakuten. This is a totally free cash back service that has websites on it like Amazon, Sephora, Walmart and so many more.
You can get paid four times a year with cash back on purchases you have already made.
7. Openly Communicate about Money
One thing that really bugs me about people these days is how we just never talk about money openly with others. Personal finance is seen as a very taboo topic and it ends up making it so hard to have conversations with even your significant other about money!
In order to become debt free as a family, it’s important that you have open and honest conversations about it with your family members in order for there to be no secrets and no secret debt!
A lot of people who are debt free also openly communicate with their friends and family about how they’ve become debt free in order to share the wealth and help their family members become debt free as well!
8. Monitor Their Credit Score
Credit scores are seriously important and it’s an aspect of personal finance that a ton of people just ignore. A crazy thing is that your credit score starts the second you turn 18 but we aren’t told how they work unless we seek out that information ourselves!
There are a huge number of 18 year olds who are ruining their credit without even realizing they’re doing it.
People who are debt free are always aware of their credit scores because they know that a good credit score is the best way to get a lower interest rate on giant purchases like a mortgage!
A great way to monitor your credit score entirely for free is by using a website called Credit Sesame. They allow you to monitor your score as well as getting notified if anything changes that you may not have authorized.
9. Automate Their Savings
Learning how to automate your savings is a really important factor in being able to pay off debt and build up a savings account.
Why is automation so important? Well, when you set up an automatic transfer to savings that happens before you spend any of your paycheck it’s almost like you got paid less and you learn to adjust accordingly! You end up with a surplus of money in your savings and it feels really great.
Having a savings account that’s well-funded is really important for people who are debt free because they never again want to be in that position!
10. Have a Profitable Side Hustle
Did you know that a majority of people who have paid off huge amounts of debts got it done because they started a profitable side hustle? Why is that the case?
Well, having an awesome side hustle and a full-time job makes it so easy for you to put your full-time income towards your every day expenses and lifestyle and you can put all of your side hustle income toward your debt and pay it off lightning fast!
Also, a ton of the time people who are working towards becoming debt free start a side hustle that they love and it ends up being a full-time gig that they do for the rest of their life!
11. Keep Plastic Only for a Really Rainy Day
Even people who are completely debt free aren’t perfect. This is why most of them will have a credit card around that’s legitimately only for a very very rainy day. They aren’t like most people.
They know that if they use credit all the time they’ll end up right where they started and not be very happy about it, so they limit using credit to really bad situations.
There are some debt free people who use credit every single day. But there is one key difference between them and most regular people. They pay off their entire credit card bill every single month so they don’t have to pay interest.
There is a huge group of people who have paid off huge amounts of debt who follow Dave Ramsey and don’t even own a credit card. They’re the true snowflakes who are very special because I don’t think I could survive without a credit card in our new digital world. But all the power to them!
12. Have Long Term Goals
Most people who are debt free haven’t been lucky enough to be debt free for their entire lives. This means that they had to set long-term goals and actually work hard to accomplish these goals in order to get where they are today.
It’s important for people to have long-term goals in just about every part of their lives in order to really reach their full potential.
Some examples of long-term goals you could set can include:
- Saving for a new car
- Saving for a home downpayment
- Saving for your kid’s college
- Saving for retirement
- Retiring before 65
- and so much more!
Take a few hours and really think about what you want out of your life and what you want your money to do for you and you can even create a Five Year Financial Plan.
13. Be Grateful
One major habit of debt free people is to be grateful no matter how much money you have or how much debt you’ve paid off. Being grateful for your money is a huge part of the law of attraction and the law of attraction is an amazing way to bring more money to your life.
Always. Be. Grateful.
Being debt free is the most amazing feeling. If you aren’t at that place yet, reading this post is an awesome first step because you can learn all of the best habits of people you aspire to be like! If you’re looking for help getting out of debt be sure to check out What To Do BEFORE You Pay Off Debt!