5 Financial Lessons You Can Learn From Debt-Free People

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Debt can wreak havoc on your health and relationships. It causes stress and anxiety, and often causes rifts between spouses. Yet the average debt-carrying Canadian owes a total of $27,368 in non-mortgage debt. Debt-free people don't experience financial anxiety. And if you think that you have to be rich to be free of debt, think again. Even people on modest incomes can dig out of debt. If you'd like to work on debt consolidation, here are five financial lessons you can learn from debt-free people.

Free Yourself with a Budget

Debt-free people don't look at sticking to a budget as a burden. It may feel like freedom when you're swiping your credit card left and right during a shopping spree, but the piling credit card debt will soon have you feeling like you're in prison. Having a budget in place gives you the freedom to spend without worrying.

If you're not sure how to create a budget, consider taking a course on financial planning or meeting with a financial planner yourself. By sticking to your budget, you know exactly how much money you have for discretionary spending you have each month. You won't stress about overdrafts, late charges or coming up short on your electric bill, because that's all taken care of in the budget. Now that's freedom!

Get Rid of Small Expenses

Those small expenses add up, but you may not even notice them leaving your checking account. How many subscriptions do you have? Ten dollars here for a monthly music service subscription, $15 annually for a magazine subscription, $50 a month for your gym membership (even though you rarely go)… it adds up. People who are debt free monitor these expenses, and if they're not getting their money's worth, they drop them. Perhaps it's time to look at your small recurring expenses to see what you can live without.

Pay Cash for Almost Everything

You may not be able to save up enough cash for a house or a car, but for everything else, there's usually no reason why you can't wait until you have the cash saved up for it. Debt-free people pay almost exclusively in cash. And if they put items on a credit card, the balances are paid off entirely each month.

Before you swipe your credit card again, ask yourself if you really need the item right now. If it can wait a few months, put all your extra money toward that expense. You'll feel great when you hand over cash for it instead of taking on new debt or adding to the existing pile.

Learn to Wait

The consumerist culture makes it difficult to grasp the concept of waiting for something that you want. After all, you can order most things with the click of a button—you don't even need to go to the store anymore. But waiting has its benefits. First, it allows you to save up enough money to pay cash for what you want. Second, it gives you time to think your purchases through. Have you ever regretted a purchase you've made? When you're forced to wait a while for an item, you may decide that you don't need it after all. You'll very seldom experience shopper's remorse when you've planned on making a purchase for a long time.

Splurge Once in a While

Many people picture those who are debt free as penny-pinching misers. While that may be true for some, it's not the case for all debt-free people. In fact, they're known to splurge where it counts. Debt-free people prefer quality for a higher price to cheaply made products at rock bottom prices. Knowing when to pinch pennies and when to invest in something is the hallmark of a debt-free person.

Now that you know how debt-free people manage their finances, you can put these lessons into practice. If your current payments on credit cards and personal loans are unmanageable, consider consolidating your debt for a smaller monthly payment and lower interest rates.

8 September 2014