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Have you ever wondered how debt-free people got that way? Or more importantly, how do they stay that way?
It’s not magic, and it’s not luck. Debt-free people develop and maintain a set of deliberate habits that put their financial health first. What’s more, they leverage tools and resources that make those habits easy.
These are the 7 habits of debt-free people and how to make them work for you.
1. Debt-Free People Monitor Their Money
Here’s the deal: debt-free people are engaged with their money. They know where it’s going and what it’s doing at all times. That means tracking their income, spending, and saving to make sure it aligns with their goals. It also means keeping an eye on their net worth. Net worth is the value of your assets minus your liabilities, and it is a powerful indicator of financial health.
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Manual financing tracking is a hack, but apps like Personal Capital make it easy. Connect your accounts and carry on living your life while Personal Capital imports your transactions and sorts them into spending categories.
Personal Capital’s dashboard gives you an at-a-glance view of your overall financial standing. I’m talking balances, cash flow, net worth, and more.
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2. They Grow Their Money
Paying off debt is an accomplishment to be proud of, but the name of the game is to grow wealth. Paying off debt = growing wealth. People with savings stay debt-free because they never have to turn to credit when an unexpected expense comes up. They have at least three to six months of expenses in a savings account, ready to cushion any financial emergency. How do they do it? They spend less than they earn and save every month.
Budget Like a Boss and Automate Your Savings
Starting an emergency fund can feel daunting, but Personal Capital’s money management tools help you tackle the goal. The best way to prioritize saving is to treat it like a non-negotiable expense and build it into your budget.
With Personal Capital, you can build customized budgets in seconds. Create a budget category for your emergency fund so it’s always in your financial plan. Next, set up an automatic transfer that moves that money from your checking account to a special savings account every pay day. Boom!
- Related: How to Invest With Little Money
3. They Don’t Waste Money
Debt-free people don’t waste money, full stop. That’s because they always know what’s going on in their financial picture and are in control of their spending. They know the value of money and aren’t willing to squander it. If they notice they’re spending money on something that doesn’t align with their values or priorities, they put on the brakes and make a change.
- Related: Ultimate Guide to Saving Money
4. They Are Not Cheap
Debt-free people don’t waste money, but they aren’t cheap, either. Being cheap happens when you’re not aware of your money. You don’t know what your money can afford, so all you buy is cheap stuff.
Be intentional with your money. Know exactly what you can and cannot afford. You won’t overspend which means you will become debt free. Debt-free people have learned not to afraid of buying high-quality items or experiences. If something they want is expensive, they create a savings plan to pay it. They buy everything they can afford. They enjoy their money.
Know Your Money and Spend Confidently on What Matters
Personal Capital’s free financial tools help you breathe easy by showing you where you stand. The cash flow tool instantly highlights how much is moving in and out, while the budgeting tool shows where you have wiggle room. On a larger scale, the net worth tracker shows the value of what you own, minus anything you owe. If your net worth is consistently growing, there’s no need to cheap out on an important purchase.
Sign up for Personal Capital and get the confidence you need to leave a cheap mentality behind.
5. They Are Patient
Debt-free people know that buying quality with cash takes time. They resist the desire for instant gratification. Watching a savings account earmarked for a special purchase or goal grow consistently can be more satisfying than settling for something inferior in the moment — not to mention it prevents you from taking on more debt. Be patient. Buy quality stuff, but don’t take on debt.
6. They Set Financial Goals and Priorities
Debt-free people are clear about what’s important to them, and they use that clarity to set financial priorities and goals for their future. Whether it’s saving for a down payment, planning for retirement, or building an education fund for their kids, they always have a plan. No one reaches their financial goals (big or small) by winging it, and debt-free people don’t risk their futures to chance.
7. They Proactively Learn More About Money and How to Best Manage It
Financially woke people didn’t get that way by accident. Those who enjoy the debt-free life hone their money smarts by learning everything they can about how to manage their resources. That means reading personal finance books and blogs, listening to podcasts, and joining enlightened communities. In this digital age, almost everything you need to know is available for free online — there’s no excuse.
Daily Capital Has What You Need
Did you know Personal Capital has its own blog? Daily Capital covers a range of personal finance topics, including investing and markets, financial planning, and news. You’ll also find a comprehensive list how-to guides on topics like:
- Filing your taxes
- Saving for your child’s education
- Choosing the right life insurance
- And much more!
Get Personal Capital, and put your money on a system. Being intentional with your money is the surest way to accomplish your debt-free journey. Then check out Daily Capital to better understand money and how to spend it right here.
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- 7 Habits of Women Who are Never Broke
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No Money in the Bank?
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Sandra Parsons is a freelance writer specializing in personal finance, travel, and health & psychology. Her work has been featured on sites like Club Thrifty, MoneyTips, and Credit Knocks. She also freelances for Wooster Media Group LLC. Sandra lives in Eastern Canada with her husband and son.