There are “debt-free” people among us – how do they do it?

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1) They say no to smaller expenses which can add up to big savings.  For example, replace an expensive dinner in a fancy  restaurant with a potluck dinner with friends, or meet up with friends for a walk in the park instead of taking an expensive exercise class.

2) They know the value of cash because they see it.  It can be easy to overspend when using credit cards and when you are never seeing actual money.  Having to part with some cash can remind you that the transaction you are making is real.  Plus, once that cash is gone, it’s gone.  Try using only cash for a while and see how it changes your perception of purchasing.

3) They are masters in deferred gratification.  As many studies across the world have shown (I just say, “Marshmallow Test.”), kids who can wait and manage their temptation for bigger rewards a bit later will be significantly more successful later in life.  And what applies to kids should work for adults just as well.  Don’t defer deferred gratification.

4) They think long term to 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, avoiding impulse purchases.

5) They know their stuff and do their own research.  When 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.

6) They aren’t afraid to ask for help.  Ask for lower interest rates.  Ask for forgiveness when making one late payment on the credit card.   So if you know someone who has met a financial milestone you admire (saved $1 million for retirement or bought a car in cash), don’t be afraid to ask how they did it.

7) They pay attention to details and check their statements regularly.  If you are not checking your statements regularly, you won’t notice that recurring fee on your credit card for the gym you’ve stopped using.  People without debt monitor their personal finances closely and are less likely to waste money, forgetting payment due dates or overdraft fees.

You can start paying more attention as well.  The key is just to start.  Try looking at your credit card statements every month.  Then monitor all of your spending.  Now add up your income.  Compare the two and see where you can cut back.  Re-visit this budget a few times a year to stay on track.

8) 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, and an emergency fund.  This provides a financial independence that allows you to have more options in the future.

9) They Set Goals and have a purpose for saving.  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.

10) They Value Experiences over Stuff and aren’t focused on 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 trade-offs.  Would you be better off, not working late and having two (or four or eight) meals at home with the family instead?

To become debt-free, you are going to have to shed some of your current bad habits and take on some new and more constructive ones.

Use the people who are already living debt free as inspiration.

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