If you are swimming up to your eyeballs in debt, it can seem utterly baffling that some people out there live a completely debt-free lifestyle. They save money to buy what they want, have nice houses and cars, and take regular holidays with their families. So, how do they do it?
Debt-free people aren’t that way by accident. They have a specific mindset and habits around money, and they handle it in a responsible and realistic way.
Sure, they might be enticed by consumer goods and make a few frivolous expenditures here and there, but at the end of the day they feel in control of their money – it doesn’t control them.
Our attitudes towards money are often formed at a young age
Our attitudes towards money and finance are often formed at a very young age. If we witnessed our parents spending money they didn’t have with abandon and living beyond their means, we saw this with young and attentive eyes. When the time came to pay those bills, we saw them skulking to avoid debt collectors, or panicking about where the money was going to come from.
Or maybe luxuries and overspending weren’t the issue. If you grew up in a household where there simply wasn’t enough money to go around each month, you would have seen your parents try to eke out the most from every penny, fretting about the rent and worried that there wouldn’t be enough for groceries.
Perhaps in your home, all of the bills got paid, but there was never enough left over for holidays, or savings, or responsible money practices.
No matter how you grew up, your parents modelled how to handle money. If you are struggling with debt, it pays to look back into your own upbringing to think about what you learned from them and how it’s formed habits in tour adult life.
Now, here is the good news. While some debt-free people grew up in households with responsible spending, many didn’t. They assessed their own upbringings and decided that they didn’t want to be sentenced to a life of panic, misery, and financial stress when the bills came due each month.
You can do the same – but it all starts with acknowledging that the lessons about money you learned as a child are impacting the way you spend money today. Removing your negative emotions and attitudes about money is the first step towards changing your habits permanently.
Everyday habits you can cultivate to become debt-free
Let’s face it – one plate of avocado toast isn’t the reason why you are in debt. Some lists encourage you to ‘skip Starbucks’ and avoid that breakfast favourite but, living a debt-free lifestyle is more of an overall change in how you approach money, and the effect it has on you.
Most importantly, learn to give yourself some time between your impulse to spend, and the actual decision to buy. You’ll be amazed at how many things that seemed like a ‘must have’ were actually just a fleeting impulse.
I used to be quite bad at this – when I saw something I wanted, I wanted it right now. I definitely have an impatient gene. But enforcing a ‘cooling-off’ period has meant I buy less and only what I really do need.
Living a debt-free lifestyle is more of an overall change in how you approach money
Here are a few more habits and traits that will help empower you around money.
- Turn off the one-click purchase function
It is easy to overspend on Asos or Amazon when you have the one-click purchase function enabled. Turn it off, and give yourself some time to think.
- Treat your credit cards like debit cards
Credit seems like a godsend, until you realise how much money you are throwing down the toilet on interest and unnecessary purchases. Every time you use your credit card, pay it off that same evening. This is great if you want to collect points or airmiles or similar, but not collect debt.
- Take out a set amount of cash for the week
Calculate how much money you are permitted to spend on lunch, coffee, and extras each week and withdraw it in cash. When the cash runs out, so does your slush fund. Some people finding using cash for every day purchases easier to manage.
- Automate your debt payments and savings
While you should disable your one-click to purchase functions, you should automate your savings and debt repayment. This will ensure that these important payments are never forgotten (or skipped in favour of a big night out or a nice new outfit). Often called the reverse budget, it’s a simple way to manage your money.
- Maintain your budget, even if you start earning more
Once you set your workable budget, you know you can live on this amount going forward. It doesn’t matter if you start earning more – resist the urge to spend more, which is known as lifestyle creep. Funnel all of the extra income into your debt repayments or your savings.
- Be goal driven
Having a goal in place, whether it’s paying off debt or saving for early-retirement, those that are working towards something are more likely to achieve it. Give yourself a purpose and set some money goals.