What does it mean to be debt-free? Obviously if someone has no debt then they are debt-free right? Yes, but it is actually a bit more complicated than that.

Debt and credit are parts of modern life. Simply looking at whether or not you owe anyone any money presents a very inaccurate picture of your debt situation. For example, an individual who spends $1000 on a credit card each month, pays off the balance each month and has $10,000 sitting in an emergency fund is in a much better debt situation than someone without a credit card who has no idea how they are going to pay for their next meal much less the rent.

Small amounts of debt managed correctly can bring significant convenience in record keeping capabilities to your financial life.

Being primarily debt-free does have some drawbacks. The average consumer in the United States spends significantly more than they make. To keep up with your peers, you will have to either make more money or follow them down the path of high consumer debt. Being debt-free means driving an older but paid for car than your friends. It may mean keeping an older TV or sticking with the last generation of DVD player for a few years longer than the people around you.

On the other hand there are significant advantages to being debt free. Being debt-free allows you to take risks in life that you simply couldn't take being burdened by debt. It is easier to start a new career, launch your own business or take a lower paying more enjoyable job if you aren't saddled with debt. When you are one paycheck from bankruptcy it is much easier to live by your principles.

This is really about a mindset. It involves financial discipline in planning. It involves being strong against peer pressure and consumerism. It's easy to make decisions based on what we see our friends doing. The debt-free mindset involves going beyond that and making good decisions based on long-term benefit.

The first step is to control your spending. Without good financial discipline it is going to be impossible to move away from consumer credit. Good financial discipline me not buying some stuff even if you think you might be able to afford it. It means focusing your financial resources on fewer things. It means spending time defining your priorities so your money is spent on what you truly feel is important.

The debt-free journey is a lifelong adventure. It is about saving money -- not by having less -- but by enjoying what we have more.

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