Even though two people could have the same education, come from the same financial background and make the same amount of money, the difference in their financial picture could be night and day, depending on how they view money. One such instance is how people view debt. Some people think debt is the norm rather than the exception. Credit cards and other loans can put what you want within financial reach, but a life without debt is surely more rewarding?
The great thing is, when it comes to your money, no matter where you start, you get to decide where you go from here! Here are my three reasons you should aim for a debt-free life.
You have the freedom to work less
The more debt you have, the more you must work to keep up with monthly payments. Whether it’s a house payment, a car payment, or credit cards, debt holds your freedom hostage and keeps you stuck in a career or job you don’t like. Think of how great life could be if you had fewer bills. Rather than working a 40 or 50-hour week, you might get by working only 20 or 30 hours a week. With fewer financial pressures, you can quit a high-stress job and find satisfying work, although you might earn less.
You have increased security, less anxiety
Being debt-free makes the prospect of losing your home less likely, and it means that you don’t have to worry as much if you lose your job. If you do become unemployed, you’ll have the security to look for the ideal position rather than grabbing the first thing that comes along because you must pay off your debt. Living free-and-clear also means that you can leave a job that you don’t like without worrying about your finances. Pay down your debt and you’ll feel an immense relief at knowing that if something happens and your income becomes limited, you won’t have to worry about making debt payments.
You become the priority
People who are in debt generally carry a mentality of scarcity — the feeling or mindset of never having enough. And very often this causes people to avoid investing and continue spending, because they associate cashflow with a sense of temporariness. But if you think purposely about your money, and you tell it where to go before it’s even spent, then you can avoid this mentality altogether. You might have heard this saying from people who have been successful in their finances: pay yourself first. People who are debt-free make it a priority above anything else!
To pay yourself first means simply this: Before you pay your bills, before you buy groceries, before you do anything else, set aside a portion of your income to invest. The first bill you pay each month should be to yourself.
This habit, developed early, can help you build tremendous wealth.
When you pay yourself first, you’re mentally establishing investing as a priority. You’re telling yourself that you are more important than the electricity bill or the landlord. Building an investment asset is a powerful motivator — it’s empowering. It gives you power over your life and time, especially looking at when you can as oppose to should retire.
Even if you know the importance of early retirement planning, debt can limit how much you stash for the future. Eliminating needless debt and reducing monthly expenses frees up disposable cash, allowing you to grow your retirement account faster. A sizeable account might be the difference between working into your 60s and retiring young while you’re still healthy and energetic.