After practicing bankruptcy for almost 20 years I have become very aware of the power of debt and the havoc it can wreak on someone physically, mentally, and emotionally. I have seen marriages tested (or destroyed) because of money. I have met with clients who suffered heart attacks or stokes because they had been trying to keep up with the “Joneses” (even though the Joneses are usually broke!) and they couldn’t maintain appearances anymore. I recently recorded a series of post-bankruptcy tips for my clients so that when they are making their new financial start they can hopefully stay of the debt-free path.
1. They Live On Less Than They Make
People who are living below their means have a debt free life. The key to this is being happy with what you have. Having the newest car or home doesn’t matter to debt-free people. What matters to them is that they have a safe future and a nest egg to fall back on if they have an emergency. Letting go of other’s opinion of your car, home, clothes, and vacations is life changing.
2. They Surround Themselves with Like-Minded People
As the motivational speaker, Jim Rohn, said “You are the average of the five people you spend the most time with.” Your relationship with others greatly influenced you and your financial habit as well. Take a look at your network. Do they make you feel comfortable when you’re with them? Do they keep you inspired to spend less and save more? Do they motivate you to reach your goals? If not, then maybe it’s time to surround yourselves with like-minded people who are aiming for a debt-free life.
3. They Have a Budget which Aligns with Their Life Goals
Just because you’re earning a good income doesn’t mean you need to over spend and not have a budget. This kind of thinking can get you in trouble and in debt. I deal with lots of clients who make six figures but spend more than they make and are forced to file bankruptcy.
4. They Make Thoughtful Purchases
Debt-free people know when to say “no”. They work hard to stick to their budgets and avoid impulse purchases. Thoughtful spending also applies to eating out: Debt-free people are choosy about when and where they’ll dine out because they know cooking at home can save hundreds of dollars each month.
5. They are Patient
Debt-free people have patience; it’s not always perfect but they’ve learned to grow in self-control. They demonstrate this in the practice of delayed material gratification. For example, if they need a new computer, they start saving now and build up the cash. They are not trying to keep up or impress anyone else by having the newest trends. Unlike an impulse buyer, they are willing to have patience and save before making a purchase. If you don’t have the money, don’t get it.
6. They Maintain a Solid Budget
They make choices today that benefit them in 10 years. When we live paycheck to paycheck and forget about the big picture, we end up in the same stressful situation at retirement.
7. They think long term
When the focus isn’t on immediate gratification, you can make smarter decisions. Sure, it would be nice to have this season’s hottest purse, but how will they help your long-term financial goals? This doesn’t mean you can’t ever buy a new bag it just means you have to save up before you buy it. This also gives you the time to avoid impulse purchases.
8. They keep things as simple as possible.
When life gets messy, so does our money. We lose sight of our spending and our money management. Debt-free dreamers keep their eye on their daily money activities and make sure they are never too busy to sort receipts, pay bills, and manage each bill with respect and diligence. Don’t procrastinate on managing money well.
9. They prioritize their own well-being.
Keeping up with your Instagram-famous neighbor who is really in financial distress isn’t a smart strategy for money-making or happiness. Whenever you are in a season of spending or anxiety, take a long walk and have a meaningful conversation with yourself.
10. They check their finances weekly.
There is an empowering feeling in staying on top of our finances. Reviewing your finances every week keeps your eye on the ball and can keep you motivated to maintain. your finance goals.
11. They have an emergency fund and are liquid.
Liquidity. It is very important that you always have access to cash should you need it. Assets are amazing and so important to growing your net worth, but having fast access to cash is crucial. You should have an emergency cash fund that would allow you to pay your bills for at least 6 months.