3 Smart Characteristics of Debt-Free People

I recently posted on facebook an article about how a good portion of Filipinos are in debt. Now, we know that some kinds of debt are good and being in debt is not necessarily bad. However, if 2 out of every 5 people you know is in debt, then it's probably a good idea to at least be more conscious about it.

And today, we have guest blogger Kyle to talk more about how to be debt-free.

Filipinos are the second most indebted nation in Asia, right behind Malaysia. This is according to the latest Manulife Investor Sentiment Index (MISI) survey. The main factors contributing to debt accrual are daily expenses, children’s education, and medical expenses. These make it difficult for Filipinos to save regularly and make them more reliant on credit and debt.

According to the survey, 41% of Filipino investors carry debt. This means that the remaining 59% of respondents are debt-free, which then poses the question, how is it possible that these people have zero debt?

It all starts with having the right characteristics. MoneyMax.ph, a comparison website with personal finance resources, enumerates the 3 characteristics of debt-free people:

They live within their means

Expenses should never exceed income. This is one of the foundations of personal finance. Some people get into debt when the money they have cannot cover expenses, and are forced to take out a personal loan or carry a credit card balance. If you want to be debt-free, it’s important to eliminate debt. This can only happen if you save a portion of your income and use it to pay your debt.

Pro tip: To get into the habit of debt payment, pay first the debt with the lowest balance or the one with the lowest interest rate. Starting small will give you the confidence to take on bigger debts.

They know which expenses to say ‘no’ to.

You have to learn to say ‘no’ to unnecessary expenses. Eating is necessary to live, but eating out in a swanky restaurant every day isn’t. Wearing clothes is necessary, but donning designer isn’t. Shelter is another necessity, but buying a car isn’t when your apartment is within walking distance from your office. You have to learn how to differentiate your wants from your needs and how to turn away from certain luxuries that will deter you from being debt-free.

Pro tip: You can have anything you want, but you can’t have everything. Pick your top spending category for fun (e.g. clothes or games or eating out). Spend on one category and sacrifice on the others.

They have a long-term mindset

People with zero-debt have a long-term mindset. They’re looking at the bigger picture – at the kind of retirement they’ll have, their children’s future, and the lifestyle they’ll have when they’re older. Those without debt know that debt restricts them. You can save and invest more which can lead to a better and financially free future without debt. You can send your future children to prestigious universities without worrying about the tuition if you are financially free. You can live the retirement you’ve been dreaming of instead of spending your retirement years working because you still have debt and insufficient savings.

Pro tip: Write or type down your goals for the future. Think about whether money plays a big role in achieving these goals (clue: money is needed in everyday activities from commuting to buying groceries). This should give you the much-needed push to be debt-free.

Now that you know the 3 characteristics of debt-free people, you’re ready to follow the three steps and say ‘goodbye’ to debt.

About the Author:

Kyle Kam is a Digital Marketing Specialist of MoneyMax.ph, a financial comparison website aiming to help Filipinos save money through diligent comparisons of financial products.

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