I purchased Steve Jobs biography yesterday in order to learn more about what made him successful. I am really interested to understand what habits people practice to make them successful. In terms of financial success, why do some people know how to control their finances so well, while others are constantly trying to get out of debt. Why is it that there are families out there with household incomes under $50,000 comfortably making ends meet and saving for retirement with no debt on the books, while others who make six figures per year have trouble keeping their financial heads above water?
Here are some characteristics of people that properly manage their finances and stay out of debt:
They are not defined by possessions 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.
They pay close attention to their finances 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 have a good handle on the state of their personal finances, they are less likely to buy something they can’t afford. They also associate with people like themselves and continuously seek knowledge.
They realize debt is a mortgage on their future 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 such a trade ends up being short lived and increases your debt obligations.
They understand the meaning of value 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?
They are 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.
They manage their credit cards 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 them. 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.
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?