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Habits of successful debt-free people

24 May 2013, 13:54

Some people enjoy a debt-free status. We should realise that they have been working hard for it - it is not a privilege that has been handed to them.

They observe the following seven habits, which you could also adopt so that you too may live a debt-free life.

1. A frugal lifestyle

Living frugally could translate to greater savings. Frugal people live a modest lifestyle which is not costly but practical.

They may live by the principle that what they do not need, they do not own. Moreover, they know that using utilities wisely can lead to significant cost savings, which can accumulate to cash in hand that may be used for various purposes.

2. Being pragmatic

As mentioned, being practical pays off. Debt-free people usually understand the true meaning of value.

If you need to buy a vehicle, why would you settle for an expensive Lexus when a simple Corolla would do?

3. Fighting the shopping addiction

Excessive and impulsive shopping can be a form of addiction.

Debt-free people are mostly not too much into shopping. This way, they avoid incurring debts, especially with the use of their credit cards.

Uncontrolled shopping habits make it almost impossible to remain free from debt. It is time to fight the urge and temptation to shop regularly, even if there is no imminent need to buy new items.

4. Regularly monitoring income and expenses

One way to fight off excessive spending is to be more aware of cash flow.

Debt-free people usually know how much regular income they make. At the same time, they know their basic expenses. Thus, they could adjust or lower those expenditures to create a better monthly budget.

A portion of their income is allocated to savings, which could be used in case of need so that they would not have to rely on loans.

5. Knowing when to ask for any help

Debt-free people can be independent. But they admit that they may need help or guidance when it comes to managing their personal finances.

Most debt-free individuals today have become savvy about finances because they have been consulting financial coaches or debt advisers for quite some time.

6. Patiently saving for major purchases

As mentioned, most debt-free people don’t take loans or use credit cards to fund significant purchase transactions. They have the forbearance to save money to buy any item they want, especially an expensive one.

They prefer buying in cash, using the money they have saved for that particular transaction. It could take them quite some time to save enough money for the purchase, but they patiently wait and save cash until they reach their goals.

7. Observing personal responsibility

Debt-free people have emergency funds or savings that they have set aside for urgent needs. They are responsible enough to prepare for the unexpected.

For instance, if they suddenly lose their job, they can access an emergency fund that is equivalent to at least three months of their regular income.

*This guest post is from Andrew Black, who has been working in the finance industry for Australian Lending Centre, a debt consolidation company. He has published numerous articles on how to deal with and manage debt.

- Fin24

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