At a Glance

Picture it now:&You’re fully vaccinated and may or may not need a booster before 2022.&You’ve done a bunch of work on yourself and are&reentering society a better person than you were when you last&set foot in your office in 2020.&You’re fortunate to have kept your job, and you&saved more than you thought you would.&And on top of that, you&paid off your debt.

But now that you’ve reached the goal of&becoming debt-free, you need to learn how to maintain a debt-free lifestyle.

  • Living a debt-free lifestyle takes work
  • 5 tips for living a debt-free lifestyle

What does it take to live a debt-free lifestyle?

Savings and cash flow

If you can’t afford an emergency medical bill or car repair without using credit, you’re probably not in a position to live a debt-free lifestyle just yet. But that doesn’t mean you can’t get there.

Ideally, you’ll want to save anywhere from three- to six-months’ worth of living expenses so if you get hit with an unexpected bill or lose your job, you’ll be able to manage for some time without having to restart the debt cycle.

Positive cash flow also is key to maintaining a debt-free life and can be achieved in one of two ways: through increased income or decreased expenses. Earning more than you spend can prevent you from falling back into debt.

Mindfulness and a tracking system

People who live a debt-free lifestyle can tell you where every dollar goes. They’re good at tracking what comes in and what goes out with a monthly budget (more on that later).


You or someone you know has probably managed to lose a significant amount of weight through a fad diet but only managed to keep the weight off for a few months before packing the pounds back on.

Getting out of debt (and back into it) can follow a similar cycle. Becoming debt-free for a few months doesn’t mean you’re living a debt-free lifestyle. That takes longevity. And to get there, you have to do some introspection on how you were able to become debt-free and what habits you need to adopt long-term to stay debt-free.

You might decide that living a completely debt-free life doesn’t align with your values. Maybe you want to own a home but realize you won’t be able to afford a house with cash anytime soon. You could adapt your goal to something more realistic like living a debt-free lifestyle, except for your mortgage. (Your mortgage could be good debt anyway, since homes usually appreciate in value over time. Again, think long-term!)

Small incentives along the way

Eliminating your debt can be a grueling process. Becoming debt-free probably isn’t worthwhile if it’s going to make you miserable in other ways. Reward yourself for small victories along the way. Hit a savings goal? Treat yourself to a nice bottle of wine. Just don’t make it a Pavlovian thing.

Want to live a debt-free lifestyle? Do these 5 things

Create a budget and stick to it

If you’ve reached the debt-free goal, you probably already have a budget and have stuck to it so far, so this probably isn’t anything new. The ‘sticking to it’ part is crucial, though. Find what works best for you, whether it’s the envelope system, 50/30/20 rule, the zero-based budget, or something else entirely. Don’t overthink it. Your budget can be a handwritten document or drawn-out spreadsheet. You can use an app like Mint or PocketGuard to nudge you to stay on track.

Pay off your credit cards on time and in full

Living a debt-free lifestyle doesn’t necessarily mean eliminating your credit card usage, though that is an option. Instead, you can keep your credit cards, but treat them more like a debit card. With a debit card, you wouldn’t spend more than you have in your account. If you think about your credit cards that way—only swiping when you can really afford what you’re purchasing—then you can pay off your credit card bills on time and in full, simultaneously avoiding interest and late fees and accruing debt.

Avoid buying things you don’t need

This is a tough one for impulse buyers and overspenders, but if you’re going to reach the debt-free mark, you need to prioritize your needs above all else (which, frankly, you should be doing anyway). This means you should limit unnecessary and superfluous purchases.

According to a recent Slickdeals/OnePoll survey of 2,000 American shoppers, the average American will make one impulse purchase a month with an average cost of $276.1 That’s $3,312/year. While impulse purchases might give you a slight mental boost, it’s only a temporary high. Remind yourself of that when you’re tempted to buy something you don’t need.

Get into investing

This may seem counterintuitive but if you want to continue living a debt-free lifestyle, it’s important to build your wealth. Generally, you don’t want to prioritize one over the other, but instead you want to pay down debt while you invest. Once you’ve paid off your debt, though, you can reallocate the funds you were using to repay debt toward investments—whether that’s your retirement fund, the stock market, or cryptocurrency.

Make sure you have a good insurance policy

Like building a safety net with your savings, having a good insurance policy also can help prevent you from spiraling into debt when faced with an emergency.

To manage risk, you might consider taking out a better auto insurance policy so you’re well protected in case of an accident, or maybe you’ll finally bite the bullet and pay for renters’ insurance in case your place floods. But if you’re going to skimp somewhere, make sure it’s not medical insurance.

According to the Survey of Income and Program Participation from the U.S. Census, nearly 1-in-5 households had medical debt in 2017 with a median of $2,000 owed.2 If only we had universal healthcare. You can’t be too prepared for the next global pandemic, right?