Being debt-free is important for those who want to decide how their money is spend instead of giving the added income in the form of interest to banks and loan companies. Imagine how it would feel to be 100% free from all debt.
We hear messages and inspirational stories about not having debt…but in a society overrun with credit card debt and low-interest loans, is it really that important?
It’s easy to see the appeal of using credit to live the life of your dreams, but behind the facade of “Keeping Up With the Joneses,” there are so many drawbacks to debt.
Today I want to take a deep dive into why is being debt-free important and share 10 reasons that will help you feel good about your decision to be financially responsible.
Being debt-free gives you financial security
Financial Security is when you feel stable and safe in terms of your money. One major drawback of debt is that you are always thinking about where to get your next dollar from and who to pay it to first.
Becoming debt-free is a huge step towards financial security. It will allow you to move towards your money goals.
Financial security also frees up money for you to use on things that you want. Increasing your net worth at the same time.
From investing to putting money into your kids’ college funds, helping others, or taking amazing vacations, working towards financial freedom early on in your life sets you up to be financially successful in the long-term.
Having limited monthly expenses frees up money to do other things.
No debt means improved credit scores
Your credit score is a “grade” assigned to you based on how fast and reliably you have paid off loans in the past. If you have a high credit score, you will be more likely to get loans at great rates.
Your credit score affects your purchasing power for big purchases of “acceptable debt.”
The amount you pay over the life of a home mortgage or student loans can be drastically different depending on your interest rates.
The higher your credit score, the lower your interest rate as banks will see you as a “good” risk.
By working towards a debt-free life and improving your credit scores, you will have more and better options for large loans.
Not owing money gives you an increased ability to save and build wealth
Time is one of the best tools we have for acquiring wealth. The quicker you are done with debt payments, the faster you will be able to save money.
When you are in debt, the portion of your income that isn’t going towards your needs is promised to creditors.
When you become debt-free, you gain control over how that money is used! Your portfolio will be able to grow faster and you will earn even more money off of your investments.
You will have less stress when you are debt-free:
Studies have shown that people who are in debt tend to be more stressed and are generally more prone to mental health issues.
It’s no wonder. When you’re in debt there is a constant cloud of worry over all aspects of your life.
Every payday you have to figure out which bill to pay first, move money around to keep angry creditors at bay and try to manage all of your normal living costs.
When you can easily pay all of your bills, have cash in the bank to pay for things you need or want, and are building up financial security because you are debt-free, your financial stress levels will plummet.
It takes hard work to become debt free, but your mental and physical health will be vastly improved by a less stressful life.
When you are debt-free, you have finanical agility
Agility is the ability to move quickly and easily. When you have no debt, you gain financial agility…the ability to make sound financial decisions without hesitation.
Did you hear about a great stock to invest in? You can do it! Need to repair your car? You no longer have to juggle your debts to find money to take care of things.
Financial agility means that you can jump on opportunities to increase your wealth, rather than waiting or missing the opportunity altogether.. Since you are able to take advantage of more opportunitiesn you’ll be able to build more wealth.
For example, no car payment or other monthly payments will give you hundreds of dollars available if you need it.
Financial agility also means that you don’t have to go into debt when you have an unexpected expense.
When you are debt-free and financially agile, you can build up emergency savings accounts and sinking accounts to take care of surprise costs.
Financial agility is a huge asset for ensuring long-term financial prosperity.
Being debt-free sets a good example for your children
Kids will obviously benefit from parents who are less stressed about money, They will also gain lifelong skills from watching your example.
When children see you creating your budget, saving money towards big purchases, and working towards building wealth they will learn to do the same.
I think it is important to teach our kids from a young age about saving money and help them to feel the satisfaction that comes from working hard to accomplish a financial goal.
I think it is important NOT to saddle our kids with worry by sharing too much about our finances.
However, as parents can choose to openly communicate about how finances work.
By learning from your example, your kids will have a wonderful financial foundation ready for when they are earning their own money.
No debt allows you to pursue your hobbies
Do you want to travel more? Learn a new skill? Pick up an old hobby?
When you have all debt payments gone, you will have increased opportunities to pursue your hobbies.
Not only will you have more money available (since you aren’t using it to pay off debt), you’ll also potentially have more time to pursue interesting hobbies.
You won’t have to work that second job or side hustle because you’ll have all of the money you need to pay the bills along with some extra for savings and/or fun.
Pursuing debt payoff is a gateway to opportunity. With extra time and money on your hands, it is easy to bring your dreams to life.
You’ll be able to retire earlier if you are debt-free
Another perk of the debt-free lifestyle is the ability to retire earlier. If you are shackled to debt, you will have to keep working until the day you die.
However, if you work hard to pay off all money borrowed, it will free up extra money for you to build wealth which will help you to retire.
I talked earlier about how time is one of our greatest tools for being financially secure. The more quickly you become debt-free, the more money you will have available to invest and prepare for retirement.
When you are debt-free, you’ll be able to help others
Do you want to start a non-profit? Volunteer in your community? Help friends or family members who are struggling?
One of the most fulfilling aspects of living a debt-free life is having money available to help others when you want to.
We’ve all had an experience where we wanted to help someone who is having a hard time but were unable…imagine if you ALWAYS had some money budgeted for helping others?
You might want to do this in the form of a tithe or donation, or you can simply designate a portion of your budget to bless others when you see the opportunity.
I think being able to help others is truly one of the best aspects of living a financially free life.
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Your life will be more peaceful when you are debt-free
Take every emotion you feel when you are deeply in debt…anxiety, worry, sadness, regret, impatience, embarrassment…and imagine your life without these feelings.
Being free from owing money and financially responsible will help you feel peace and power.
In the journey to becoming debt-free, you will recognize that you have inner strength and courage that helped you endure through the hard times.
There is such peace that comes from being able to pay your bills, invest in your future and make financial goals. Living with all belongings paid off is worth all of the hard work it takes to get there.
What’s next?
Now that you know 10 reasons why it is important to be debt free, what is your next step?
As a financial coach, I am here to help!
Whether that means you look through my articles or set up an individualized coaching appointment with me, I will help you get through the overwhelm that occurs when you try to get out of debt.
I can look at your specific situation and give you actionable tips and ideas to use as you work towards becoming debt-free.
Final thoughts on why being debt free is important
Being in debt takes away your freedom. Instead of being in control of your hard earned income, you are a slave to your debt and creditors.
Being debt-free will give you financial security, improve your credit scores, increase your ability to grow wealth, and make your life less stressful.
It will allow you to be financially agile, set a good example for your children, allow you to pursue your hobbies and retire early, give you more opportunities to help others, and create peaceful and fulfilling debt-free lives.