Adopting good financial habits can help you get out of debt and stay out of debt. It really comes down to your daily routine. If your goal is to become debt-free this year or in the next few years, you need to reevaluate the way you spend, save and think about money.
For many people, debt has become a common part of life. From living with a credit card balance each month to long-term student debt, to monthly car payments, to a lifetime of mortgage payments, it seems like this how things are supposed to be.
However, there are many benefits to living without debt. When you become debt free, you’ll be able to save more money instead of paying interest, you’ll have the freedom to live the life you want, you’ll be less stressed and happier too.
Becoming debt free is not going to be easy and it will involve some sacrifices along the way. It’s important to remember that these budget cuts are just temporary. Once your debt is gone, there will be more wiggle room in your budget for all the fun things – I promise!
To give you some inspiration, here are some key habits of people who are already living debt-free lives. By adopting these habits, you too can get started on your journey towards a more financially secure future. I know you can do this, my friend!
- How to stop living paycheck to paycheck
- 5 things to do before creating a budget
- How to create a budget for beginners
1. They have emergency savings
If you were hit with an unexpected $500 bill, would you be able to cover it?
According to a recent report from Bankrate, nearly 6 in 10 Americans say that don’t have enough savings to cover a $500 or $1,000 unplanned expense. Only 41% of Americans report having enough money in their savings account to cover a surprise bill.
Creating a financial cushion is important and something that everyone should have. Having emergency savings to cover unanticipated expenses can help prevent long-term financial damage. We never know when something could happen, which is why it’s always important to be prepared.
While it may seem impossible to build an emergency fund, especially for those living paycheck to paycheck, there are ways to start small. The best way to get started is to track your spending and look for money leaks in your budget. Cut back on your spending in these areas and direct this money towards building your emergency savings.
Here are some easy ways you can start saving money today:
- Meal plan
Dining out can take a huge dent out of any budget. A great way to save money and eat healthier is to meal plan. I recommend trying the $5 Meal Plan. This is a weekly meal plan service that can make meal planning simple. For just $5 per month, you will receive a delicious meal plan, where every meal will cost about $2 per person (or less). Click here to try it free for 14 days.
- Increase your income
There are lots of different ways to make extra money. This can help you pay off debt, save for a large purchase, and build wealth. Click here to read my post: 15 Side Hustles To Make Extra Money
- Get cashback on your purchases
Earning cashback on your purchases is another great way to save money without much effort.
When shopping online, I recommend using Ebates. They have over 2,000 stores to choose from, which makes it easy to earn money on all your purchases. You can join Ebates for free and get a $10 welcome bonus when you sign up through this link. You’ll also be able to earn $25 when you refer a friend!
When grocery shopping, get cashback with THIS app. You can download the app or browse the available offers online. Then buy these offers at any store and upload your receipt using the app to earn cashback!
- Get rid of cable
There are SO many great options today to replace cable TV. I highly recommend signing up for Amazon Prime. With Amazon Prime, you get instant access to watch thousands of movies and TV shows. You can also borrow Kindle books, get unlimited FREE two-day shipping, and get special savings exclusively for Prime members. Click here to try Amazon Prime 30-Day Free Trial.
- Look for coupons and deals
I always search for coupon codes online. One of my favorite spots to find deals is on Groupon. Groupon is a great resource to find deals from 50-90% off restaurants, travel, fitness, shopping, beauty, etc. I have even used Groupon to save money on my Invisalign braces.
2. They pretend they make less
Debt-free people know that in order to get ahead financially, they need to live below their means. Pretend that your paycheck is 10% or even 50% smaller than it is right now. Create a realistic budget based off this smaller amount and direct that extra money towards building your savings and paying off debt.
When you pretend that you make less than you do, it has a number of benefits including:
- Building your emergency fund
- Paying down debt faster
- You can save money for a down payment on a home
- You can save money for a new car
- You can put more money in your retirement savings
- You can be prepared for an income drop or job loss
3. They have a budget which aligns with their life goals
Many people dislike the word “budget”. In fact, I used to think that budgeting meant that I needed to have a restrictive lifestyle that prevented me from doing what I wanted and living an unhappy life.
This type of thinking got me into a lot of trouble though. My spending became reckless because I wasn’t tracking it effectively and I was struggling to save money for my future because I didn’t have a plan.
Then I started thinking about budgeting differently. I associated having a budget with having freedom. I realized that budgeting is just a tool that could help me accomplish my goals, such as graduating from college debt free.
Debt-free people understand that having a budget which aligns with their life goals can help them control their spending, stay out to debt, build wealth, reduce stress, and achieve their dreams.
4. They pay themselves first
People who are debt-free pay themselves first. They save a specific amount of money each month – I recommend saving at least 10%.
If 10% seems impossible right now, start with 5% or even just $10 per month. Before you do anything else with your paycheck, set aside a specific amount.
To make this process easier, you can ask your bank to automatically deposit a certain amount of money into your savings account each time you get paid. This allows you to save money each month without too much effort.
If you are having trouble finding wiggle room in your budget to save money, you’ll need to find ways to increase your income. I wrote an epic post here sharing over 70+ different ways to make extra money. You can earn an extra $300-$1,000 per month with these ideas.
5. They are patient
Debt-free people and those who want to get out of debt are able to delay gratification and walk past the shoe section. They are not trying to keep up with everyone else by having the newest car or wearing the latest fashion trends. They are not impulse shoppers and are willing to wait and save before making a purchase.
6. They have an abundance mindset
Debt-free people focus on the long term. They understand that if they don’t get something now, that doesn’t mean that they won’t get it later. For example, someone else getting a raise at work doesn’t mean that you will never get a raise.
They don’t feel jealous when someone else has good news. Instead, they’re genuinely happy for that person, because they know that person’s good news or perk doesn’t take anything away from what they have in life or anything they may yet receive.
Having an abundance mindset is vital for financial success. Focus on adding value to the world. There is an unlimited amount of wealth that you can accumulate and there are no limits to the opportunities you have to build more wealth.
7. They surround themselves with other like-minded people
Motivational speaker Jim Rohn once said, “You are the average of the five people you spend most of your time with”. We are greatly influenced by relationships and those who are closest to us. These relationships can impact our life in general and our financial life too.
We all have to make tough decisions at some point, especially if you are trying to get out and stay out of debt. That’s why it’s so important to surround yourself with positive and supportive people who will cheer you on as you make progress towards achieving your financial goals.
Related: How to be rich in your 20’s
8. They value experiences over stuff
Debt-free people don’t focus on material things. They understand that stuff can never be a replacement for meaningful relationships with their family and friends. People who are determined to get out of debt know that experiences make them happier than things, so they stay focused on reaching their goals.
9. They pay attention to details
Debt-free people know that tracking their spending is the first step in getting control of their finances. This allows them to see if there are any money leaks in their spending so they can eliminate unnecessary expenses.
They also notice if an incorrect charge appears on their bill and are less likely to miss a payment due date.
10. They do their homework
Debt-free understand the importance of doing their research. They understand the basic concepts of personal finance so they can gain control of their money and make informed decisions. They don’t let others make important decisions for them.
They think long-term when making any big purchase and they are not afraid to be pro-active or negotiate to get a better deal. They actively seek out opportunities to save money and increase their income on an ongoing basis.
Over to you — have you adopted any of these habits? What are your tips for saving money?