21 Habits to Help You Eliminate Debt

“What can be added to the happiness of a man who is in health, out of debt, and has a clear conscience?”

Adam Smith

21 Habits for Getting Out of Debt

There are a million ways that we can describe debt. Debt is debilitating. Debt is frustrating. Debt is torture. And debt is painful. Just to name a few. By now, you surely have more than enough adjectives to describe the unpleasantness that comes along with being in debt. But what if I told you that you could employ a certain set of habits to help you get out of debt?

In particular, there are 21 debt-free habits that will help to eliminate debt from your life. Some of these habits are good habits that need to be built up, and others are bad financial habits that need to be torn down. A debt-free life can be achieved as long as we work on this two-part approach to both building up good debt-free habits while eliminating the bad financial habits.

But, make no mistake, employing the debt-free habits and eliminating the bad financial habits is no walk in the park, nor are any of these overnight solutions to your problems. They require true grit, sacrifice, and devotion. If you want to get out of debt, you have make sure that you’re committed to it.

But think about how good it would feel to be debt-free…

Imagine for a moment being debt-free. How much of a weight would be lifted off your shoulders? What would you do with your time? Where would you go? Would you continue to spend money or would you change your behavior and ensure that you didn’t burden yourself with unnecessary debt again?

Being debt-free isn’t some pie-in-the-sky hope. You can be debt-free as long as you’re willing to make sacrifices and employ a set of debt-free habits to help eliminate debt from your life once and for all. .

Why Debt-Free Habits?

Almost every is familiar with the term “habits.” We all have them. They either work to help us in life or hinder us. Plain and simple. In fact, we’re a direct reflection of our habits, whether we like it or not. And deep down inside we all know what habits are working to serve us and what habits are working to hold us back.

So, when it comes to eliminating debt from our lives, not only do we need to institute a set of good habits, but we also need to eliminate a set of bad habits. This one-two punch, if you will, is the best way to really cripple, decimate, and ultimately, raze debt to the ground, entirely eliminating it from our lives.

Of course, it’s not easy to employ these debt-free habits, in both building up good financial habits while eliminating the bad ones. But if you stay focused for at least 90 days, and commit yourself to doing whatever it takes, then you could climb out of the chasm of debt that tends to swallow most people whole.

But, what you’ll also come to learn is that by first starting with good financial habits that are considered keystone habits, you can make much more progress. Focus on the keystone debt-free habits, and you’ll watch as the bad habits fall to the wayside and your arsenal of good habits to help eliminate debt slowly builds over time.

So what are keystone habits and what role do they play here?

Keystone habits, as Charles Duhigg once coined them in his best-selling book, “The Power of Habit,” work as a gateway towards good-habit development. They help to build momentum and set yourself up for success. For example, on days that you work out for 20 minutes, you’ll find that you’re more conscious about things like drinking more water, taking your vitamins, and eating healthy. Why? Because working out is a keystone habit.

Debt-Free Habit List

If you’re serious about getting out of debt, the following list of both good habits that need to be employed, and bad habits that need to be eliminated, is the ticket there. Concentrate on a minimum of 90 days. Why 90 days? Because most habits are both formed and eliminated within that period.

It takes us, anywhere from 16 to 254 days to create habits, good or bad, and of course to eliminate them. But the 90-day mark is an important hurdle. At 90 days, the neural pathways in the mind etch the new behavior deeply. It becomes ingrained and almost a part of us.

If you’ve ever tried to build up a good habit or eliminate a bad habit in the past, if you got past that 90-day hurdle, you were far more likely to succeed. Make it past the 6-month mark, and you can almost guarantee your success.

So, stay committed, be resilient, and never give up no matter how long it takes you. There will be upsets, there will be setbacks, and there will be distractions along the way. But as long as you don’t lose sight of your long-term goals, slowly but surely, you’ll succeed. 

Good Habits for Eliminating Debt

#1 – Track & Record All Expenses (Keystone Habit)

One of the best ways that we can get out of debt is to track and record our daily expenses. This debt-free habit means carrying a little notebook around with you where you can jot down your expenses in. You have to record everything. If you spent $5 on a latte, write it down. If you spent 50 cents on a pack of gum, write it down.

Often, it’s not that we don’t make enough money to service our debt, but it’s that the extra money that we do make is usually spent unwittingly on small purchases that add up over time. Benjamin Franklin is famous for once saying “Beware of little expenses. A small leak will sink a great ship.”

How much did you spend on eating out last month? Do you have an exact figure? How about on your gas? How about bank charges and fees? Could any of that have been avoided? What we tend to do is hide from our debt and expenses rather than bring them to light. But tracking and recording everything, is a debt-free habit that will break that cycle.

#2 – Create and Manage a Budget (Keystone Habit)

Debt-free isn’t a possibility without a viable budget. That budget has to be managed on a daily basis. How much spending money do you have each month or each pay period? How much of that goes towards transportation, meals & entertainment, living expenses, servicing your debt, and so on?

Do you have any idea what it costs you to live? What are you variable expenses? What about your disposable income (income available after taxes), and so on? If you don’t know, and you’ve been putting this off, now is the time to dig your heels in and do the legwork. Create and manage a budget and refer to it daily.

Not only will this habit help you get out of debt,  but it will also help you to stay on track and not create more debt in the future. When we ignore our finances, it’s far easier to get swallowed up by the veil of secrecy that we tend to shroud on our poor spending habits.

#3 – Pay All Bills on Time (Keystone Habit)

Always pay bills on time, all the time. Why? Well, getting into debt is easy when we don’t take care of our obligations first. Depending upon what we prioritize at the time, distractions can easily get in the way. But, this debt-free habit helps to eliminate that by ensuring that you’re not overspending or spending money you shouldn’t be.

Paying bills on time, or even early, also helps in other ways. For example, it helps you to avoid late fees, bank charges, and can even assist you in paying off debt earlier for example, such as when extra principle is paid towards a mortgage. As long as you get in the habit of paying bills on time, all the time, being debt free moves from a hope to an eventual reality.

#4  – Money Minute (Keystone Habit)

Your money minute could quite possibly be the most important minute in your day. When you schedule a money minute, you quickly run through your finances just to get a glance for where you stand. For example, in the morning, when you awake, you could log into your financial accounts and do a quick assessment of the last day’s charges.

Keep in mind that most expenses and payments post sometime after midnight of that day. This debt-free habit allows you to see just where you stand, what charges you were billed for, and how much money you have available. It also helps to avoid any major problems that might occur when you don’t review your finances for days or even weeks at a time, such as identity theft.

In goal setting, I talk a lot about long-term goals and short-term goals. When it comes to your finances and eliminating debt, your long-term goal would be to enjoy complete debt freedom but your short term goals would be what you do on a daily basis, such as daily goal setting. Your money minute is akin to setting and tracking daily goals.

#5 – Automatic Savings

This should be apparent to everyone: pay yourself first and setup automatic savings. No matter how small the amount is, always pay yourself first. Why? Because, when you pay yourself first, you prioritize your future. You’ll also find that this debt-free habit works in a magical way, since you will always have just enough at the end of the month, even after paying yourself first.

When money goes into a savings account, automatically, and you don’t have to worry about it, you enjoy a sense of security for your future. A recent survey by CashNet.com concluded that 22 percent of people have less than $100 saved for emergency expenses and that another 46% had less than $800. It’s clear that people find it difficult to save money.

For that reason, making your savings automatic takes the guesswork out of things. You get to pay yourself first with this debt-free habit, and in turn work your way towards building a nest egg for the future.

#6 – Consult with a Financial Mentor

We all need a mentor in life. Often, our mentors usually help to guide us in the right direction. That’s also because they tend to have more experience than we do. Locate a financial mentor that you can consult with for all things finance-related. This not only helps you to get out of debt, but also to improve your financial planning.

Now, I’m not speaking about a money manager, a tax consultant, or some other professional that’s paid to work with you. A financial mentor is someone that you meet who helps you on a personal level. Don’t know anyone successful like that? Go to networking meetings. Speak to people. Engage in online chats and forums.

You have to put it out there into the world. Don’t be afraid or shy. Utilize your powers of persuasion to get what you want.  Once you find a financial mentor, make it a debt-free habit to consult with them on a periodic basis. This doesn’t have to be daily. But at least weekly if not monthly.

#7 – Freeze Credit Cards

It’s good practice to freeze your credit cards when you’re trying to eliminate debt. For most people, credit cards can burn a hole in their pockets. If there’s money left to spend, they’ll spend it. Does this sound familiar? If so, you’re not alone. In May 2015, it was reported that the average U.S. household was carrying $15,609 in credit card debt.

But, by freezing your credit cards, you’re sending a powerful message to your brain with this debt-free habit. You’re telling it that you’re no longer willing to sacrifice your financial health and your mental wellbeing, just to enjoy the spending impulses that seem to plague most folks out there.

#8 – 15-Minute Buffer for Spending

For most people, it’s easy to get caught up in the moment when it comes to spending. For that reason, you need to create a buzzer zone. What is it? Well, for this debt-free habit, give yourself a 15-minute buffer when it comes to impulse purchases. If you’re browsing a Website or at a shopping mall and just have to buy something, stop what you’re doing and set a timer on your phone to 15 minutes.

Why 15 minutes? Impulse buying is just that – it acts on impulse. It becomes an emotional response to a subconscious trigger. But, when we pull ourselves away from the situation and really think about things for a moment, we can limit our impulse spending. Learn to employ this debt-free habit, and watch as you slowly take back control of your financial life.

#9 – Pack Your Lunch

This might not sound like a debt-free habit, but packing your lunch can help you to save money every single day that can be used to pay down your expenses. For example, if lunch costs you $10, $15, or even $20 per day with a beverage, that cost can balloon over time. At $15 per day, 5 days per week, 4 weeks per month, that’s $300 per month.

How much of that can be used to eliminate credit card debt, student loans, or even put into a savings account or invested into stocks, bonds, or mutual funds? It’s hard for us to see how our small habits on a daily basis have a great impact on our lives when we don’t calculate the cost of something over the long term and not just the short term.

This, and other debt-free habits don’t help you to get out of debt overnight. But they do help you to work towards a debt-free goal over the long term. The problem? Most people absolutely need instant gratification. But we can’t have all things overnight. Implement this debt-free habit for at least a year and ensure that you use the savings to pay off your debt and not spend it in other ways.

#10 – Pay Down Your Debt

Last, but certainly not least when it comes to habits that help to extricate you from the shackles of debt, is to pay down your debt. Focus on your highest interest-rate cards first. Pay double the monthly minimum payments until it’s paid off, then move to the next one. If you’re only paying minimum payments, it will take forever to eliminate your debt.

We pick the highest interest-rate cards first because the interest rates can help eat up your entire debt-eliminating budget. Once the first card is paid off, do the same thing for the next card and so on. If you can pay triple the payments, even better. If you’re committed to this, you’ll find ways to save money so that you can employ this debt-free habit regularly.

Bad Financial Habits that Cause Debt

Here’s the flip-side of the coin. With the good, there come the bad. Not only do we have to build up the good debt-free habits, but we also have to eliminate the bad financial habits if we want to enjoy freedom from debt. If you relate with any of these bad financial habits, do what you can to break free of them.

#11 – Impulse Buying

Sometimes we just can’t help ourselves – we just need to buy that certain watch, car, suit, vacation, latest electronic device, or what have you. But, impulse buying is a surefire way to wind up in debt. The problem today is that credit is so cheap that it’s so hard to avoid acting on impulses. But, if you can consciously eliminate this bad financial habit from your life, you can be on your way to being debt free over time.

So, how do we avoid impulse buying? Well, first of all, don’t put yourself into situations where you might want to buy something on impulse. Don’t go shopping with all your credit cards or browse online at your favorite stores when you know you shouldn’t be spending money.

Second, keep a ledger with you to record your emotions. You’ll find that this takes some of the impulse out of things. For example, if you’re feeling the sudden urge to buy a new smartphone or wearable device, jot down that feeling. Why do you need it right now? What can you spend the money on if you didn’t make that purchase? How much debt can you pay off?

#12 – Bank Fees

One thing that plagues many individuals are excessive bank fees such as overdraft charges, which are the result of poor financial planning and acting on impulses. Considering that bank fees can be avoided, having an excessive amount of these can decimate any limited financial budget.

So, what’s the solution? Well, if you’re going to eliminate debt from your life, this is absolutely one habit you must break. Analyze your past 6 months of bank statements and total your average amount of bank fees. How did they occur? How could they have been avoided.

Some people pay in excess of $150 in bank fees per month, money that can easily be used to pay off high interest credit cards, student loans, and other expenses.

#13 – Payday Loans

Quite possibly one of the deadliest financial habits you can have is to get into the payday-loan cycle. Payday loans, sometimes referred to as cash advances, can have interest rates up to 1000%, making it very difficult to get out of the cycle, especially for those who find themselves overspending their means.

You should never take a payday loan, regardless of the situation. This habit won’t let you become debt free; it will, in fact, force you deeper into debt than you already are. Some states and countries have begun to both regulate and outlaw payday loans, redefining the terms of usury.

#14 – Credit Card Spending

Credit card spending is a bad financial habit plain and simple. It’s easy to whip out that shiny credit card and purchase something that you ultimately can’t afford to pay off right away. Especially when it comes to small expenses, credit card spending can add up and it’s a deadly financial habit.

Use your credit cards wisely. If you want to eliminate debt from your life, then cut up all of your credit cards except for one that would be used only for emergency purposes. Employ debt-free habit #2 to create and manage a financial budget, and use your money minute (debt-free habit #4) to analyze your financial standing day to day.

#15 – Minimum Monthly Payments

This poor financial habit equates to doing the bare minimum in life. That certainly won’t get you far, especially if you’re looking to rid yourself of debt. But, this is a bad financial habit that plagues a good portion of people who are just getting by in life due to the bad financial decisions of their past.

If you find yourself employing this poor habit, immediately do something to change it. Always pay more than the minimum monthly payment due, especially on loans or credit cards with excessive interest rates. For example, some credit cards can stretch upwards of 30% in annual interest. On $5,000 in credit card debt, that would equate to paying an additional $1,500 just to service that debt.

#16 – Overspending

Of course, the bad financial habit of overspending doesn’t need much description. Many people find themselves in this situation from month to month. Of course, in emergency situations, often there’s no avoiding overspending. But, on a regular basis, you should be putting away at least 15% or more of your income towards savings.

To stop the bad financial habit of overspending, you really have to employ some of the good keystone debt-free habits discussed in the first section. By tracking and recording all expenses and doing a daily audit with your money minute, you can have a better handle on your financial life and avoid overspending by carefully planning.

#17 – Small Expenses

Small leaks will sink a great ship, as Benjamin Franklin once said, and there have never been more truer words. It’s hard to see the small expenses that add up, but when we look at the big picture, it’s far easier to become aware of this.

If you have small expenses that seem to be eating away at your monthly budget, such as gym memberships that are unused, and other payments for things you might have long ago forgotten, it’s important to regain control of your financial life by eliminating these.

These small expenses equate to bad financial habits that we employ on a daily basis. If you can rid yourself of the small expenses, you can ultimately work towards a debt-free life. Calculate your small expenses and see just how much you’re spending on the various unused services in your life.

#18 – Cigarette Smoking

Quite possibly equivalent to throwing your money away, cigarette smoking is a bad financial habit. If you’re a smoker, how much do you spend on that habit? Is it one pack per day, two, or even more? At an average cost of $8 per pack and just one pack per day, you’re looking at $240 per month in added spending.

What can you do with an extra $240 per month? What debt can you pay down? It really is hard to see the bigger picture when we’re so enthralled in our daily habits. But, if you’re a smoker, do whatever it takes to eliminate this bad financial habit from your life right away.

#19 – Gambling

Needless to say, gambling is a bad financial habit. Some people have it worse than others. Now, it’s not to say that you can’t get out there and buy the occasional lottery ticket. But, when you’re constantly gambling, betting, and playing the lottery on a daily or weekly basis, you really are throwing your money away.

This is why it pays to write down all of your expenses (keystone debt-free habit#1), because you can go back and see just where your money went, especially if you didn’t use a debit card for your purchases.

#20 – Excessive Drinking

There’s no two ways around it, excessive drinking is a bad financial habit. You are, in fact, drinking your money away. Not only is drinking costly, especially if you’re out on the town often, but it also leads to other poor financial decisions when you’re too uninhibited to make sound and reasonable choices about your spending.

If you drink, especially excessively, do what you can to eliminate that from your life. If you want to be debt free, commit to a 6-month or even 12-month cleanse. Rid yourself of the toxins and also eliminate the debt from your life in the meantime. How much could you save if you didn’t drink for 12 months?

#21 – Lying, Cheating, & Stealing

These three, although not directly tied to bad financial habits, can easily affect your financial future by landing you into hot water, possibly legal trouble, and even jail. All of these will become financially costly in the end. So, don’t lie, cheat, or steal, and always act with integrity.

Again, becoming debt free isn’t just about employing good debt-free habits, it’s also about eliminating the poor financial habits that tend to get us into trouble. It doesn’t happen overnight, but these poor financial decisions ultimately lead to our demise.