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In order to become debt free, you need a certain mindset to do it. A debt free way of living.
Just going along your merry way isn’t going to change the amount of debt you have or the amount of debt you are accumulating.
These must-needed traits will help you learn how to become debt free and enjoy a debt free lifestyle!
We have been debt free for many years (except our mortgage and that is slowly shrinking too)! This is something I talk quite frequently about. But also, we are determined to debt free lifestyle as well.
In order to get out of debt, you need to tell yourself no and be willing to accept living a counterculture lifestyle (as in no debt).
If you don’t believe me, here are some shocking debt statistics:
- Americans owe $13.5 Trillion dollars in household debt – credit cards, auto loans, student loans, and mortgages.
- Credit card debt alone has topped over $1 Trillion dollars.
- Recent statistics show that roughly 80% of Americans have debt from at least one source, ranging from credit card debt to student loan repayment to mortgages.
- Average person carries $38,000 in debt (not including mortgages).
- U.S. Government Debt is astronomical. The debt per citizen currently sits at $67,631 and debt per taxpayer is $181,164. (www.usdebtclock.org)
Those are huge numbers, which most people cannot wrap their heads around.
So, that is why people continually live in debt. Because debt is considered normal.
BUT, DEBT IS NOT NORMAL!
Until more people realize the detrimental causes of debt, this debt epidemic will continue. And many people will never reach debt free living.
Debt is one of the most common money mistakes people make.
When you are becoming debt free, there are many hard decisions to make. That is normal and we will walk through how to make those hard decisions easier.
Here are habits to start now to get out of debt. Plus, once you have become debt free, it doesn’t mean you should go back to your old habits. At least if you want to continue debt free living.
If you are desperate and saying I want to be debt free, then keep reading. Later in the post, I will let you in on the little secret once you pay off debt…
Now, let’s discuss is it good to live debt free!
What Does being Debt Free feel Like?
Imagine just for a moment…
What would being debt free feel like for you?
Being debt free will feel different for everyone, but there are some common themes.
- It will feel like a breath of fresh air!
- Finally feeling like you aren’t a slave to any past money decisions you made.
- You start sleeping better.
- You are finally able to do those things that you want to do.
- Options open up, which leads to freedom in your decisions finally.
Do you hear a keyword here?
Being debt free means you are finally able to make progress financially, have more say so on your money, and be confident in your decision.
Whatever your reason for being debt free, that is the emotion you want to remember to help you pay off debt faster.
To be honest, we are debt free except mortgage. When we hit that point in our lives, it was like a door swung right open, let in the breeze, and we were able to do things we wanted to do. That freedom was life-changing for us. I can already imagine the freedom when our mortgage is paid off as well.
Yes, it feels good to live debt free.
Does Debt Free Mean No Mortgage?
Oh, this one is a hot debate!
Everyone has an opinion on this subject… Are you debt free if you have a mortgage? Does a mortgage hold you back from being debt free?
So, let’s look at both sides of the coin.
Debt is debt. You are borrowing money and repaying the principal back plus interest. You aren’t able to make much progress financially because debt will slow you down. The debt payments eat away at any possible savings and attempt to reach financial independence.
Many people saying you are debt free when you are free of consumer debt specifically credit card debt, car loans, student loan debt, medical debt, or personal loans. That is when people say, “I am debt free except the mortgage.”
Other people say you are debt free when you are free from ALL of your debt obligations including your mortgage.
Here is the caveat to that debt free / mortgage debate and I will use myself as the example:
We could sell our house today and claim to be debt free including our mortgage. However, we wouldn’t have a roof over our heads and would have to find somewhere to rent. The cost of rent to stay in our area would be 2-3x our current mortgage.
So, that wouldn’t make a lot of financial sense just so we could say we are truly debt free (including our mortgage).
Now, the next debate would move to a lower cost of living area to keep the rent the same as our current mortgage. A few problems with that: (1) we wouldn’t be building equity in our house as an asset and (2) we would have to take a pay cut because of jobs.
Related Post: HCOL vs LCOL – What Makes Financial Sense?
At Money Bliss, we say you are debt free when you paid off all consumer debt. Then, as you work through the Money Bliss Steps to Financial Freedom, you become truly debt free and begin your path to financial independence.
The bigger goal here is to become financially stable which will happen along your path to becoming debt free.
What is Debt Free Living?
For simplistic sake, debt free living can be defined as shying away from debt and paying with cash.
With the debt free lifestyle, you need to save for purchases in advance.
You prioritize your wants, always paying your needs first, and wait to buy things. Impulse purchases are not a part of your debt free life.
Being debt free important.
Debt free living opens the doors for other opportunities like saving money, giving to bless others, and investing to earn passive income.
At what age, should you be debt free?
In the perfect world, you would be able to stay away from using debt.
However, most of us needed debt for one reason or other – good or bad. So, ultimately you want to pay off your consumer debt within the next 6 months or one year. If you are looking at a staggering amount of consumer debt or student loans, then the next 5 years to pay off your debt.
So, add your age plus 6 months or 1 year or 5 years. That is the age you should be debt free.
If you are truly looking to advance your financial freedom sooner, then being debt free in your 20s is the goal. I wasn’t. So, use the formula to figure out your age to be debt free.
Mortgage debt should be paid off before retirement. A solid debt free age would be 50 for all types of debt.
How to Be Debt Free – Habits Needed for Debt Free Living
None of these habits are complex or difficult to understand. They are basic practices in life and with money.
These simple habits can drastically change your money journey – more specifically your path to financial freedom.
Whether you are looking to get out of debt or stay out of debt, these habits should become part of your lifestyle. All of these habits have helped us to where we are today.
You may find some similarities with the millionaire habits with debt free living. This is the debt free life!
1. Find Contentment
This is one of the things I talk about the most often at Money Bliss.
Finding contentment. But, also practicing contentment.
Be grateful for what you currently have.
Our society makes us want, want, want, and buy, buy, buy. But truly, do we need the newest or fanciest device or trend? Can’t you find contentment with what is around you?
New shiny objects won’t bring you happiness. Money can’t buy you happiness. Only you can find happiness through contentment.
You can be content in your skin, in your house, in your car, in your clothes. If you can’t find contentment from within, then material objects won’t bring you contentment only discontentment.
Exercise in Contentment: Look around you right now. What brings you the most contentment? Be thankful for those blessings and the means you were able to acquire them. Actively find contentment.
Debt free people set money goals, but always put the steps needed to obtain them.
They are actionable to their money goals.
They are motivated to reach their financial milestones.
When we set out to pay off our debt, it wasn’t just on a whim or quick idea. It was a thought-out process to make sure it align with our life goals and help us reach other priorities sooner. We make progress when there is a goal in front of us – constantly reminding us where we want to do.
Debt free living means striving for more than the average American lifestyle of being swaddled in debt. It means creating money goals and taking action to meet them.
Goal-Oriented Task: Set your next money goal during your monthly huddle time. Download the free printables to track your progress. With a goal, you are lost in your destination.
3. Okay To Live Differently
As we stated with the ugly debt statistics above, that most people live a life full of debt. So, if you choose debt free living, then you must not settle for overspending and using credit or debt as an option. Even if you use a credit card, that is fine as long as you pay it off in full each month.
This is where the comparison trap becomes a problem with debt free living.
Becoming debt free means you are swimming upstream against the current or societal norms. That means it will be more difficult than following the flow (in this case living in debt).
So, you must mentally prepare yourself and your household that it is okay to live differently.
In our household to explain this concept, we emphasize on vacations all of the things we don’t do in order to travel. Guess what? The kids caught on fast and stopped asking for things all-the-time. They are still kids trying to define their line of “want vs. need” and will still ask for things once in a while. But, they quickly come around when posed the question if they prefer to live differently (AKA travel more often).
Be Different Task: Determine areas you are okay living differently. Pick your battles. Learn to say no. Put your choices first.
Lifestyle Choices Resources:
- Avoid the Trap of Lifestyle Creep and Reach Financial Freedom
- 35 Ways You Wasted Money This Year
- Being Frugal with Money – A Millionaire’s Case Study
4. Money In and Money Out
To be successful at debt free living, you must know how much money is coming in and how much money is going out.
If not, you can’t get control of your money situation.
The advantages of budgeting are real. (Hint: most debt free people already know that and budget consistently)
Do you want to control your money? Or have money control you?
Stick around at Money Bliss. We have plenty of resources to help you learn to manage your finances your way. Plus enjoy life with money!
Money In / Money Out Task: Figure out where your money is going. That is essential to help you move forward. Here is my favorite budgeting app / software.
- How to Budget Money and Still Enjoy Life
- 9 Surprising Advantages of Budgeting your Money
- How to Make a Budget in 7 Simple Steps
- Do You Know the Ideal Household Budget Percentages?
- The Best Methods of Budgeting You Need to Know
5. Saving Money is Non-Negotiable
Money that is saved will keep you from diving into debt.
It is necessary to save money each month!
If you have never saved before, then start with one of our challenges:
- 52 Week Money Saving Challenges
- Ultimate Guide to a Successful No Spend Challenge
- Monthly Money Saving Challenges You Need to Try
- 100 Envelope Challenge – Fun Money Saving Plan
With debt free living, it is mandatory to save money in advance for any purchase. Big or small. A mortgage is the only type of debt that should be acceptable in your debt free lifestyle.
Save money is the priority. It doesn’t take the leftovers. It takes the first harvest, the money available at the beginning.
By saving money automatically, it helps with your other debt free living traits like being goal-oriented, living below your means, and being okay to be different.
If you haven’t set up a separate bank account for savings, then I suggest you do it now.
Saving Money Task: Using our free printables, add up how much you are currently saving vs your income. Figure out ways you can increase that amount.
More Saving Money Resources:
- Important to Know How to Save Money Each and Every Month
- 175+ Simple and Easy Frugal Living Tips to Save Money
- Complete Guide to Sinking Funds Examples & Categories
6. Show Self-Discipline
Do you have to buy it because it is on sale? Fear of missing out (FOMO)? Everyone else is buying one?
Those are ways we cave in to societal pressures.
A key habit for debt free living is to show self discipline.
Know when are able to spend money and know when you are unable to spend money.
There are two tactics to know where you fall on the self discipline spectrum.
- After making a purchase, do you have buyer’s remorse for spending money? If so, return it immediately. Remember the reasoning you caved to pressure and try to avoid it in the future.
- What are you willing to sacrifice to reach your money goals? That means the word “NO” will be frequently used in your vocabulary. However, by saying “NO” now, you will be able to say “YES” later on.
When we were on our journey to becoming debt free, we had to have a lot of self discipline to completely change our spending habits and pay off $53,000 of debt in one year. Read why we paid off our debt.
Self-Discipline Task: For one week, participate in a no spend challenge. Write everything down that you would have bought. Have the discipline to say no.
7. Live Below Your Means
In a synopsis, debt free living means you are living without debt, which means you live at or below your means.
This is a hard one to do in today’s society. With social media, we are consistently bombarded by the best highlights of someone’s life. That reel of perfection which is difficult to maintain on a daily basis.
But, we fall victim to trying to live the same as our friends and family. We don’t want to be the only ones without.
Here is a secret…
You don’t know their financial situation. You don’t know how much debt they owe. We don’t know what happens behind closed doors.
Avoid the trap of comparison. Use the other debt free habits and find contentment in your life. The life that you are creating.
Live Below your Means Task: Take a look at your financial picture. Is this a lifestyle you can continue doing? If not, what areas can you cut back or eliminate from your budget?
Debt Free Lifestyle Habit Tasks
Throughout this post, we highlighted areas that are ways you can start living a debt free life. These habits will take time to build and become a normal part of your lifestyle.
Recap of the tasks:
- Exercise in Contentment: Look around you right now. What brings you the most contentment? Be thankful for those blessings and the means you were able to acquire them. Actively find contentment.
- Goal Oriented Task: Set your next money goal during your monthly huddle time. Download the free printables to track your progress. With a goal, you are lost in your destination.
- Be Different Task: Determine areas you are okay living differently. Pick your battles. Learn to say no. Put your choices first.
- Money In / Money Out Task: Figure out where you money is going. That is essential to help you move forward. Here is my favorite budgeting app / software.
- Saving Money Task: Using our free printables, add up how much you are currently saving vs your income. Figure out ways you can increase that amount.
- Self-Discipline Task: For one week, participate in a no spend challenge. Write everything down that you would have bought. Have the discipline to say no.
- Live Below your Means Task: Take a look at your financial picture. Is this a lifestyle you can continue doing? If not, what areas can you cut back or eliminate from your budget.
Ready to Enjoy Living Debt Free?
Debt free living is a new way of life.
A lifestyle on picks up when trying to get out of debt quickly. But, it lingers on, which is a good thing.
Once we become debt free, our habits said the same. We didn’t feel the need to spend money since we had extra cash that wasn’t going to debt payments. In fact, our saving percentage skyrocketed and continues to increase each year.
As promised earlier in the post, once you are debt free, you are less likely to hoard and accumulate things. That just-in-case-you-need-it mode. You know that your needs will be provided with what you have.
Debt free living is a step towards financial freedom.
And that my friend will open up many doors…
Enough saying, “I want to be debt free;” take the steps today to becoming debt free!
Financial Freedom Resources:
- 10 Money Bliss Steps to Financial Freedom
- Avoid the Trap of Lifestyle Creep and Reach Financial Freedom
- How to Achieve Financial Independence Retire Early (FIRE)?