Being debt-free is essential for those who want to decide how their money is spent 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 dive deep into why debt-free is important and share 10 reasons to 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 about your money. One major drawback of debt is that you always think about where to get your next dollar from and who to pay it to first.
Becoming debt-free is a significant thing you can do toward becoming financially secure. It will allow you to move towards your money goals and better control your spending habits. You can even build an emergency fund for those unexpected expenses.
Financial security also frees up money to use for things 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. With a high credit score, you will be more likely to get auto or personal finance loans at great rates or easily get new credit cards.
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 loan 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 can save money. This can be on anything from car loans to medical bills. Any outstanding debts look better with zero balance!
When you are in debt, the portion of your income that isn’t going towards your needs is promised to creditors. The best way to get free from this is to improve your financial situation.
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 from 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 constant worry over all aspects of your life.
Every payday, you must figure out which bill to pay first, move money around to keep angry creditors at bay, and try to manage 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 build up financial security because you are debt-free, your financial stress levels will plummet.
It takes hard work to become debt-free, but a less stressful life will vastly improve your mental and physical health.
When you are debt-free, you have financial 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.
Have you heard 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 you can jump on opportunities to increase your wealth rather than waiting or missing the opportunity altogether. Since you can take advantage of more opportunities, 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 needed.
Financial agility also means you don’t have to go into debt when you have an unexpected expense.
When 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 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 essential to teach our kids from a young age about saving money and help them feel the satisfaction of working hard to accomplish a financial goal.
I think it is crucial NOT to saddle our kids with worry by sharing too much about our finances.
However, parents can choose to openly communicate about how finances work.
By learning from your example, your kids will have an excellent financial foundation ready to earn 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?
You will have increased opportunities to pursue your hobbies when all debt payments are gone.
You will have more money available (since you aren’t using it to pay off debt) and potentially have more time to pursue exciting hobbies.
You won’t have to work that second job or side hustle because you’ll have all the money you need to pay the bills and some extra for savings and fun.
Pursuing debt payoff is a gateway to opportunity. With extra time and money, bringing your dreams to life is easy.
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 the money borrowed, it will free up extra money to build wealth, which will help you 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 to….imagine if you ALWAYS had some money budgeted for helping others?
You might want to do this as a tithe or donation, or you can 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.
Your life will be more peaceful when you are debt-free
Take every emotion you feel when 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 the inner strength and courage that helped you endure through the hard times.
Such peace comes from paying your bills, investing in your future, and making financial goals. Living with all belongings paid off is worth all the hard work it takes to get there.
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 overwhelming feeling 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. Your finances are defined by how much debt you have.
Debt-free living will give you financial security, improve your credit scores, increase your ability to grow wealth and make your life less stressful. You won’t be constantly tied to those minimum payments on credit card balances or payments on student loan debt. You’ll even have fewer bills coming through the door!
It will allow you to be financially agile, set a good example for your children, pursue your hobbies and retire early, give you more opportunities to help others, and create peaceful, fulfilling, debt-free lives.