If you’re like most people, debt probably seems inevitable. It’s something that will always weigh you down. You just have to live with it. Here’s the question: Is that really true? Do you have to live with debt? No, you don’t. You just need a strong enough reason to get out of debt. Here are seven of the most important ones.
1. More Disposable Income
Being out of debt means that you keep more of your money each month. This is money you can put toward retirement, family vacations and fun nights out with your family.
However, having more disposable income also means that you have money to save, not just for retirement, but for an emergency fund. Having a fully-funded emergency fund actually allows you to stay out of debt because you have the money you need to pay for emergencies out of pocket instead of putting them on a credit card.
2. Financial Security
Your financial security comes into question when you have an enormous amount of debt. For example, if you lost your job and couldn’t find another one for months, would your debts eat up your savings? Here’s a related question. Do you pay so much on your debt that you have no savings? Neither scenario equals financial security for you.
Obtaining financial security is probably the primary reason why people seek out financial advice Geelong. Many of us didn’t grow up learning how to take care of our money in order to create financial security for ourselves.
3. Increase Your Credit Score
Paying down your debt raises your credit score in a couple of ways. First, it shows that you have been faithful in making your payments. Second, it reduces your debt-to-income ratio. This shows potential creditors that your debts haven’t gotten out of control and that you can handle the new credit that’s been given to you.
4. Earlier Retirement
When you don’t need to use your money to pay down your debt, you can use it to increase your retirement savings. If you’re aggressive enough, you can even retire early.
However, even if you decide not to retire early, you might still want to be aggressive about paying down your debt. People are living longer today, which means that the money they do save for retirement might not be enough. Having to pay down debt means you have less time and money to put toward your retirement accounts.
5. Guilt-Free Spending
Often, when you have too much debt, even a small splurge, like coffee with a friend can feel like a lot. If you owe no one money, you don’t have to feel guilty that your money isn’t going toward your debt.
6. Less Stress
Having serious financial worries can keep you awake at night. Wondering where the money is going to come from to pay your current bill du jour creates “squirrel-cage thinking.” That is your thoughts keep spinning and spinning and spinning on the imaginary wheel in your head. The wheel spins because you’re trying to puzzle out where you’re going to get more money. However, you have no clue where it’s going to come from. This is very stressful.
7. Better Relationships
Money has the potential to cause a lot of conflict in relationships, especially close ones, like marriage. Money problems are also one of the leading causes of divorce.
It stands to reason. When a couple is deeply in debt, they run the risk of not being able to pay their bills, including important ones, like their mortgage or car payments. The results that go along with missed payments like these include losing a car or losing a place to live. In other words, debt brings a real feeling of insecurity and often fights into a relationship.
There are so many reasons for you to finish your debts sooner rather than later. Being debt-free frees up your disposable income for other things, like savings, investments, a child’s education and even fun.
There are other benefits, too. Your health will improve because your stress levels improve. Your relationships will also improve. Getting out of debt means that you and your significant other don’t need to fight about paying down your debts, and given that money problems are some of the chief causes of divorce, getting out of debt is one way to keep the divorce lawyers away.