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.
Whether 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.
1. 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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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.
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.
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.
I didn't read the article, didn't have to.
How does it feel to be debt free? It feels awesome.
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?
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