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Financial habits for a Debt Free Life

Ramesh and Suresh, two software engineers. They went to the same college, hail from the same financial background and make the same salary. Yet Ramesh owns a house in Mumbai, has a stable balance to life whereas Suresh is finding it difficult to meet both ends meet on a regular basis. The difference in their financial picture could be night and day because they view or rather handle money matter very differently. One chooses to walk in the path of debt free life whereas the other doesn’t quite see the benefit of it. We aren’t saying Ramesh didn’t ever carry debt. He might have carried debt in the past or might have witnessed the havoc that carrying a large amount of debt has had on other people’s’ lives, vowing never to be in the same position. This may sound like unattainable, but debt free life is something you can achieve. It will take some time and you will need to put in the work to take the path of Ramesh. Start with the steps we suggest and then you decide where you can go from there!

Don’t be ignorant

Every penny of yours is hard earned so you can’t afford to ignore where it is going. At least debt-free people like Ramesh certainly won’t. Debt free people attach a high value to every penny , because they know how hard they had to work to make that money. Be watchful over your money and money your accounts regularly, so you know what’s the status. Tracking your spending — every rupee that comes in and every rupee that goes out — is one of the best ways to maintain control of your money and reduce how much you’re wasting or saving or investing each month.

Don’t go overboard with spending

This is one advice that is for everyone trying to get a debt free life or trying to have financial independence – don’t go overboard with spending. The trouble is that many of us have a hard time following it. We live in a world where we constantly hear about the things that we “should” buy. It’s very easy to spend money on extra things that we don’t need (you can list 20 things instantly). Debt- free people do not waste money on unnecessary items and they are always checking to make sure there are no hidden fees on their bills and there are no fraudulent chargers on their bank statements. Living below your means is key for your long-term financial success. If you regularly spend all of your money, or more money than you make, you can’t expect to grow any savings. To accomplish this make sure to chalk down a budget for each month. Then you can work with that number to make sure you don’t overspend.

Don’t neglect saving

People who are in debt generally carry a mentality of scarcity (mindset of never having enough). And very often this actually causes people to avoid saving and continue spending, because they associate cash flow with a sense of temporariness. You have to put your money to saving first and then workout your spending schedule accordingly. People who are debt-free make it a priority above anything else! According to experts, the rent/mortgage of an individual doesn’t make up more than 30% of his or her monthly spending. So leaving that aside one can easily get a buffer of 10% to 20% of the remaining money towards the future. That means your retirement account, emergency fund and other savings accounts. Workable!

Don’t overlook the power of “knowledge”

People who are debt-free take charge of their financial education. Being debt-free for them hasn’t happened by luck or through a trick — it’s because they’ve realized a thing or two about money, and they are committed to getting better at it. Start taking responsibility of your finances, and you can do so by gaining knowledge on how money works. If you’re truly committed to reaching financial freedom, you have to invest the energy required to make it happen. Take for instance home mortgage: Most people aren’t aware that by the time they finish paying on a 30-year loan, they will actually be paying over double the home’s original value — due to high interest! People who are free from debt understand the consequences of debt, and they understand why bad debt should be avoided whenever possible.

Wondering about your debt free life ?? Want to know more about financial management to get debt free life. Feel free to write us on contact@sbsfin.com