Debt-free living is a way of life that can make you happier, healthier, and more successful. It's also the best way to ensure your future financial security.
While debt isn't all bad, in that it can be used in some circumstances to help grow an individual or family business, debt should not be used as a tool for making purchases when they are beyond what one can afford without debt financing. A debt-free lifestyle is possible with careful planning, discipline, and creativity.
If not handled properly, debt can quickly become a problem. The danger of not knowing how to live debt-free can be a life of debt servitude, which is a trap many individuals have fallen into.
This blog will provide debt relief tips and debt management advice that can help you get out of debt quickly and maintain a debt-free lifestyle. You'll also get a sound understanding of how credit unions can help you manage debt and identify debt relief options.
What Is Debt and Why Does It Matter?
Debt is a word that's tossed around a lot, and it seems to have taken on a whole new meaning.
According to the Federal Reserve Bank of St. Louis, because so many individuals are in debt, the implication of being in debt makes one feel wealthier. People refer to this increase in wealth as the debt currency.
And, rightfully so. When you owe someone else an expensive sum of money, it usually means you're in the red financially. This "in the red" syndrome can make your life difficult no matter how successful you are with other areas like relationships or career satisfaction.
Debt can be like cuffs that keep your feet or hands to the ground, making it hard to paddle out into what used to be clear open water. Suddenly there's all this weight pulling back at your fingers and toes.
Debt matters because living without it is one of the most sure-fire ways to build wealth.
Debt, on the other hand, is not inherently bad. It simply takes on a different color depending on your purpose. If you think about it as a tool that can be used to build a business, then the debt will be the fuel.
It's when debt is used for something like paying for college or buying a house that debt can feel overwhelming.
The Cost of Debt
The disadvantages of debt are diverse and depend on the person's life situation.
- It adds stress - Debt is something that many people associate with an increase in stress levels. It also means that there will be less money available to spend on things like home repairs, medical expenses, college tuition, vacations, food, and other essentials.
- It makes it difficult to build an emergency fund - Too much debt can leave you without a buffer for emergencies and the perception of being at greater financial risk. The more debt someone has, the less control they have over their financial situation too.
- It interferes with carrier and relationships - Interferes with High debt levels can be a psychological burden that might interfere with career or personal relationships. It presents an obstacle that must be negotiated to get what you want.
It doesn't need to be this way. If handled properly, short-term or even long-term debt can be used to reach one's goals quicker than otherwise thought possible.
Debt should be seen as a means to an end, not an end in itself. Debt has the potential to improve someone's standard of living, comfort level, and provide a better quality of life. The debt payoff process should be thought of as an investment in your future, but you have to have a plan in place.
How To Get Out of Debt and Rebuild Your Credit
In order to get out of debt, it's essential to understand what got you into debt in the first place. Debts can be paid off in various ways, but the debt payoff process should be carefully planned.
The following are five strategies for how people have done this:
- Pay more than what you owe - Pay a little more than what's due each month, even if it's only 10% over or even 5%. It will save you money in interest if you make a more significant payment than the minimum.
- Try the Debt Snowball Strategy - This is done by ticking off payments from your debts in order, starting with the smallest and working up until they're completely paid off. Now you can start snowballing your payments. All the money you were using to pay off your first small debt is now available to pay off your next smallest debt. Each time you pay off a loan, you free up more of your regular income to pay extra on your next smallest debt.
- Get a debt management plan - A debt repayment program can get you out of debt faster than you thought possible by negotiating with creditors to lower interest rates and monthly payments or debt consolidation.
- Dedicate windfall to debt - A windfall might come from an inheritance, a lawsuit settlement, a property sale, an income boost, or even a winning lottery ticket. Use these funds towards settling balances instead of spending them on things you don't need.
- Live within your means - This means that your monthly expenses are less than or equal to your monthly income. It's easier said than done for many, but when debt repayments are factored in, it makes sense to live within your budget.
Your credit score improves when you pay off your debt on time. Your debt payoff process will have a lasting impact on your credit score.
It's important to keep paying bills until your debt is paid in full and the debt is removed from your credit history.
Moreover, credit builder loans are an excellent alternative if you want to improve your credit score without taking on more debt. When you get a Certificate of Deposit loan, the bank puts the money in a separate account for you.
Like a typical loan, you make monthly payments, but you can't access the money until the CD is fully matured. After that, you'll get all of your money back, plus any CD interest. You may build credit in the process while also saving money.
Getting out of debt is not impossible. It does take effort and dedication. Debt payoff can be achieved by making responsible financial decisions that will benefit you in the long term.
Benefits That Come From Living Without Debt
Not having debt has a lot of benefits. For those who are looking for a more fulfilling lifestyle, living debt-free is the way to go.
Imagine yourself not thinking about debt on a daily basis. You don't have debt collectors calling you and debt payments hanging over your head every month.
With all this in mind, we've compiled a list of benefits debt-free living can bring you, with the hope that some of our readers will feel there is more to life than debt and make debt-free living a choice!
Financial Benefits
- More spare cash - Debt payments can take away at least 30% of your monthly income. This means debt-free living will give you more cash to spend on things you think are important for you and your loved ones.
- Early retirement - Investing the additional money saved by paying off debt is another option. Putting more money into your retirement accounts now could spell the difference between retiring at 65 and working into your golden years.
- Reduced risk - One of the worst aspects of debt is the risk it introduces. Anyone in debt with no emergency funds is always one financial blow away from tragedy. Debt-free living allows your budget to breathe, preventing a single unlucky incident from wrecking your financial and personal life.
- Improving your credit score - Being debt-free and having few accounts paid in full every month will reflect in your FICO score. This means debt-free living allows you to take control of your debt and improve your credit score.
- Greater employment prospects - Debt might also hinder your career. Money worries might keep you awake at night, making you less productive the next day. The issue gets worse if you have to deal with debt collectors contacting your company directly to locate you, which can be unpleasant and cause tension with your manager.
Mental Benefits
- Reduce stress: Paying off debt is a huge relief. You no longer feel caught in a hamster wheel. You can sleep better. Having less time to worry about money means more time for your job, family, friends, and hobbies.
- Improved mental health: Being debt-free promotes mental wellness. You're less likely to suffer from anxiety or despair, and you're happier overall.
- More Confidence in Oneself: Not debt-free? You can't help feeling like you're somehow lacking. Debt-free individuals feel good about themselves and their choices. They learn how to save money, spend wisely, and live debt-free.
- The ability to think more clearly - Thinking about debt can keep you from being productive, so debt-free living encourages a clear mind and better productivity.
Relationship Benefits
Debt-free living has a number of benefits to your relationship. Debt is debt, no matter who owes it or how old the loan may seem.
Debt-free living is the best way to have better relationships and be a stronger spouse.
Plus, you'll spend more time with your family by helping them out financially so they can focus on themselves instead of worrying about paying for everything else in life.
When you live debt-free, your children tend to earn higher grades since it becomes easier for parents not to have any financial worries holding back their careers or education goals!
Maintain Debt Free Living
Debt-free living is not overly challenging or difficult to achieve. It all comes down to how conscious you are of avoiding situations that lead to borrowing money or seeking financial aid.
Being aware of the consequences can act as motivation if you want to avoid getting into more debt because you know what it takes. Traits like being organized with money and enjoying stress-free living are just two examples among many others of how someone usually does well when avoiding debts.
Final Word
Maintaining a life with little to no debt at all can be a challenge, but it's well worth the effort. Living debt-free takes hard work and commitment to yourself, your family, and those around you.
It’s one of the best decisions you can make for your financial future. If you’ve got debt, it's time to take control of your finances and get out of it as soon as possible. Use the steps above to get started.
When it comes to getting out of debt, there is no one-size-fits-all solution. We know it can be overwhelming to try and tackle all that debt by yourself. That’s why we are here to help.
Our team of financial experts will sit down with you, listen to your situation, and develop a plan for getting out of debt fast. You don’t have to go through this alone!
We have some great resources on our site that will help you figure out how to go about this process so that you never end up in debt again.
At 121 Financial Credit Union, we offer solutions for those who are ready for them, including personal loans and refinancing options if necessary. We want everyone in our community to live their best lives without worrying about money or finances on a daily basis.
We also offer savings accounts that will help you save up for whatever it is that makes you happy, without debt, whether it’s a new car or a vacation home by the beach.