How to live a debt free life

Becoming Debt Free: 5 Tips for a Debt Free Life

Becoming debt-free has been the most impactful experience of my entire life. Getting to live a debt-free life has meant turbo-charging my investments and savings, traveling, time off work, and a less financially anxious life.

Because I’m not going to lie to you: I was dealing with depression while I was paying off my debt, and I was so low income that I didn’t have any extra money to invest either. Moving beyond that…it’s been life-changing.

Characteristics of People Who Live a Debt-Free Life

Are debt-free people different than people with debt? I mean, fundamentally, NO. We’re all walking, talking, meat sacks who are trying to figure out this crazy thing we call life.

It is really common in the personal finance world to characterize people with debt as lacking willpower, or generally just kind of less intelligent than debt-free people. It’s very “if you could just figure this out, your life could be better!”

And ignores the very real systemic and personal challenges to paying off different types of debt, at different life stages, and on different income levels.

So let me say: being debt-free is awesome and cool, but the fact that some people don’t have debt doesn’t inherently make them better than the people who do have debt.

5 Tips For a Debt-Free Life

1. Track your spending

None of us can change anything about our financial lives without knowing what’s first going on IN our financial lives! So we have to get a picture of what’s happening first.

Take 2-4 weeks and track your spending. Our budget workbook comes with a 30-day spending tracker for this very reason! You can do this manually or use an app like Mint or Fudget.

When I was paying off my debt I tracked it manually, but I’m analogue like that.

debt payoff budget

This is just one example of my debt payoff budget- as you can see, I literally wrote out each monthly cost. Then I’d add them all up, pay the bills, and anything else went to debt!

2. Understand your debt payoff WHY

Why are you focused on paying off debt? What’s the reason you want to live a debt-free life? Knowing the answer to these questions will help you stay focused, motivated, and reach your goal.

Our debt-free why is like a match. It lights the fire in us. For me, I wanted to be debt-free because carrying my student loan debt made me feel like a failure.

It made me feel like going to college was a mistake since I didn’t have a full-time salaried job yet I had paid for this degree.

I wanted to remove the debt both from my personal spending each month AND I wanted the emotional burden of debt to be lifted.

3. Pick a debt payoff strategy

The two most popular debt payoff strategies are the debt avalanche method and the debt snowball method. Here’s how they each work:

Debt Snowball

List out all your debts from the lowest balance to the highest balance. Focus on paying off the lowest balance first! Make the minimum payments on all the others until the smallest is paid off.

Once it is, roll over the extra money you were putting towards that smallest debt to the next smallest. Repeat until debt-free!

Debt Avalanche

List out all your debts from highest interest rate to lowest. Focus on paying off the highest interest first! Make the minimum payments on all the others until the highest is paid off.

Once it is, roll over the extra money you were putting towards that highest interest debt to the next highest. Repeat until debt-free!

People ask me a lot: which one is best? I personally like the avalanche better, as you will save the most money on interest that way.

But if your smallest debt is $500 and your highest interest debt is $5,000, it’s going to be easier to start with the smaller balance. And that’s cool!

The most important step to achieving a debt-free life is just getting started paying off your debt.

And remember step one? Track your spending? Doing that will show you which areas of spending you can pull back in to free up much extra money to put towards debt!

4. Build support and community

Most traditional financial advice to build a debt-free life is to do everything alone. By yourself. Totally solo.

I think that’s nonsense. Humans are social creatures! We live in a society! We literally need each other!

Building a financial community should definitely be part of your larger financial plan and your debt payoff strategy. You can join our free Facebook group, or sign up for our once a week newsletter here to be a part of OUR financial community!

When I was paying off my student loan debt this was something I did. Firstly I brought up money with EVERYONE. I mean it, if you spoke to me at all between 2014 and 2015, we were talking about how I was paying off my debt and learning to invest.

This in turn meant people started coming to me specifically to talk about THEIR money, and a little financial community was born! I had friends I could celebrate wins with, ask questions, and learn with.

5. Build in rewards

This tip is one I’ll defend to death but is definitely *controversial* in the personal finance world. I think more people will see more success if their debt payoff journey is not a painful one.

Instead of seeing paying off debt as a time when you must suffer to reach your debt freedom goal, let’s make it a journey you can enjoy.

I tell my money coaching clients that they should pick milestones to celebrate in their debt payoff journey. Keep the celebration reasonable, of course!

Try something like going out to a $75 dinner after paying off $5,000 in credit card debt.

That’s a huge amount of debt and you should celebrate! And that $75 dinner isn’t big enough to throw you off track, especially when you have a budgeting system down that works for you.

These kinds of celebrations can help you stay motivated especially if you are working on a big pile of debt.

How to Stay on Track With Your Debt-Free Life

Once you become debt-free, how can you stay debt-free? I’ve remained 100% debt-free since I made my last student loan payment in 2015. That’s 8 years of a debt-free life!

The most important thing is to build up financial security for yourself. Becoming debt-free doesn’t mean you are automatically rich. It just means you no longer have debt.

So make sure to build a 4-month emergency fund, open an IRA, start investing, and keep on budgeting to manage your money well! Here’s our guide to five things you should do after paying off your debt.

My debt-free life journey has been one that has focused on building financial savings, diversifying my income, and focusing on building long-term good financial habits. And it’s worked for me so far!

I hope that you reach your debt-free life ASAP.

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