10 Key Characteristics of Debt-Free People

Photo (cc) by danielmoyle

Editor’s Note: Several months ago we began seeking out the best money articles we could find. The goal? Create a personal finance “supersite” where the web’s finest writers can showcase what they consider their best work. The following post comes from our first such discovery, Len Penzo. Stay tuned for more!

This post comes from guest columnist Len Penzo at LenPenzo.com.

The other day a friend and I were discussing why some people manage to live their lives in complete control of their finances, while others are constantly trying to get out of debt fast – and usually in hock up to their eyeballs no matter how much money they make.

I’ve preached that financial freedom can be achieved by anybody, regardless of their income level, more times than I care to count.

So what is it that separates the financially free from the financially inept?

Why is it that there are families out there with household incomes under $40,000 comfortably making ends meet and saving for retirement with no debt on the books – or at worst, a single mortgage payment – while others who make millions per year – like Sinbad, Ed McMahon, Mike Tyson, and Stephen Baldwin – have trouble keeping their financial heads above water?

The more I thought about it, the more I realized there is no single trait that determines who will successfully manage their personal finances and those who won’t.

More often than not, it seems to me that people of modest means who exhibit an ability to properly manage their finances have some combination of multiple characteristics.

Here is my list of 10 key characteristics that enable people of modest means to lead a debt-free life…

1. They’re detail-oriented

People who are in a good financial position always pay close attention to their personal finances. They know how much they earn, and they keep track of how much they spend and where every penny goes. Because they’ve got a good handle on the state of their personal finances, they are less likely to buy something they can’t afford.

2. They realize debt is a mortgage on their future

I remember somebody once telling me that debt is a form of indentured servitude, where we end up sacrificing our future earnings in exchange for instant gratification. Financially savvy people understand that, in most cases, such a trade almost always ends up being a Faustian bargain.

3. They’re pragmatic

More often than not, folks who are debt-free are also practical people. Because they are practical, they understand the meaning of value. For example, a car is often looked at merely as means to get from point A to point B, so why buy a Lexus when a Corolla will do? In the same vein, why pay double for designer jeans that will last just as long as the no-name alternatives? Such a philosophy even stretches to the grocery store, where name-brand items often give way to their store-brand counterparts.

4. They’re self-reliant

Most people who work hard to maintain a life of financial freedom take pride in being self-reliant. To that aim, they make sure they always live within their means, and save as much money as they can for a rainy day or when times get lean. (They’re also quick to give when others fall on hard times.)

5. They aren’t addicted to shopping

We all know there are people out there who get a high on spending money, whether they have it or not. While not physically destructive like a drug or alcohol addiction, an uncontrolled shopping habit will make it virtually impossible to remain debt free.

6. They’re patient

People who are debt-free didn’t get there because they were impulsive shoppers, or always looking for instant gratification. If the money for something wasn’t in the budget, then they saved their money and waited.

7. They’re self-confident

Because they refuse to let their self-worth be defined by their possessions, the financially free never feel any pressure to spend money in order to try and keep up with the Joneses. Those who are debt-free understand that their status in life is more accurately conveyed by self-confidence, rather than dubiously deceptive displays of wealth.

8. They realize credit cards are a double-edged sword

People who are in control of their personal finances aren’t afraid of credit cards. In fact, they embrace them. And while the financially savvy understand the incredible benefits that credit cards provide their owners, they also know that if they fail to pay them off in full at the end of each month, they will pay a heavy price. This knowledge fosters a healthy respect that keeps their credit cards from being abused.

9. They believe in personal responsibility

Financially responsible people refuse to make excuses. If they lose their job, they know it’s their responsibility to have a rainy day fund in place – and if they don’t, they’ve got no one to blame but themselves. Short of an unforeseen catastrophic medical issue or natural disaster, they also understand that when it comes to living within one’s means, they are in complete control of their own destiny.

10. They’re not materialistic

The pursuit of expensive toys and other possessions can certainly make life more luxurious. But at what cost? I know it’s a cliche, but most people who are debt-free understand better than most that money cannot buy lasting happiness. As such, they often tend to live simpler lives that focus on the joys of family, rather than the accumulation of material possessions.

This is by no means an exhaustive list. However, the more aforementioned characteristics that a person possesses, the more likely they are to be debt free and living a life of financial freedom. How many of them apply to you?

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
10 Things You Should Never Buy on Amazon
10 Things You Should Never Buy on Amazon

Just because you can purchase something on Amazon doesn’t mean that you should.

15 Free Streaming Services to Watch While Stuck at Home
15 Free Streaming Services to Watch While Stuck at Home

These free movie streaming sites offer thousands of movies and TV shows, including recent releases and beloved classics. If you love free movies, online sites are where you need to look for the best list of features that are just one easy click away.

The 5 Worst Home Upgrades for the Money
The 5 Worst Home Upgrades for the Money

These home improvement projects basically never pay off.

This Is the Best Age to Buy Long-Term Care Insurance
This Is the Best Age to Buy Long-Term Care Insurance

If you wait too long to apply for coverage, you could be denied. So, when’s the sweet spot to apply?

Beware These 3 Tax Penalties on Retirement Accounts
Beware These 3 Tax Penalties on Retirement Accounts

Protecting a nest egg is tough — but you can make the situation far worse with some boneheaded mistakes.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

Am I Eligible for My Mother’s Social Security Benefit?
Am I Eligible for My Mother’s Social Security Benefit?

Can an adult daughter tap into her late mother’s benefit?

9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

This Surprise Factor Can Raise Your Risk of Dementia
This Surprise Factor Can Raise Your Risk of Dementia

Nearly half of U.S. residents may face this threat.

Organize Your Home With These 10 Thrift Store Finds
Organize Your Home With These 10 Thrift Store Finds

Resolve to be clutter-free in 2021 with these secondhand purchases.

This Gas Station Scam Is Victimizing More Drivers
This Gas Station Scam Is Victimizing More Drivers

For the second straight year, a growing number of Americans believe they’ve fallen prey to this scam.

11 Laws You Could Be Breaking Without Knowing It
11 Laws You Could Be Breaking Without Knowing It

Seriously? Fibbing about the weather is a crime? This and other little-known legal traps await the unwary.

11 Generic Products You Should Buy at Costco
11 Generic Products You Should Buy at Costco

Not all generics are worthwhile, but these are among the best from Costco’s Kirkland Signature brand.

These Are the 3 Best Used Cars You Can Buy
These Are the 3 Best Used Cars You Can Buy

These vehicles boast reliability, safety and long-lasting value.

13 Things Seniors Can Get for Free — or Almost Free
13 Things Seniors Can Get for Free — or Almost Free

There are many ways to get cheap or free services and goods after reaching a certain age.

6 Legal Documents Retirees Need — but Don’t Have
6 Legal Documents Retirees Need — but Don’t Have

Few retirees have all of these documents that are crucial to their golden years — especially during a pandemic.

8 Tips for Retiring Comfortably on Social Security Alone
8 Tips for Retiring Comfortably on Social Security Alone

It’s never too early to start learning how to live well while living on less.

Internet Providers Can’t Charge You for This Anymore
Internet Providers Can’t Charge You for This Anymore

Starting this month, your ISP no longer can bill you for this fee.

15 Painless Ways You Can Cut Costs in 2021
15 Painless Ways You Can Cut Costs in 2021

Follow these tips to save, so you’ll have money for things that really matter.

9 Small Expenses That Are Bleeding Your Budget Dry
9 Small Expenses That Are Bleeding Your Budget Dry

Keep more of future paychecks by eliminating these budget-busting unnecessary expenses.

The 4 Best Things to Buy in January — and 4 to Avoid
The 4 Best Things to Buy in January — and 4 to Avoid

As a new year dawns, deals abound for some types of products. In other cases, it pays to wait.

11 Huge Retirement Costs That Are Often Overlooked
11 Huge Retirement Costs That Are Often Overlooked

Does your retirement budget account for all of these costs?

7 Bank Accounts With Extra Perks for Seniors
7 Bank Accounts With Extra Perks for Seniors

These accounts offer exclusive discounts and other perks — including interest — to older customers.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.