10 Advantages of Living a Debt Free Life
Ever dream of waking up each morning and heading to a job you love. One that challenges your intellect, is meaningful to society, and gives you the opportunity to work with people you enjoy. Maybe your perfect world includes sleeping in and having your work day begin when you are ready, instead of when the alarm clock demands your attention. Maybe a debt free life will enable you to retire with financial security, travel the world, or spend more time with family. Whatever the goal, create a vision in your mind that will help motivate you to achieve the goal of paying off credit card and other consumer debt.
When you set a goal of living a debt free life, what does that look like? Having a picture in your mind, of what your life will be like when you are not saddled with $1,000 or more in credit card debt payments every month, can motivate you to reach your goal. This will increase the odds of success.
Financial freedom from debt may still include a mortgage or house payment because you must live somewhere. Even when your home is paid off there will be taxes, insurance and repair costs necessary to any budget. However, debt free living provides freedom from other forms of debt such as car payments, student loans and particularly high interest credit card payments.
Key Advantages of Living a Debt Free Life Include:
1) Reduction in the cost of living. Without payments on debt you will have fewer required monthly expenses. This provides more discretionary income for goods and services you want or the ability to put those funds into savings or investment accounts. A lower cost of living will also enable you to live on less when in retirement, giving you a fuller, richer life.
2) More control over your lifestyle. You have the ability to live simply and this requires less income. When you do not have to pay hundreds or even a thousand dollars or more each month towards debt payments, you have more control over how you live. Is $1,000 or more going to make minimum payments on credit card bills and possibly $500 or more towards car payments? What about student loans, are they still haunting you long after you have graduated? These costs can eat up all your discretionary income. Are you staying in a job you hate just to pay for the debt you are carrying?
Eliminating this debt will give you the freedom to work at a job you love, or retire without the high costs of debt eating up your retirement savings. Then you can choose to live large or frugally depending on your resources, giving you more control over your lifestyle.
3) Higher quality of life through reduced stress. Stress causes an array of health problems which cycles into more health problems, higher medical costs, leading to more stress, and around and around you go. Eliminating debt and reducing stress will help you live a healthier and happier life. While it is not the equivalent of living stress free, it will certainly eliminate the stress of how the bills will get paid, avoiding aggressive collection calls, and wondering constantly about how you will ever be able to retire.
4) More financial choices. No debt means everything you earn today can be used for the needs you have today and tomorrow, rather than paying for yesterday’s expenses. This in and of itself is very empowering. You will now be able to choose how much money you need for today’s wants and needs and how much can be set aside for future needs, rather than running out of money before the month is out.
5) Ability to save and invest. Instead of spending $1,000 or more on credit card payments and even more for other debt like vehicle payments or other loans, you will have the ability to set that money aside for retirement. Depending on your age, you might need to put 20% or more of your income away for future needs to make up for lost time. Imagine being able to add $1,000 to $2,000 a month towards your retirement. That’s $12,000 to $24,000 a year that will get you to retirement faster.
6) Ability to capitalize on investment opportunities. Often the best investment opportunities appear with a very short window of time. Whether it is a foreclosed house, an estate sale with rare collectibles being sold for a bargain, or a new technology IPO, you will now have funds available when an opportunity presents itself.
7) Better Financial Health. When bills are paid on time and you have a little money in the bank your finances can build each month. You will be able to take advantage of market gains and compound interest instead of always just using money to pay bills or make debt payments. Just like interest on credit card debt can become an avalanche, adding to investments and savings with each paycheck can create a positive avalanche resulting in a long term picture of good financial health.
8) Inner peace. Being debt free may not automatically result in a peaceful life, but it can eliminate the constant worry about how you will juggle your finances. What bills can you pay with this paycheck and which ones will have to wait for the next one? Which ones carry what fees and what bills will cost the least to pay late? This stress erases the ability to have inner peace and contentment with your life as a whole. Without debt you can reengage your inner peace.
9) Control over spending priorities. Imagine being able to decide where your money goes. With debt payments, there is often little or nothing left over when your paycheck arrives. No debt means that all those former payments are now “found money” available to you, and you get to decide where it goes.
10) Higher Level of financial security. Financial freedom, especially when you have struggled to pay off debt, will give you a sense of freedom and power. You have slain the dragon. This leads to a confidence that you will be able to meet future needs and set aside enough money for retirement and other financial needs down the road.
Living a debt free life will not guarantee that you will never have any money problems again. You will still have spending limits that are dictated by your income. You will still be required to live on a budget and create spending priorities based on your wants and needs.
The biggest advantages you gain from lack of debt are freedom and control. Control to choose where your money goes and the freedom to spend or invest based on what’s important to you. Regain your freedom and control over your finances by paying off debt and implementing financial practices that will prevent debt from accumulating again.