7 Key Traits of People Who Are Debt-Free

People Without Debt Develop These Characteristics

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People with no debt tend to be the exception, rather than the rule. Between mortgage loans, credit cards, student loans and car loans, it's not uncommon for the typical American to have one or more types of debt.

The ones who are living debt-free may seem like a rarity but they aren't special or superhuman, nor are they necessarily wealthy. What distinguishes them from people who still have debt are their willingness to utilize the resources they have, financial or otherwise, to pay off debt or avoid it altogether.

While some people may be taught as children to avoid debt, others come to the debt-free lifestyle after years of indebtedness and money-related stress. In doing so, they develop certain characteristics that set them apart and allow them to enjoy a way of living that isn't driven by debt.

If that's something you're interested in, here are seven traits you can cultivate in pursuing debt freedom.

1. Goal-Driven 

People who live without debt understand that if you don’t know where you’re going, you’ll never get there. They set money goals, starting with getting out of debt, and organize their financial life around those objectives. If you lack financial goals, it's time to create some.

When shaping money goals, make them S.M.A.R.T--specific, measurable, achievable, realistic and time-bound. As you cross a financial goal off your list, create a new one to replace it.

2. Shrewd

Debt-free people don’t fall for marketing hype that tells them they “deserve” a new luxury car. They don’t believe debt is a powerful tool to help create the life you want. They know that carrying debt can limit their financial options, both today and tomorrow.

If you have debt now, ask yourself what behaviors or attitudes contributed to it. For example, if you took out a large car loan, was the motivation to purchase a reliable vehicle or to keep up with the Joneses? Looking at debt from a motivation perspective can help in making wiser decisions about when to borrow and when not to.

3. Disciplined 

Getting and staying debt-free means being consistent, day-in, day-out. Debt-freers follow their budget. They do without niceties until they can truly afford them. They understand that not eating out, or skipping the hot new family movie (until it’s on DVD) is a temporary sacrifice.

If you've struggled with paying down debt in the past, consider what type of system you had in place. Did you pay your bills on a set day of each month? Commit to paying a certain amount above the minimum? Creating some discipline and regularity in your debt payoff efforts can make it easier to stay the course.

4. Non-Materialistic 

When debt is incurred simply by purchasing "stuff", you can end up paying for more for it in interest charges. Rethinking how you spend and making purchases with a clear intent and purpose is one way to avoid taking on new debt. Debt-free people tend to have less interest in amassing “stuff.” They derive their happiness not from things, but from experiences and from knowing they are financially secure. Taking that same attitude can benefit your bottom line over time.

When shifting spending habits from "stuff" to experiences, watch out for FOMO--the fear of missing out. Create a budget for experiences to avoid overspending and potentially taking on new debt.

5. Patient

People who live without debt are able to delay gratification. They know the joy of paying cash for something they really wanted and saved up to buy. They have a vision for retirement and other long-term goals and the ability to steadily work towards them.

If you struggle with impulse purchases which lead to debt, consider imposing a 24-hour or 48-rule on new purchases. With this type of system, you commit to waiting 24 or 48 hours before buying something. This cooling-off period can help you decide if the purchase is truly worth it if it means taking on debt.

6. Responsible 

For a person who's debt-free, household needs always come first in allocating their resources. They do the hard work necessary every day to make sure true needs are met within budget, and they resist the temptation to take on debt for wants. 

This goes back to learning how to live below your means, not at them or worse, above them. Reevaluate your household budget and ask yourself which expenses are truly necessary to maintain your standard of living. You may find that in cutting out expenses that aren't necessities, you can take on less debt and have more money to pay down what you already owe.

7. Confident

Debt-free people exhibit some unusual financial behaviors — everything from not carrying a credit card, to skipping vacation this year, to buying cars for cash. But debt-free people don’t care what others think. They are secure in the knowledge they are doing the right thing for their family’s future.

How confident do you feel about your own financial situation? If you don't feel in control of your finances, you may be more susceptible to giving into purchases that don't make sense for you or your family budget. If you feel less than confident about managing your finances solo, consider talking to a nonprofit credit counselor or a financial advisor who can help you create a clear money roadmap to follow.

Disclosure: The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.