Good Habits of Debt-Free People

Do you want to know how to become debt free? If so, one of the things you need to learn are good financial habits. It is a fabulous feeling when you find yourself debt free. There is freedom in knowing that you will not have to make payments to creditors. To avoid accruing more debt, you have to develop particular character traits that often people who are not in debt share. You too you can emulate these characteristics and become debt free.

Here are tips to help you develop the habits that debt free people have: 

img-3Focus on your goal

If your goal is to become debt free.  Make it a priority!  Don’t just tell everyone you want to become debt free.  Create a plan that will get you there!

Develop a long-term goal

When you get out of debt, it is crucial to have a viable plan that you will follow to stay out of debt. Have a definitive plan that includes savings and retirement goals and stick to it.

What are you spending your money on?

Have you ever kept a debt diary?  I think you would be surprised at all the “little things” you buy during a week and how quickly they add up!   Creating a debt diary doesn’t mean you have to actually carry a diary with you everywhere you go.  Just for a week or two, take a picture of each receipt you receive after making a purchase.   Create a spreadsheet at the end  and calculate how much you spent.  Then next to each entry write down if it was an absolute must have or if it was an impulse purchase.

The longer you track your spending the better.  Its easy to stay on track for a week or two.  But when you have to focus on it for a month or more…. you really get a good picture of how you are spending your money.

Create a budget

Creating a budget Now that you have kept a debt diary, you can accurately evaluate your “needs” versus “wants”.  A need is rent, electricity, food.  A want is cable, internet, Netflix etc.

There are several types of budgets and a LOT of different ways people create their own budget.  Find one that works for YOU and the way YOU live!

Types of budget plans

I am a fan of the pay off the debts with the highest interest first.  While my partner loves the “snowball  effect”.  The snowball effect is when you start paying off the smallest debts first.

Some people find it easier to create a monthly budget, while some only like to do it by the week.  Or some people create it based on when they get paid.   So there are MANY ways to create a budget that will work for you!  You just need to do a little research and be willing to “tweak” established practices to fit your needs.

Whichever plan you follow.  Make sure that you make all your payments ON TIME.  Not only will you be getting out of debt, but you will be improving your credit score!    A part of becoming debt free is making sure you don’t waste money on things like late fees!

Live within your budget

Sometimes sticking with a budget is like following a diet plan!   You know what you are allowed to eat and you may even go as far as creating a menu each week.  But you don’t take that last step of doing meal prep so that you avoid the pitfalls of coming home from work and ordering take out!

Too many times I see people take the time to put their debt reduction plans on paper.  But they don’t take any of the steps necessary to put the budget into action!   Its as if they feel since its there, and in writing, its doing something.

A plan without action is just a dream!

If you allow life desires to drive you, you might find yourself buying things you cannot afford. Once you start spending outside of your budget, it can be hard to become disciplined enough to stop.  If you start depending on your credit cards to live, you will find yourself deep in debt again.

Emotional spending – The budget killer!

Emotional spending has become a big problem.  Especially with home shopping channels and ready to fulfill our every wish and desire.  Jealousy, envy, and sadness can cause you to become an impulse buyer. You need to let go if you are that person who is always trying to compete with others. Emotional spending is just as bad as emotional eating.  Both are very bad for you.  One is bad for your wallet and will cause you to stress over money problems, the other is bad for your health.    Within no time, you will end up in debt.

Make creating a savings account a priority

Saving money is another good habit of debt free people. You should set aside some cash for savings and investments. Even if it is $5 every month, it is worth it. If you give it time, you will be surprised at just how much you can save up.

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Use cash

Another way to avoid debt is by refraining from using credit cards.  But that’s easier said then done for some people.  If you are like me, you LOVE your reward credit cards.   Using reward points has made my vacations over the last 10 years SPECTACULAR, instead of just ok.

So if you are like me, and you use your credit cards a lot. Get in the habit of paying your credit cards off at the end of each month.  I make it a point to never let my credit card usage get so high that I cant’ pay it off at the end of the month. I understand things happen, but you have to be disciplined enough to know that if you put a large charge on your credit cards that you can’t pay off right away. Then you don’t use them again until you are back to a zero balance!

Decide right now to be debt free

As you already know, you can avoid debts by saving more and cutting on costs. However, your success will depend on how active you are. So, even if it means disconnecting your current cable TV to look for a cheaper deal, do it.

You can’t get water from a stone!  So you may need to go out and get a part time job to come up with more money to put a dent in your debt.  Then do it!   We started a part time home based business.  It was rough at first, but we worked hard, got serious and focused on making that the way we would generate enough extra income to pay off our debt.

Final word:

As you search for ways on how to become debt free, remember that cultivating good spending habits is just the first step to becoming debt free.   But its one of the most important one.  Curbing impulse spending and re-evaluating your “needs” and “wants” will go a long way in helping you create a budget that you can live with and will help you get out of debt.


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Elizabeth Roberts

Elizabeth Roberts

Liz Roberts and her team are continuously providing information to people who are ready to repair their credit and improve their credit score. Also team strives to empower the homebased and small business owners by bringing information that can help them to manage and grow their businesses. Let our 24+ years of business finance experience help you to get the financing you need! CONTACT US if need financing for your business.

  1. I’ve already stopped using my credit and and only paying cash. I never thought of keeping a debt diary. Im going to start this. I think it will really help me even more

    • Hi Joanna,

      Its a good thing to have no debt. But remember you want to keep your credit report active. Get in the habit of buying on your credit cards, but paying it off completely at the end of the month. We do that using our reward credit cards. And it has helped us having AMAZING vacations! Esp with the HHilton Honors card. They let you use day to day spending to gain not just points, but status! We got upgraded to a BEAUTIFUL suite at Waldorf Astoria in Chicago! We paid the AAA rate, and since we have Gold status from our SPENDING, not previous stays. They gave us a DOUBLE room upgrade! It was perfect! Had a FIREPLACE, balcony, and soaking tub in the room! Don’t go into debt to get status. But let your monthly expenses help you get incredible rewards!

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