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10 Habits of Debt Free People: Thoughts and actions that you should take if you want to live debt fr

Humans are creatures of habit! We do what we always do. If we want to change what we do, we must change what and how we think. We need to break the mental pattern that we have created for ourselves. Here are a couple of statistics that I have learned about habits: Over 40% of what you do, on a daily basis is based on habit. This explains why you might be driving yourself or your family down a road that you take every day to work, when you are going somewhere else, and without thinking you take the turn to work instead of to where you were supposed to be going! It takes about 66 days to change a habit. That's right, you have to spend over 2 months doing something while thinking about it before it becomes automatic. The saying that comes to mind is "action precedes motivation". You always remember your habits. They become ingrained in the very fabric of your being and you will always revert back to old habits, unless they are constructively replaced by new ones.

Now that I have talked a little about the nature of habits, I would like to share with you some of the habits of people who live debt free. Habits that you should try to adopt if you hope to one day achieve debt freedom. Now I want to start by saying that I am far from mastering all of these, but I am on the path, and the first step is agreeing to start on the path!

Habit #1: Pay attention to your money! It is surprising, but there are lots of people who never regularly check their bank statements. With the invention of online banking checkbook balancing is a thing of the past, and it really is easy for people to just expect that there is money at hand. When that money is perceived to be available, it is a lot easier for most people to spend. We recommend that people at least check their balances and transactions once a week to make sure that there is actually money in the bank and that there are no unauthorized transactions. Believe it or not, the people with the most debt are most often victims of identity/bank fraud, for the simple reason that they often do not pay attention to their money.

Habit #2: Spend less than you make! Again, sounds pretty simple! The best way to stay out of debt is to avoid it. If you spend less than you make, when you do have to finance your debt you have extra set aside to pay the monthly fees ahead of schedule, so you pay that debt off faster and save interest. Which brings me to my next habit... Habit #3: Save! I know, I know, by now you are probably like, "Really? These are your profound tips on how to get out of debt?", and my answer is: YES! It really is that simple! It really does only take a conscious effort to take a handful of simple steps to start on your path to debt freedom. When it comes to saving, there are different thought processes and strategies out there for doing this. The old saying goes, "A penny saved is a penny earned", and where you will not get too far on pennies saved, even a little bit of money put aside every month will grow into a lot if done consistently over time and then eventually invested in the right money making vehicles (a topic for a different post).

Habit #4: Set attainable goals! I HIGHLY recommend that you keep a "Goal Journal". Every day you should write down your long term goals (5-10+ years), your monthly goals, your weekly goals, and your daily goals. I will write another post on how to set goals and how to attain those goals, but writing them down is paramount! In fact, studies have found that people are 42% more likely to achieve the goals that they write down. When writing goals you should mix the absurd with the achievable! By throwing in some "dream goals" or "If I had unlimited money I would own a..." types of goals, it motivates you through the mundane and routine tasks that are required to achieve some of the smaller, less exciting goals. You should try to structure your daily goals to help achieve your weekly goals, your weekly to help achieve your monthly, your monthly to your yearly, and your yearly to achieve your long term goals. By doing this, you break your goals down in to "manageable bites", taking the larger vision and breaking it down to tasks that are attainable, which will pay off in the end. Habit #5: Budget! There are plenty of programs out there that will help you create a budget for free, but budgeting is part of paying attention to your money. As an insurance agent, I have set a whole bunch of people up on automatic payments. Something happened and their payment was not taken out and their policy cancels. They say that they set it up on automatic payments so they expected that it would always be paid. Not unreasonable to expect, except when the company goes to draw the money from the account and the funds are not available, or better yet, the client closed that particular account or forgot to update an expiration date on a card. Having a budget that people pay attention to would resolve this issue, and a slew of other issues that end up causing people to turn to debt to "solve their financial problems" One of the programs that I have truly come to appreciate is called It is a free budgeting tool from Intuit (the company that created and sells Quickbooks) and it even links to your financial accounts for free and updates regularly. It gives you alerts when you are over or under budget and it helps accomplish goals that are set within the system. It is a great tool for people, like myself, who have a hard time wrapping their heads around the whole process of budgeting.

Habit #6: Cash is king! When you set up a budget, take the cash out of the bank and keep it on hand. This is a good practice for so many reasons. When you run out, you know that you are out of money, and if you know that you are out of money then you will not spend more money. For those of us that are visual people, this helps "keep us in line" especially when it is hard to imagine how every dollar literally adds up! I don't know how many times my wife has pulled me aside and talked to me about my spending habits when I would buy a new book or some new toy for $5 or $10 on! I did not understand why it was such a big deal, until she showed me the account and how quickly those $5 or $10's added up! Having cash on hand is an easy way to resolve that problem and prevent you from spending more than you have. Habit #7: Be Proactive!

This is a big one! People who live debt free look for ways to not spend as much money. Many debt free people have cut their cable bills, have turned to couponing, or have started using sites like to start earning cash back on their purchases. Many people who are debt free use Craigslist, Ebay, and even shop at local thrift shops and farmers markets to intentionally not spend as much money. An easy trick to try is to grab a basket at the store instead of a cart. You obviously can not fit as much in a basket so, naturally, you will buy less. The other aspect to being proactive is to try to calculate how much major purchases will affect how long you will remain in debt. There are tools available that can help you with this (again, I will cover some of those in another post), but if you buy a new car with a car loan payment that stretches over 5 years, then you should plan on adding another 5 years to how long you will remain in debt. Look for ways to save money and be conscious of how major financial decisions affect your overall debt portfolio. Avoid decisions that prolong your indebtedness.

Habit #8: Learn to say "NO!" So many people have a hard time saying no. Saying no to themselves, their spouses, their kids, or whoever. As much as people are creatures of habit, we are also creature of impulse. For many people, when they want something, they buy it. This kind of goes hand in hand with some of the other habits, like budgeting, but it really is a separate habit, since so many people buy things in the moment. Again, this is one that I have not yet mastered myself. When my kids want something small, and they have been good, and I know I have the extra cash, I buy it for them. Next time you want to buy something on impulse, either go home and enter it into your budget to make sure that you have the extra money and that making that purchase will not affect your ability to pay off other debts and financial obligations, or if you use an app to budget, enter it into the app to determine the same thing! And remember, it is ok to wait to buy something until you have the extra money to do so...saving helps with this! Habit #9: Don't give in to materialism!

I met a multi-millionaire that sold his company to a major software firm. He had both a regulation basketball court, complete with his and hers locker rooms, and movie theater with at least 20 Lazy-Boy recliners lined up in rows. I know what you must be thinking, "I thought this was about not giving in to materialism???", well, he drove an older model Dodge Dakota pick-up truck. There was nothing wrong with it, but it was not what a person would expect to see a multi-millionaire drive up in! Which tells me that he was not concerned about what other people thought about him while he was out and about. The material things that he spent money on, where things that would increase the memories, experiences, and overall comfort of him and his a sense, a multi-millionaire sense, his home was more practical and functional, as opposed to keeping up with the Jonses...or...Wellingtons I guess (for rich people). People who are debt free typically do not concern themselves with the Status Quo. They prioritize being debt free over luxury, knowing full well that luxury is acquired with wealth, and wealth can not co-exist with debt, unless of course that wealth far exceeds debt or the debt is actually being used to create wealth (another topic for a different post). A person who is debt free does not mind shopping at a thrift store or yard sales in order to avoid going into debt, they are usually more resourceful and thus more self reliant.

Habit #10: Invest your money!

The rate of inflation, historically, has stuck right around 3% a year, which means that every year your dollars are worth $0.03 less than they were the prior year. In essence, when you save money, without a goal or purpose (i.e. saving up for something that has a relatively static/constant/predictable cost), you are actually losing money. To avoid this the best thing that a person can do is to invest the money that they are saving. There are websites such as Lending Club, Prosper, and Loyal3 that allow people to invest smaller sums of money (as low as $10 to $25). US Treasury Securities can be purchased for as little as $100 which provide low risk, low return options to protect your money from inflation. Look into Dividend Reinvestment Plans, commonly known as DRIPs. DRIPs allow you to invest as little as $20 into a company and then any dividends that are earned get added into the initial investment, which then earns more dividends, steadily increasing as the company grows. DRIPs can be invested in for as little as $20 and usually produce pretty steady growth.

I hope these habits are helpful to you! As with anything, there is no magic bullet! There is no big secret! The key to success in anything you do is intentionality and commitment! Do things on purpose, with a purpose, and do them with a sense of duty for yourselves and those you care about!

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