Being stuck in debt not only ties up your money, but it can also hinder you from living life on your terms. Not to mention the added stress if you have what feels like unmanageable debt. That debt can not only affect your financial standing, but constant pressure over your finances may end up damaging your health, work, and relationships. Becoming debt-free can positively impact a lot of different areas of your life.
Ready to ease your financial strain? Keep reading to find out some major benefits of being debt free.
8 reasons to pay off your debt
Paying off your debt can help you put more cash in the bank, give you more freedom to choose how you want to live, and give you a better sense of financial security. Check out these 8 benefits to being debt free!
1. Increased Savings
A debt-free lifestyle can help build your savings. When you pay off debt, you can take the cash you were putting towards your monthly payments and put that money in the bank instead. Keeping extra cash every month can help you build an emergency fund, save for retirement, or even plan a fun vacation.
2. Freedom to choose
Becoming debt-free allows you the ability to choose what you want to do with your money. You can live within your means and still get to splurge a little however you choose.
3. Increased financial security
Having large amounts of debt can be a threat to your financial security because it keeps you from creating a safety net. The money you are putting toward debt payments could be stashed away for emergencies, a rainy day, retirement, or your kid’s college fund. Becoming debt-free gives you room in your budget to create more financial security.
4. Fewer bills
Making debt payments every month can add up. Between credit cards, auto loans, mortgages, and student loans, the more debt payments you make a month the more bills you have to remember to pay. Once you become debt-free you won’t have to worry about paying so many bills or potentially forgetting payments.
5. Improved credit score
Having too much debt, especially credit card debt can negatively impact your credit score. If you have credit card debt with high balances, especially when compared to your line of credit, your score can take a hit. This also applies when loan balances are high compared to the original amount that you borrowed. Becoming debt-free can help give your credit score a nice boost.
6. Own your assets
While paying off credit card debt feels amazing, paying off your assets like your mortgage or auto loan can leave you feeling on top of the world. Being debt-free means you actually own the house you live in and the car you drive, not the bank! Best of all, you never have to worry about foreclosure or repossession when you have paid the entirety of your loans.
7. Funds to invest
A great way to use the extra cash you save every month from being debt-free is to start investing it to save for a down payment on a home or your retirement. An easy way to put the money you save every month from being debt-free to good use is to sign up for a fully managed AI investment account, taking the hassle out of investing.
8. Giving to charity
It’s a lot harder to help those in need when you feel like you’re in need and in a mountain of debt. You’re already too worried about helping yourself, adding another expense to help someone else doesn’t seem possible. Living a debt-free lifestyle gives you the choice to donate to causes and charities that mean something to you without hurting your budget!
Debt free looks good on you
There’s no time like the present to start taking control of your finances. And while getting debt-free takes time, it’s a rewarding accomplishment and can help put you on track to living with less financial stress and more freedom of choice!
Why is it important to avoid debt?
Unmanageable debt can negatively impact your financial security and mental health. Avoiding debt can help you put money in the bank and plan for a better financial future.
Does being debt free hurt your credit?
Becoming debt free or even decreasing your debt can help significantly increase your credit score because credit utilization and payment history are two major factors when it comes to your credit score.
Is it better to have money in savings or pay off debt?
It’s a good idea to pay off significant debts and debt with high interest rates. But you should also contribute at least a small amount into savings to help create a financial safety net while you pay off debt.