10 characteristics of debt-free people

If you're having trouble living within your means, it might be useful to take a look at some of the qualities shared by people who are able to do it.

By Credit.com Feb 5, 2014 2:27PM
This post comes from AJ Smith at partner site Credit.com.

Credit.com on MSN MoneyWhether you've resolved to get debt-free in 2014 or you have a long way to go, it’s good to be inspired. Look at people you know who are already living debt-free lives. Whether it’s a friend, family member or co-worker, the person you are thinking of probably shares similar qualities with other debt-free people. Here are 10 common characteristics you can copy to live within your means.

Smiling woman with credit card © Burke/Triolo Productions/BrandX/Getty Images1. They pay attention to details

You won’t notice that recurring fee on your credit card for the gym you've stopped using if you’re not checking your statement regularly. People without debt monitor their personal finances closely. They are less likely to waste money by forgetting about payment due dates or overdraft fees.

You can start paying more attention also. The key is just to start. Try looking at your credit card statements every month. Next monitor all of your spending. Now 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 own research. They might have an accountant, but they don’t send over paperwork or sign their taxes without looking them over. If you want control over your finances, you need to learn about them. It may feel overwhelming but the sense of security you will feel in understanding what’s happening with your money will outweigh the discomfort.

(Editor's Note: If you want to get an idea of where your credit currently stands and how your debt is impacting it, the free Credit Report Card will provide you with two free credit scores and a breakdown of your credit profile.)

3. They pretend they make less

Even if you are already deep in debt, you can start to improve your situation by immediately changing the way you look at your money. Imagine you make 10%, 25% or even 50% less than you do. Make a budget using that math. It may be impossible at first, but start making cuts to your spending.

Debt-free people live on less than they make. This allows them to put money aside for buying a house, retirement an an emergency fund.  This provides a financial independence that allows you more options in the future.

4. They think long term

When the focus isn’t on immediate gratification, you can make smarter decisions. Sure, it would be nice to have this season’s hottest shoes, but how will they help your long-term financial goals? This doesn’t mean you can’t ever buy shoes! It just means you have to save up before you buy them. This also gives you the time to consider if you really even like the shoes and avoid impulse purchases.

5. They aren’t afraid to ask

Ask for help. Ask for lower interest rates. Ask for forgiveness when they make one late payment. Debt-free people take control of their finances and they aren’t meek about it. If you know someone who has met a financial milestone you admire (saved $1 million for retirement, bought a car in cash, etc.), don’t be afraid to ask how they did it.

6. They save

Whether you got a significant bonus or a $25 check from Grandma, you should think first of paying yourself. This is true of your regular paycheck as well. You know you have to pay the rent (or mortgage), so treat your savings account the same way. Make it a habit. And better yet, make it a mindless habit by setting up automatic deposit. Debt-free people know adding even small amounts now will give you more financial freedom later.

7. They set goals

You’ll find it easier to put aside money if you have a strong sense of what it’s going toward. This works for when you are saving up for those shoes, planning a vacation or thinking about retirement. Debt-free people set specific goals so they know what they are striving for. This helps you stay on track. Retirement can be a hard one for young people. It seems so far away! Think about what sounds appealing about retirement. If it’s travel, imagine the places you will visit. Now the goal seems more specific.

8. They say no

You may get lots of tempting offers throughout the week for lunch with co-workers or dinner with friends. Don’t be afraid to say no. 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. Host a potluck dinner instead of trying out the new, expensive restaurant. Meet up with friends in the park for a walk instead of taking an expensive exercise class.

9. They know the value of cash

Debt-free people know the value of a dollar… because they see it! It can be easy to overspend when you are never seeing actual money. Having to part with some cash can remind you the transaction you are making is real. Plus, once that cash is gone, it’s gone. Try only using cash 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 more than having the latest things. The average person will list family and friends high on what they value. But are your choices reflecting that? If you are working extra hours to pay for a fancy meal with the family, think about the tradeoffs. Would you be better off not working late and having two (or five or 10) meals at home with the family?

To become debt-free, you are going to have to shed some of your current bad habits and take on some new, more constructive ones. Use the people who already living debt free as inspiration.

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Feb 6, 2014 1:14AM
Me and my wife also live debt free.  We are both 50 and clear just above $50,000 a year in combined income. We made our last house payment in 2004. We have never had car payments or credit card debt. My wife drives a 2001 Camry and I have a 98 Infinity I30.  Bought them used and paid cash.  I learned my finances from my grand mother, she had a saying...."I pay cash or I do not have it and mostly I do not have it". Another thing she taught me about money is do not live above your means, do not live within your means, live below your means.  We have a net worth with our home, cash on hand and our retirement accounts at $600,000.  We worked for every penny of it and never had anything handed to us. We believe in personal responsibility.  We have never taken a government hand out or an un-employment check.  We both have worked since before high school. I at one time have worked as many as 3 jobs when I was younger. The time shares some you on here may have, well they are a waist of money and here is a little secret for you. They rent them out like hotel rooms when the time share owners are not using them.  Me and my wife love to vacation in Myrtle  Beach and we get a great deal in an ocean front condo. The middle class in this country need to get out of debt.
Feb 5, 2014 9:54PM
You don't have to be wealthy to be debt free. I paid for college myself. Worked my a** off to do it, but I did it. I've never had a credit card... ever. My philosophy is simple: except for autos and my house, if I don't have the cash for it, I don't buy it. Speaking of my house, I'll have it paid off in 15 years or less. I make double payments every third month. I paid off my car (that I bought brand-new in 2009) in 3 years. I continue to hold back that monthly payment amount every month, as if I still have a car payment, so that when I do need to purchase another car, I'll have plenty of money for a sizeable down-payment... or possibly pay cash, if I buy used. I don't buy everything I see and/or think I need. I don't pay for TV. Don't have home internet. Have a cell phone with a no-contract, cheap plan. I live well below my annual salary, which, oddly enough, allows me to buy far above my salary when I do make purchases.
Feb 5, 2014 9:42PM
Being debt free is like having a great dream,having lot of debt is a nightmare
Feb 6, 2014 2:06AM
I was taught the first law of economics when I was young, (16).  When your outgo exceeds your income, your upkeep becomes your downfall.  The ONLY thing I've made payments on is housing.  I lost the first one to divorce but paid off the second one in about ten years.  I bought my first NEW car when I was 76 years old only because I couldn't find a used one as good at a reasonable price.  Paid CASH.    Yes, I have credit cards.  They are more convenient than carrying much cash or a check book and they get paid off every month.  I refuse to rent money from someone else.  If you ain't got it, don't spend it. 
Feb 6, 2014 10:05AM

Wife and I are married 29 years.  I'm 63, she's 59.  We have a 29 year period of yearly income of $90.000. We switched bread winner roles when I was 58 so the yearly income has not changed in 29 years.  We paid off the house 15 years ago and have only purchased used vehicles up until 10 years ago.  We live in a $135,000 house, own two Harley's, a car, a pickup and a fifth wheel camper. We are currently saving to trade one of the Harleys, the pickup and camper.  Frugal living with vacations a couple times a year has allowed us to amass a retirement nest egg of a bit more than $1,000,000.  True, she does have a good employer match but that also means she must contribute a great share of her paycheck to be effective.  Most of what I make ($30,000) goes to everyday expenses.  We have a financial planner who invests farily conservatively and we still netted a 12% growth in 2013.  My advice?  Dump the cable service, quit smoking, buy groceries, limit your resturant outings to one night a week, tell the kids sorry you can't have everything you want and realize there is a difference between "I need" and "I want".  Oh yeah, I paid child support to my first wife for the first 10 years my marriage to my current wife. Get a job and live below your means. It can be done and it is not that painful.

Feb 6, 2014 9:53AM
We are failing to teach kids about personal finances in grade school. People in their 20's don't understand how devastating bad credit, excessive debt and bankruptcy can be on ones life. Parents are not teaching their kids about it either. I guess people are expected to just understand personal finance naturally.
Feb 6, 2014 10:46AM
These writers always leave things out. I would add that debt free people slam the phone down on all salesmen and telemarketers. Also very few throw thier hard earned money away at a casino or lottery tickets. And last but not least they tend to be better educated.
Feb 6, 2014 10:21AM
For once a decent article.  This describes my wife and I, we've been 100% debt free for quite some time. 
Feb 6, 2014 11:10AM
My wife and I have been debt free for approximately 10 years. It is such a great feeling. It just takes commitment and discipline. While others we know are out buying the latest and greatest material things (vehicles being #1) I get more of a great feeling knowing that our things all work well, and are and have been paid off for years. I drive a 98 Camry with 278,000 miles on it. Still looks great, and gets me from point A to B just the same as a new car (just an example). We look forward to early retirement. Kids are both grown up and doing well. At the current age of 51, I will be looking to semi retire at about 55. Small sacrifices over the years will add up large payoffs in the future, in the quality of life.
Feb 6, 2014 12:16PM
 I remember my dad telling me to look at the large buildings in any major city and you would see they were generally insurance or banks, so that is where a lot of people's money goes. The more I could avoid giving them my money, the more I would get to keep.

 I have had one loan in my life - the week before I started a "real"  job out of college my engine dropped a valve through a piston so I had to borrow enough to buy the cheapest economy car (Chevette) available. Paid it off in a year.  College was already paid for via some help from my parents as well as part time jobs during the semesters/full time in the summer - at one point I had 4 simultaneous part time jobs so I could come out of school debt free with a very employable science degree.

 Paid cheap rent for about 8 years while saving like mad since I was still used to living like a poor college student. Bought 10 acres of land with cash and enough to do the initial framing (myself). As much as possible I did the construction work myself over about 3-5 years - I moved in after the first year with just one bed room and bath finished. Every paycheck went to buy the next batch of lumber, plumbing, electrical or cabinets so I was truly house poor for many years as almost every spare dime went into the house project. End result was by my early 30s the house was completely paid for and I never had a mortgage. 

 I used the above hard work in my 20s to set me up financially for the rest of my life. For the next 20+ years I kept pretending I had a mortgage and auto-deducted well over a grand a month into mutual funds (love those low cost Vanguard index funds) so money is not a problem now. We have always paid cash for cars and until recently our vacations were inexpensive  but very fun ones ranging from visiting family to hiking, camping, etc.  Played tennis and biked as a family as well. We saved enough in 529 plans to pay college for 2 kids, and now are kicking back and taking more extravagant vacations like to Maui & Europe. Will retire in mid 50s with funds to take those trips every year if we want, or as long as our health holds up.

 I didn't do all of the above for love of money or greed, I did it for freedom of choices in life and to have enough funds to take care of my family in a disaster situation.   The greatest benefit from all of the above was the freedom it gave us. No worries about getting behind in payments and losing our home or cars, having a large enough savings account to weather an extended disability if injured, etc.  It also allowed us time and money to volunteer teach at a local school as we cut our work hours to part time for several years while the kids were young. For the first 15 years of their lives, they didn't realize we were as secure as we were and now so the also developed saving/thrifty living habit and should not get into money problems when they graduate and start their own lives.  
Feb 6, 2014 10:36AM
I have never owed money. No credit cards. Built my own house without a mortgage. Buy used cars with saved cash. I hate the whole idea a paying interest and simply refuse to do it. 
Feb 6, 2014 11:33AM

Aside from our mortgage we have no debt.

Our mortgage was planned so that should I ever loose my job and have to go flip burgers we would still have our home.

We stashed one year's income away for emergencies. and also have $10K in gold, just in case.

401K is fully funded and we max our personal IRA's every year.

It ain't easy but sure beats worrying.

Feb 6, 2014 1:50PM

When I was married to my first wife we lived from paycheck to paycheck and were up to our eyeballs in debt. After the divorce I decided to live as frugally as possible to get out of debt. And I mean living without almost everything! Eight months later I was out of debt. Four months after that I bought a house. Three years later I married a woman whom viewed finances the same as I did. We have been together for 32 years now. Everything we have we own outright. It took a lot of will power to live like I did for the two years after my divorce, but I am sure happy I did now.

Feb 6, 2014 11:38AM
To me being in debt is the same as being A slave to your creditors,banks etc.Whenever I wanted to buy something I would pay cash.Or I would just save up.People today want it now,then they become A slave.At that point they are only making banks richer.I use creditbcards and pay them off in full before they are due.That way I use the banks money.It works for me.
Feb 6, 2014 1:14PM

I didn't read the article, didn't have to.

How does it feel to be debt free? It feels awesome.

Feb 6, 2014 2:27PM

Let's face it, this article from MSN Money has value!


Started working when I was 12 yrs. old (early 60's), grew up in a very "blue-collar" neighborhood that displayed a hard-working (if you're going to succeed you've got to do it yourself) work ethic. I've particularly and diligently applied numbers 4, 6, 7 & 8 throughout my life.


Thinking Long-Term, Saving, Setting Goals and Saying NO can place one on sound financial footing.


Just think of what our country could become if we would apply just these four principles in Washington?

Feb 5, 2014 10:51PM
Being debt free is nice.  Expect Uncle Sam to really show you the love come Federal Tax time but that's the only downside.
Feb 6, 2014 12:58PM
Advice my father gave me at a young age: pay your bills first, then pay yourself.......then you can eat.
Feb 6, 2014 11:52AM
have no liens or mortgages on your soul either if you want the real deal.
Feb 6, 2014 10:11AM
Have all income come into a checking account and all outflow bills paid from that account automaticly, such as house taxes, insurance, credit card bills (full payment) so  you never miss a payment and save postage and time writing checks.  Just now went to a store and got my wife a Valentine day card, showed it to her and put it back, then she got me one also, showed it to me and put it back, no cost and smiles !!!  NEVER pay interest !!!  Maybe for a house or car !!!  But get them paid off ASAP !!!!!!!
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