What is it Like to Be Debt-Free?

Working toward a debt-free life takes time, patience, and self-discipline. But once you reach your goal, the payoff is worth it.

Living without debt has many benefits, such as less stress and a healthier lifestyle. You can also save money for things like vacations or home repairs. Plus, funding your dreams becomes more accessible without the burden of debt payments.

1. Less Stress

The process of paying off debt takes years, and it requires constant discipline and focus to stay on track. However, when that debt comes off your balance sheet, you’ll have more money to spend, save or invest, and your life will change significantly.

You’ll have less stress, which can improve your physical health, mental well-being, and emotional stability. It can also help you sleep better and have a more positive outlook.

Financial problems and the stress associated with debt can lead to an increased risk of heart disease, diabetes, gastrointestinal problems, headaches or migraines, depression or anxiety, and more. Debt also contributes to a higher rate of relationship conflicts and financial hardship, which can negatively affect family and friends. Being debt-free can improve your relationships and allow you to focus on what matters most.

Becoming debt-free will allow you to build a better life for yourself and your family. For example, you might be able to quit your job and become a stay-at-home mom or dad or go back to school to finish your degree. Or you might choose to retire at a younger age than expected so that you can enjoy the fruits of your labors for the rest of your life.

While the goal of becoming debt-free is noble, you should also consider your lifestyle once it’s achieved and how that fits with your budget, goals, and values. Debt can still be helpful, even for short-term purposes like financing a wedding or home remodel, but it’s essential to understand the actual cost of borrowing and keep the rewards in mind.

Many people believe debt-free includes having no mortgage or car payments, but that’s not necessarily the case, says Sanborn Lawrence. While it’s best to avoid credit card and student loan debt, she says a mortgage is technically an investment that can potentially grow in value over time, so having some debt can be more beneficial than none. That’s especially true if the interest rates are low, as they are now.

2. More Time

Debt often leads to a lifestyle that prioritizes living paycheck-to-paycheck and sacrificing the pleasures of life. Many people end up missing out on vacations, the ability to pursue hobbies or a dream career, and other experiences that make life worthwhile. Getting rid of debt can open up your budget so that you have more money and time for these things.

The goal of becoming debt-free requires self-discipline and determination. The process can take years, but the payoff is big – less stress and more money in your pocket. For many people, that means having more time to enjoy the things they love most, and it may also mean spending more quality time with friends and family.

One of the most common reasons people get out of debt is to afford the lifestyle they want. When debt-free, you’ll likely have more funds to save for exciting long-term goals like retirement or a new home. This might also allow you to quit your job or start a business.

Being debt-free can even allow you to finance some of your dreams in cash. If you’re paying interest on your mortgage, car loan, or student loans, those expenses will eat into your income and make it difficult to accomplish other financial goals. Once you’re debt-free, however, it’s easy to put aside money for these types of expenses and to purchase a home, car, or other items you desire.

Depending on your debt type, it may make sense to pay it off as quickly as possible to minimize the cost of interest and fees. But, it’s essential to consider the bigger picture and run numbers before rushing to be debt-free, advises Rachel Sanborn Lawrence, advisory services director and certified financial planner at Ellevest. If the interest rate on your mortgage is low, for example, it might be better to invest your extra cash and let it grow in the stock market rather than aggressively pay down your home loan. As a result, you could reach your financial goals faster and be able to retire early or help your kids pay for college earlier than planned.

3. Better Health

Financial stress impacts your mental health and can lead to many physical problems. Those problems include high blood pressure, heart disease, weight gain, digestive issues, and headaches. Being debt-free can help alleviate those issues. In addition, the emotional stress of dealing with debt can strain relationships and cause isolation if you’re constantly thinking about your bills and whether or not you’ll be able to pay your debts. Being debt free can improve your overall health and make you happier.

While many people may think that only older Americans experience debt-related stress, the truth is that all ages have to deal with it to some degree. From millennials who start adulthood with student loan debt to baby boomers who have to consider retirement and long-term care expenses, Americans of every age struggle with debt.

The average American has four credit cards and owes around $6,200 in credit card debt. That includes mortgages, car loans, medical debt, and other responsibilities. This type of debt can feel insurmountable, especially during a pandemic when money worries are heightened. Fortunately, getting out of debt is possible and can be done at any age.

Debt is relentlessly egalitarian and can afflict anyone. It doesn’t matter if you’re white, black, or Hispanic; it doesn’t matter your age or education level. Those with more money typically have an easier time managing their finances, but debt can still be burdensome for anyone.

There’s a reason why financial hardship is often cited as a reason for divorce and other relationship issues. Financial troubles can also increase depression, which can have severe consequences for your overall health. Those who are struggling with anxiety disorders or depression find that debt can be a significant trigger and make their symptoms worse. Debt can also make sleeping harder, which has been linked to decreased health outcomes.

Being debt-free can eliminate all these struggles and allow you to focus on work, family, and friends. You’ll be able to save some of your income for fun, fund your dreams and take up a hobby. You can even use some of the money you would have been paying toward your debt to give back to those in need. Research shows that giving to others is one of the most rewarding things you can do.

4. More Money

Becoming debt-free can open the door to more money in your bank account. This extra cash can be used to achieve your financial goals, like paying off credit cards or saving for a new home or car. It can also be used to build an emergency fund, a crucial step toward being financially independent.

It’s also easier to save for those fun things you want but can’t afford right now. Whether it’s a 20th wedding anniversary trip with your spouse or an exciting new hobby, debt-free gives you the power to finance those dreams with cash instead of borrowing money that could have been spent on something else.

The road to becoming debt-free can be long, but it’s well worth it for many people. Being debt-free is a feeling of freedom that lifts a huge weight off your shoulders. It allows you to focus more on your work, family, and hobbies without worrying about how you’ll pay the bills.

Living with debt is not healthy for your mental health. Debt can cause anxiety, negatively impact your mood, and even lead to substance abuse. According to Psychology Today, people who struggle with debt tend to use more substances and spend more money than those without debt. These habits can have lasting effects on your quality of life and create a vicious cycle where it’s hard to break out of.

Being debt-free can also give you more room in your budget to donate to charity. Research shows that giving is the most rewarding way to spend your money. It’s fun to help friends, family, and a cause you believe in, and it feels good knowing that your money is making a difference. Being debt-free means keeping your hands open and being generous with your money in significant ways (like starting a community fund close to your heart) or small ones, like contributing to a friend’s fundraiser on Facebook. Giving makes you feel good, both physically and emotionally. The key is to make it a priority.