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Debt is an ugly, little four-letter word. It is easy to get into, hard to get out of and it can make your life utterly miserable.
In a world that touts a “Buy Now, Pay Later” philosophy, it can be difficult to imagine life without debt. But being debt free is absolutely freeing – and that is just one of the many benefits of being debt free.
Imagine a Debt Free Lifestyle
Being debt free is awesome – but I only know this because I was able to rid myself of a substantial amount of debt!
Even though I pride myself on being frugal by nature, in my mid-20s, I had racked up a pile of debt. It wasn’t crippling, but it was heavy enough. I squirmed uncomfortably under the weight of student loans, a car loan and credit card debt.
I had a good job and an affordable place to live, so making the payments wasn’t the problem. The problem was that I was living beyond my means and being in debt made me subservient. I was under someone else’s thumb – the thumb of my creditors. My debt was a dark cloud – and it wasn’t going to go away on its own.
I challenged myself to imagine a lifestyle of being debt free. I thought about what I could do with my future if I wasn’t paying for my past. It was eye-opening and enlightening. I made a pact with myself to become debt free by the time I was 30.
Being Debt Free by 30
With focus and effort – and a heaping dose of self-discipline – I executed my pay off plan.
Two months after my 30th birthday, I wrote my final college loan check, the last of my remining debt. It was a monumental moment – and I immediately felt the relief of being debt free. In fact, becoming debt free was a pivotal moment for my personal finances.
Debt Free FAQs
Before we jump into my list of the advantages of being debt free, let’s cover some frequently asked questions about debt.
Is Being Debt Free Good?
Yes, yes, YES! Yes, it is good to be debt free – especially free of credit card debt! Some people even say that being debt free is the new rich.
Are There Disadvantages of Being Debt Free?
I am a big believer that there are pros and cons to everything…except when it comes to debt. In my opinion, there is no advantage to carrying debt.
There are some people that tout the disadvantages of being debt-free, but I think their arguments are weak. The benefits of debt free living clearly outweigh carrying debt.
Is It Okay To Be Debt-Free except a Mortgage?
Not all debt is equal; there are some debts that are considered to be ‘good debt’ – like a home loan (as long as you are purchasing a home that is within your means and have a plan to make your debt payments).
While I do believe there are immense advantages to becoming debt free, it is certainly okay to take on debt to invest in your future, like buying a home or taking on reasonable debt to attend college.
Start by asking yourself, “What would a debt-free future look like?” and go from there!
Why Be Debt Free?
There is no doubt that there are numerous benefits to debt free living – from healthy finances to better mental health. Being debt free can have an incredibly positive impact on your life.
8 BENEFITS OF BEING DEBT FREE
Drawing on my first-hand experience, I’m detailing my top benefits of becoming debt free. Stay tuned until the end of the blog post, where I highlight tips for how to eliminate debt!
#1 Less Stress
Debt is stressful; it can affect your mental, emotional and physical well-being. Headaches, ulcers and heart issues can all stem from stress caused by debt. In fact, debt can cause so much stress that it can lead to a medical condition called, Debt Stress Syndrome.
Therefore, one of the greatest benefits of being debt free is a serious reduction in stress levels. Without debt, you can ultimately live a healthier life.
#2 More Control of Your Money
When you owe money to a bank or credit card, they demand that they get paid first. And they should; you borrowed money and you need to pay it back!
When you live without debt, on the other hand, you get to control your money and where you spend it – or how you save it!
Living without debt puts you in complete control of your own money.
#3 Less Hassle
One of the other advantages of living a debt free life is that you will experience less hassle. Life is just simpler without juggling multiple minimum payments.
Once you pay off your debt, you will be relieved of the juggling act of satisfying debtors – like keeping up with multiple bills, making sure there is enough money in your checking account to cover the varying amounts and verifying that payments were received on time.
#4 More Money To Spend
One of the worst things about debt is the interest that is accrued and added to your running total.
When you are debt free, however, the amount you pay at the cash register is the actual price you pay…not the price plus interest.
One of the pros of being debt free is that you will no longer waste your hard-earned money on interest payments – and, therefore, you will have more money to spend on other things.
#5 Less Risk
Another one of the benefits of paying off debt is that it eliminates your risk.
Any time you put something on credit, you risk not being able to pay it back. A life change – like a job loss or large, unexpected expense – can put you in the danger zone of not being able to repay your debts. Not paying debtors on time can lead to a lower credit score…or much bigger financial problems.
#6 More Financial Security
One of the top advantages of being debt free is that you obtain more financial security – and who doesn’t want that?!
When you live a life without debt, you can start saving more money. With a solid emergency fund and money in the bank, life events – like losing a job or expanding your family – are a lot less scary.
#7 Actual Ownership
When you purchase things on credit, you don’t technically own them until you pay the creditor what they are due. For example, your car lender holds the title of your vehicle until you make your final payment; that car isn’t really yours until that happens.
One of the biggest benefits of living debt free is the knowledge that you own what you buy. It is yours, free and clear – and that is an incredible feeling!
#8 More Freedom
Pay off your debt and let freedom ring! Living a life without debt is not only freeing, but it is empowering!
When you are not held down by debt, you are freer to make life decisions. Once you attain and maintain financial independence, you can spend and save money as you please.
Trust me, it is so much easier to relocate, go back to school, plan an epic vacation or retire early if you aren’t drowning in debt. Being debt free is also a great time to start a sinking fund for upcoming expenditures.
How To Get Out of Debt
For many people, it’s not a question of ‘Why get out of debt?’ but rather ‘How to pay off debt?’. While I am not a financial advisor, I do have a few tips for getting out of debt that might help you get started in the right direction toward a debt free life.
Set a Goal and Create a Budget
The reason creating a budget is one of the best ways to get out of debt is that you can see and dictate what money is spent where.
Pay Off Debt with the Snowball Method
The Snowball method is touted by finance guru Dave Ramsey in his Total Money Makeover book as the best way to get rid of debt. With the Snowball method, you stay motivated and gain momentum while paying off your debtors.
How it works is that you start by paying off your smallest debt first (while making minimum payments on the remaining bills). Once the smallest bill is paid in full, you add the amount you were paying on the first bill to the next smallest bill. Once that bill is paid off, you put all the money on the next bill and so on – until you finally pay off your largest bill.
Using the Snowball method, you get to celebrate the small successes – paying off each bill – plus you start paying off subsequent bills even faster.
Debt Avalanche Method
Other people believe the best way to get out of debt is with the Avalanche Method. This way of paying off debt is helpful for people who have several debts with high interest rates.
To pay off bills using this method, debtors prioritize paying off bills by focusing on the bill with the largest interest rate first (while maintaining minimum payments on all other bills). By paying the highest interest rate bills first, you can quickly cut the amount you owe in total.
Snowflake Your Debt with Savings Games
Snowflaking your debt can be used in conjunction with both previously discussed methods. To Snowflake your debt, you put any extra money – like garage sale funds, birthday money or side gig income – toward paying off your debt.
These smaller payments are essentially taking baby steps to becoming debt free. While it is worthwhile to dedicate any extra money – no matter how small – toward debt repayment, Snowflaking is best done alongside a more motivated and focused method for eliminating debt.
Need ideas for small savings? Use the tips in my blog post, Savings Games.
If you have tried different methods of how to eliminate debts on your own but are still struggling, then you might want to consider consolidating your debt.
Ideally, you could consolidate your debt onto a 0% intro rate credit card, but if that option is not available to you, there are companies that offer debt consolidation, as well as apps (like Tally).
One of the biggest benefits of consolidating debt is that you can merge multiple bills into one streamlined payment. Other reasons to consolidate debt are to get a better interest rate and the ability to pay off debt even faster.
Debt Free Charts
If you want to be debt free and need some encouragement and motivation, consider creating a vision board or using debt free charts.
Debt Pay Off Charts are a visual representation of your pay off goal. They also serve as little personal cheerleaders, encouraging you to stick to it and cross the finish line.
You can make your own chart – or use the Payoff Printables from my collection. In my Payoff Bundle, I include a Debt Free Chart for credit cards, car loans and student loans. You can find all of my Printables on my Shop page!
Being Frugal to Pay Off Debt
The best way to become debt free – and stay debt free – is to be more frugal. You don’t necessarily need to become extremely frugal, but learning a few frugal hacks and figuring out how to be frugal with food can help you pay off debt more quickly.
Debt Free, Now What?
Once you have accomplished paying off your debt, first, take a moment and let it sink in. How does it feel to be debt free? Pretty amazing, right? Now, hang on to that feeling by making better financial decisions with your money going forward.
Stay Out of Debt
The most important thing to do once you are debt free is to stay debt free! Avoiding debt can be difficult for many people, so be aware of your strengths and weaknesses and come up with a plan that will ensure you continue living a debt free life.
Getting organized with your finances – and staying organized – is a good first step.
Debt Free Future: With or Without Credit Cards
One of the biggest questions you might have once you attain a No Debt lifestyle is whether to cut up or keep your credit cards.
I personally still use a credit card for the security and rewards – but I pay it off in full each month. Plus, by using a credit card – and paying it off each month – you can get a higher credit score.
On the other hand, you don’t want to become debt free only to turn around and rack up another credit card bill. If you find that the temptation to spend is too great with access to a credit card, then it might be best to ditch credit cards altogether.
If you struggle with spending too much money when using credit cards, I recommend tracking your expenses. Literally keep a diary of every single purchase you make – whether using cash or credit card – and tally up the amounts each day. This method an help ensure that you don’t overspend and have enough cash at the end of the month to pay your credit card bill in full.
It is up to you to figure out what works best for your finances.
Stash Your Cash
After you become debt free, you will find that you have a surplus of cash. Instead of blowing it, determine how and where you want to stash your cash and be sure to Track Your Savings!
If you don’t already have an emergency fund, now is the time to start one! (Seriously, everyone should have an emergency fund!) With no-debt living, you can also start a Sinking Fund or consider a Buy and Hold investment strategy. Whatever you decide, make a solid plan on how you would like to save and spend your money.
Now, go enjoy your debt free life!
Interested in more of my Budget and Goal Tips? I round them all up on the Budget blog page!
We Want To Know: What are your personal benefits of being debt free? Tell us how it feels to be debt free in the comments below!
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