15 Everyday Habits of Debt-Free People
Updated: May 01, 2023
Put your mind on your money and your money on your mind—or rather, your bank account—with these expert tips for living debt-free.
Simple tips that help you live debt-free
Getting into debt can be incredibly stressful. Constantly worrying about paying your debt while still having enough money to stay afloat can make you feel lost like you’re running in a never-ending maze. There are ways to stay out of debt, though. You can learn how to make a budget and how to avoid hidden fees to help you save a couple of bucks. You can also pick up these smart habits to help you live debt-free.
Set goals
Having a plan means having a purpose. “Americans that lead healthy financial lives more often than not have clear financial goals and are actively working towards them,” says Yoni Dayan, Chief Editor of Money Under 30; he adds that “if you have a good why to save, the how will come much more naturally.” Not sure where to start? These 19 personal finance tips you were never taught are probably a good place.
Wait to buy
“If you have trouble with impulse spending, waiting a few days is a great habit,” Joe Udo of Retire By 40 explains. “You may find a lower price or simply realize that you don’t need it after all.” While this is particularly helpful when it comes to big-ticket items, like a new TV or even a new car, it can also apply to everyday buys that can add up over time.
Turn off auto pay
Shannah Compton Game, a Certified Financial Planner and host of the Millennial Money Podcast, recommends removing all auto-pay or auto-fill options on sites where you shop frequently. This forces you to “think about how much money you’re spending before you hit the “buy now” button,” she says.
Pay as you go
Surprise parties are great. Surprise bills are not. To avoid owing at the end of the month, Erica Gellerman, creator of The Worth Project, suggests treating your credit card like a debit card. “For example, if I swipe on lunch for $10 and gas for $40 I’ll use the credit card app on my phone that night to transfer $50 from my checking account,” she explains. “That way I’m not spending money that I don’t have.”
Pre-pay your credit card
This tip from Compton Game is pure genius: “Pre-pay your credit card for however much you’ve budgeted for the week for your expenses,” she advises. It will help keep your bank balance in check and stop you from spending money you don’t have. Just make sure you never use your credit card to purchase these 10 things.
Don’t carry a balance
There’s a two-word reason: interest payments. Udo says that when he uses credit cards, “I always make sure to pay the bill in full every month. I get all the convenience without having to pay interest to the bank.” If you can’t pay it all, a good rule of thumb is to never carry more than 30 percent of your credit limit to the next month. Bonus: Paying off your balance every month is one of our top tips for boosting your credit score.
Use cash
Another thing to consider if you find yourself holding a hefty credit card bill when the 31st rolls around, is to start paying with cash. Udo explains that not only does this make sure you’re living within your means but “the physical action of handing over cash to someone else is a lot more difficult than swiping a card.”
Automate your savings
Remembering to set aside money each month is tough. Fortunately, Sophia Bera, CFP and founder of Gen Y Planning, has a sneaky solution. “Automate your savings and retirement contributions so you don’t have to think about it yet you’re consistently making progress on your goals.” An easy way to do that is with a savings app like Qapital or Digit.
Find inexpensive alternatives
More free time often involves spending more money, from brunch to happy hour to window shopping (which turns into actual shopping). “Nothing is wrong with these activities, but when I was doing them out of habit, I realized that so much of my spending was on things that I didn’t really care that much about,” Gellerman says. Now she keeps a list of budget-friendly activities to swap out for her pricier pastimes, like inviting friends over or going on a hike.
Have a good attitude
As New Age-y as it may sound, the law of attraction applies to money, too. The better your attitude is towards your finances, the better your finances will be. “Come at money from a place of enjoyment and abundance instead of fear or scarcity,” Taylor Simpson, founder of The Money Mindset Masterclass and the Abundant Life Experience, says. “Know and believe money comes to you easily—when you feel this, you’ll live it.” One way to do that? Say “thank you” when you spend money to start seeing it as something that comes and goes effortlessly.
Create an emergency fund
According to an annual GOBankingRates study, in 2019, 45 percent of Americans have nothing saved. Zilch. To prevent going into debt, however, you should have enough set aside that you could cover a minimum of three to six months worth of living expenses in case something drastic should happen.
Don’t boost your budget
No matter what. That means even if you get a raise, start a side gig or even win the lottery—stay firm to your original budget. Better yet, funnel all that extra income directly into your savings or retirement fund, so you won’t even feel like you’re missing anything. Want more ways to stash some cash without sacrificing your lifestyle? Here are 11 ridiculously easy tricks.
Skip Starbucks
Yes, you’ve heard it before but it bears repeating: Time, in partnership with NextAdvisor, broke down exactly how much you’d save if you swapped your twice-daily coffee habit with home-brewed coffee—and it’s a lot. Assuming you spend $2.75 when you hit the drive-through lane twice a day, you could be losing $2,007.50 per year—compared to spending just $45 per year with home-brewed coffee. Something to keep in mind is that number could be more or less, depending on your order. If you have a more expensive coffee habit, prepare to spend more per year. By the way—here are the cheapest days of the week to do anything.
Track your progress
If you have a financial goal in mind, say to save up an emergency fund by the end of the year, track your progress to see how you’re doing. Seeing that number increase each time you look can give you the motivation to keep your smart spending habits on track. Or, if you don’t see it increase as much as you’d like, you can adjust your spending habits to get back on track. Either way, tracking how much you save will help you figure out if your saving habits are efficient or not. Want some helpful information on debt collectors? Here are 13 secrets debt collectors won’t tell you.
Compare prices
It’s tempting to grab something we want or need as soon as we see it, but smart spenders know to compare prices and see where to get the best deal. They utilize fliers, apps, and websites to compare prices. For instance, GasBuddy helps compares you compare gas prices at nearby gas stations, and ShopSavvy helps determine if you can get an item for less money elsewhere. Comparing prices can cut your spending and allow you to put extra money aside.
Now, read on to learn more important money habits to master. Your bank account will thank you later!
Sources:
- Yoni Dayan, Chief Editor of Money Under 30
- Joe Udo, Retire By 40
- Shannah Compton Game, Certified Financial Planner and host of the Millennial Money Podcast
- Erica Gellerman, creator of The Worth Project
- Experian: “Will Paying My Credit Card Balance Every Month Help My Credit Score?”
- Sophia Bera, CFP and founder of Gen Y Planning
- Taylor Simpson, founder of The Money Mindset Masterclass and the Abundant Life Experience
- GOBankingRates: “Survey: 69% of Americans Have Less Than $1,000 in Savings”
- Time (in partnership with NextAdvisor): “Here’s How Much Money You Really Save by Making Coffee at Home”
