A debt-free life is an attractive prospect for many people. It gives you a safety net if something goes wrong, like losing your job or getting sick.
While society may tell you that you need a credit card to survive or that mortgage and car payment is average, debt-free people know better.
1. You Own What You Buy
There’s a lot of cookie-cutter advice on becoming debt free: Earn more money, cut up your cards, eat at home, and so on. This advice is not necessarily wrong, but it can miss the big picture regarding your finances. Instead, be realistic and calculate the actual totals of your debt and income. That’s how you get a clear view of your financial situation and plan for the future.
Using this strategy, you can prioritize your bad debt and pay off the lowest-interest loans first. Then you can save for things that will benefit you in the long run. For example, paying off your student loans or a car loan can make it easier to reach the point of financial independence, which is when you can retire comfortably or even stop working altogether.
In addition, it’s essential only to use debt for necessary things, or that will increase your overall standard of living in some way. That is why avoiding credit card debt and only purchasing items you can afford to pay for with cash or savings is an essential part of a debt-free lifestyle.
Lastly, having a hands-open attitude toward the world around you is much more fun. Being debt-free allows you to be generous with your money, whether supporting your local community or contributing to a fundraiser you believe in. Studies show that generosity is one of the most satisfying activities you can do with your money.
2. You Can Save More Money
One of the best things about living debt free is having more money left over at the end of each month. Instead of being tied to interest charges, you can direct more of your income towards financial goals and travel plans.
When you have fewer bills to pay each month, saving for big purchases like a new home or car becomes more accessible. It also gives you more flexibility to rework your budget and cut unnecessary expenses like avoiding coffee shop runs, shopping sprees, or online ordering from Amazon.
Becoming debt-free requires discipline, but it also helps if you have a support system in place to help keep you on track. Consider using a debt payoff calculator or debt snowball method to tally up your debts and create a plan to get them paid off as quickly as possible. You can also try visualizing your goal using debt payoff charts or creating a vision board to motivate you to stay on track.
Managing debt takes time and effort, but it is well worth the work in the long run. It improves your finances and quality of life, leading to healthier relationships at home and work. Being debt free can also improve your health by reducing stress, which has been linked to heart disease.
Debt can be an excellent tool for accomplishing big life goals, such as purchasing a home or college education, but it should never be used to live beyond your means or for frivolous spending. Make it a priority to become debt-free to reap all the benefits listed above.
3. You Don’t Have to Worry About Late Payment Fees
Debt is money that a borrower owes to another party, usually for the right to use something of value like a home or car. Most debt comes with a contract detailing repayment terms, including interest rates charged in exchange for borrowing the money. While debt can be a good thing in some cases, it’s essential only to take out loans you’re confident you can repay on time. Otherwise, you could end up paying a lot in late payment fees.
Getting out of debt means you won’t have to worry about the stress of juggling multiple bills each month. As a result, you may be able to live a more relaxing lifestyle, which can impact your overall happiness level. According to a 2014 study, people with less debt report higher happiness levels.
Being generous with others is also easier when your finances do not burden you. You’ll be able to lend money to family members or friends with financial problems and give back to your community. Whether by helping start a local charity fund or just buying coffee for a coworker, debt-free makes it easier to enjoy the rewards of generosity.
Some types of debt can help achieve significant milestones, such as homeownership and higher education. It’s essential only to use debt when it will benefit your long-term financial health and allow you to reach your goals. For example, mortgage debt helps you own a home that will increase in value over time and build equity, while student loans help you pursue a career that can potentially lead to increased earnings.
4. You Can Avoid Foreclosure
If you are in danger of losing your home, you may be able to avoid foreclosure if you contact your lender as soon as possible. They may have options to settle your debt, such as loan modification or a deed in lieu. Those alternatives can also improve your credit score more than a foreclosure sale that will stay on your report for seven years.
It is important to be debt free because it allows you to focus on more meaningful things. Being in debt can be very stressful and even affect your health in the long run. This can prevent you from focusing on your work, family, and other vital goals. Being debt-free can reduce stress and give you peace of mind to enjoy life.
Bad debt is money that doesn’t have a positive financial plan and is often used to buy something that will decrease in value. Credit card debt is an excellent example of bad debt because it has high-interest rates, fees, and penalties. It also doesn’t help you build any equity in your home or increase your income.
Good debt can be used to achieve financial goals like going to college or purchasing a home. However, it’s essential to understand how much you can afford before taking out any debt.
The best way to be debt free is to prioritize your savings and emergency fund. Once you’ve built up those funds, put the rest of your income toward paying off any outstanding debt. This will allow you to save more and feel more in control of your finances. For many Americans, becoming debt free is a goal that can be achieved with hard work and dedication.
5. You Can Lead by Example
Debt is typical for most people, but it is essential to understand that there is good and bad debt. Good debt allows you to purchase goods and services that increase your income or build wealth, such as a mortgage or student loan. Bad debt, such as credit card or payday loan debt, burdens you with interest payments that do nothing to help you build your income and often lead to a cycle of borrowing.
If you are debt free, you can show your family and friends how to manage money responsibly. You can also teach them to work toward becoming debt-free. You will also have more money to save for unexpected expenses, such as medical bills or car repairs. These savings can make the difference between having a comfortable retirement and needing to work into your golden years.
Being debt-free will also improve your relationships with your spouse, children, friends, and coworkers. People will be more likely to listen to your advice and be patient if they know you are working to become debt-free. Being free of debt will also improve your emotional state, making you more pleasant to be around and giving you more energy to spend on other hobbies, like playing tag with your kids or volunteering at a local charity.
It takes patience and discipline to achieve debt-free status, but it is worth the effort. The benefits of being debt-free far outweigh the risks. If you want to get on the path to being debt-free, consider a reputable debt relief program such as debt settlement or debt consolidation. Our federally regulated programs are a great way to get out of debt quickly and without stress.