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Paying off debt can be challenging.
Trust me, I know.
I found myself in credit card debt when I graduated college.
Then I added to it when I couldn’t find a job and bought things to make me feel better.
At the height of my credit card debt, I was in the hole of over $10,000.
I tried and failed several times to pay off my debt.
But it wasn’t until I got honest with myself and got to the root of the issue that I was able to experience debt freedom once and for all.
Sadly, being in debt is a way of life for most people.
We accept it as part of trying to survive financially.
But you don’t have to live a life with debt.
There is another way of living out there, one without debt.
And while work is involved in being completely debt free, trust me when I tell you that living a debt free life is priceless and worth the effort.
And this post is proof.
I am sharing with you the 9 benefits of debt free living.
Once you see these benefits, you will want to work on putting money towards paying off your debt.
And the good news is I will also walk you through how to do that.
Let’s get started with changing your financial situation.
Table of Contents
9 Reasons To Imagine A Debt Free Lifestyle
If you have debt or have had debt in the past, you know how it controls your life.
Stress, embarrassment, uncertainty.
Debt causes all these feelings. It’s not fun being in debt.
Instead of worrying about how you will get out of debt, let’s focus on the benefits of being debt free.
- Read now:Click here to read my debt payoff journey and struggle
- Read now: Click here to learn the sad consumer debt statistics
#1. Improved Health
When you are in debt, whether from a car payment, student loan debt, or other debt, you experience a lot of financial stress.
How are you going to make ends meet? What if you lose your job? What about household repairs and upkeep?
It’s a proven fact that stress does shorten your life.
As a result, the less stress you have, the healthier you will be.
You immediately remove massive financial stress from your life by paying off your debt.
No more worrying about the bills coming in the mail.
No more sleepless nights trying to figure out how you will pay the monthly payments and still make ends meet.
All this leads to a longer, happier, healthier life.
#2. Better Outlook
When you have the weight of debt hovering over you, you see the bad all around you.
Your mind is filled with negative thoughts, and you see your life as a wreck.
When you start debt free living, your outlook changes, and you have a positive outlook on life.
You start seeing things with a positive mindset.
You see great things in your life and are more apt to push through things.
#3. More Confidence
When in debt, you doubt your abilities.
You wonder how you will cover the bills each month or how you will ever afford Christmas presents.
Simply put, you lack confidence in yourself and your abilities.
The good news is that your confidence grows as you overcome obstacles.
Paying off your debt is a huge obstacle to overcome. When you do, you will be prouder and more confident.
You will walk around with a new sense of pride.
You will believe in yourself and your abilities, constantly increasing your confidence.
#4. Personal Growth
As your confidence rises, you doubt yourself less and less.
When a new challenge comes along, you won’t think you can’t overcome it.
You will know that you can. You will be growing as a person, bettering yourself all the time.
I know that when I overcome a big challenge, I feel like I am Superman and can take on anything the world throws at me.
I accept challenges that I otherwise might shy away from, making me a better, stronger person than I was before.
#5. More Success
Another benefit of becoming completely debt free is more success.
As you begin to pay off debt, you achieve success.
More success leads to your confidence growing and your growth as a person.
You will then be motivated to try more things and experience more and more success as you reach the financial goals you set for yourself.
The more successful and financially secure you become, the more the cycle repeats itself, and that’s a great cycle to be in.
At some point in this repeating cycle, though, you are going to fail.
Will everything come crashing down? Hardly.
With your newfound confidence, a setback won’t matter to you.
You will see it for what it is, a bump in the road, and you will push through it.
#6. More Free Time
Up until now, the benefits of being debt free have been more emotional, but there are some great financial advantages to being debt free.
The first is a simpler financial life.
Think about your life now as you live in debt.
You worry about what bills to pay first or when you are getting paid next.
You even spend time wondering about choosing to save for a vacation or putting the money towards your debt.
All this worrying takes up a lot of your time and energy.
Now imagine life with absolutely no debt.
These questions and worries are gone.
Your biggest concern is whether to save your money in a savings account or invest it in the stock market.
#7. Reduced Cost Of Living
When in debt, you have to earn a lot more money each month to pay for your needs and still make your debt payments.
In some cases, living in debt means living paycheck to paycheck.
But debt free living means you can earn less money and still live happily and save money.
For example, if monthly payments on your high-interest debt totals $700 and you pay it off, you now have $700 of extra money each month.
You can use this money to cover your monthly discretionary spending or save it.
This extra monthly income can lead to more happiness.
You might hate your job but be stuck in it because you need the income to cover your needs and debt payments.
If you don’t have debt, you might be able to change careers and do something that excites you and pays you less.
#8. More Choices
Becoming debt free allows you to have more choices in everything you do.
By saving money, you afford to experience more life has to offer.
You can take advantage of opportunities too.
When opportunity knocks, you can take advantage of the offer because your money isn’t tied to paying off debt.
Even if you have less debt than you have now, you have more choices than you did before.
#9. Ability To Achieve Financial Independence
When you live a debt free life, you increase the chances of being able to afford retirement.
With fewer living expenses, saving money becomes much easier.
And when it comes to your retirement, you need to save less to cover yourself during your retirement years.
The reason is that, with fewer monthly bills, you don’t need to have as large of a savings cushion to survive.
If you are buried in debt, you might not have been able to save enough to retire, but you now have hope without debt.
Debt Free Living Tips | How To Live Debt Free
You now see the many benefits of a debt free lifestyle and want to take action.
But here do you start?
Here is your guide to living debt free.
#1. Manage Your Spending
The first step is getting your spending under control, and it all starts with a budget.
Look at a budget as a tool to help you become free of debt, not depriving you of spending.
There are many options for you when it comes to budgeting.
You could use spreadsheets or apps to automate the process for you.
The best choice is what works best for you.
- Read now: Click here for the best free budget templates
- Read now: Learn why so many people love budgeting with Tiller Money
As you create your budget, if your monthly income isn’t enough, you may need to cut out some spending to put the most money toward your debt.
Or you might consider working a second job or side hustle so you can put more money towards your debt.
- Read now: See the benefits of multiple streams of income
- Read now: Here are the best ways to make money on the side
Once your budget is all set up, you can move on to creating a plan to pay down your debt.
#2. Create A Debt Payoff Plan
The second step is creating a debt payoff plan.
This step is where most people run into trouble with their debt situation.
They try to get out of debt overnight, fail miserably and give up, or they put together a poorly designed plan.
Here is how to avoid these two issues.
First, understand you didn’t get into debt overnight.
So chances are becoming debt free isn’t going to happen overnight either.
It will take you time to pay off your debt.
But the time it takes is entirely up to you.
If you want to be debt free quickly, you will need to start aggressively paying off your debt.
On the other hand, if you want to take a more balanced approach to debt repayment, you can make smaller payments.
Second, you need to create a plan that motivates you.
For most of you, this means using the debt snowball.
- Read now: Click here to learn how to create your debt snowball plan
- Read now: See why so many people follow Dave Ramsey’s Baby Steps
- Read now: Learn how to pay off your student loans fast
In a nutshell, you organize your debts from smallest balance to largest.
You make the minimum payment on all debts except for the smallest balance. For this one you pay as much as possible.
By following this process, you are motivated to see progress.
And then your motivation increases more as you pay off more and more of your debt.
Another option is the debt avalanche.
This method has you pay off the debt with the highest interest rates first.
Both options work, but you will find one that works better.
It is up to you to determine which one that is.
Finally, be sure that whichever method you choose, you list all your debts, which include the following:
- Credit card debt
- Student loan debt
- Auto loans
- Medical bills
- Personal loans
The last thing you want is to commit to a plan and forget about some of your debts.
#3. Consider Debt Consolidation And Balance Transfers
If you have a lot of debt, you might be able to speed up the repayment process by consolidating your debt.
The easiest path for debt consolidation is to take out a personal loan.
You take the money from this loan and pay off your other debt.
Now you have a single monthly payment to make, and in most cases, the interest rates on personal loans are less than on credit cards, so that you will save money in the process.
Be careful when it comes to financial companies trying to sell you financial products to become debt free.
The fees often cost you a lot of money, and to negotiate your credit card balance, you need to stop making minimum payments.
The result of this is your credit score is destroyed in the process.
Your best options are sticking to a personal loan or finding help through the NFCC.
Another option to consider is balance transfers.
You transfer the balance from one credit card to another for a small fee.
Again, this lowers the number of monthly payments you have to make, plus there is usually a lower interest rate on transfers too.
Finally, you can call your creditor and ask them to lower your interest rate, which will reduce the interest you are charged, helping speed up your debt repayment.
Make sure you get a lower rate on your current balance, not new debt.
#4. Commit To A Debt Free Lifestyle
The fourth step is all about commitment.
As I mentioned, getting out of debt will take time.
The journey is long, and you will want to quit.
- Read now: Click here to learn how to stay motivated paying off debt
- Read now: See how an accountability partner will help you get out of debt
Because of this, you need to enlist the help of a friend.
Tell them about your goals and encourage them to check up on you.
Additionally, create milestones for you to celebrate when you reach your goals.
For example, once you pay off $2,500 worth of debt, treat yourself to a nice dinner.
Doing this will help to keep your spirits high.
You can do this over and over again as you continue to pay off debt.
Next, as you pay off your debt, I encourage you to keep a journal or notes on your phone.
The idea here is to be aware of the journey.
Make a note of all the stuff you bought, never used, and are still paying for.
Write down how you feel about your debt and how it annoys you that you are working so hard to pay someone else instead of yourself.
These notes will serve as a good reminder in the future so you can stay living debt free.
#5. Build Your Emergency Fund
Once you are living debt free, you want to make it a point to build your emergency fund to pay for unexpected expenses.
The last thing you want is to work to pay off your debt, only to end up in the same boat again.
The easiest way to do this is to take the minimum payments you made on your debt and put the cash into a savings account.
Ideally, you will want to build a savings cushion of 12 months of living expenses.
This amount might sound like more than enough money, but you will be glad you have it should something happen.
Disadvantages Of Being Debt Free
I’ve talked about the many benefits of being debt free, but are there any disadvantages of living debt free?
Here is a list of the negatives of being debt free.
#1. Possible Harm To Your Credit Score
If you get out of debt and never take on more debt or use your credit cards, you risk lowering your credit score.
But the impact should be minimal to most people.
If you are concerned about this and want to build credit in the future, make it a point to use your credit card a few times a year.
Just use it to pay for groceries, then put the card back and pay the balance in full.
Doing this will improve your credit score and avoid interest charges.
#2. Missing Out And Not Keeping Up
Missing out and not keeping up isn’t a major negative of being debt free, but I wanted to point it out.
Once you are free from debt, you will notice that people around you tend to have all the latest gadgets and newest cars, etc.
You won’t, of course, because you refuse to go into debt to have the latest things.
Therefore, you may feel like you are missing out and are not keeping up with others.
- Read now: Here is how to avoid debt forever
But while you are falling behind in the materialistic sense, you are miles ahead in the financial sense.
See, once you pay off your debt and start building your savings, you will have more options in life.
These options include retiring with more money than you thought you would have.
While everyone else can’t retire because they have mountains of debt, you can.
#3. Miss Out On Building Wealth
The last drawback again isn’t a big one.
When you are paying off your debt, you can make smarter financial moves with your money.
What I mean by this is if you pay interest of 3% on your debt and you can earn 8% investing in the stock market, it makes financial sense to invest and not pay off the debt.
- Read now: Should you invest or pay off debt first
But most people are better off just paying off their debt because many won’t consistently invest that money to earn the 8% return.
The benefits of living a debt free life are immeasurable.
If you accept the challenge to achieve your debt free dreams, the world is yours.
The increased confidence and personal growth will take you places you never imagined.
Who doesn’t want to experience the best of life?
Accept the challenge of life without debt and start enjoying a life of debt free living.
Don’t be like the 20% of people who believe they will never be able to live debt free.
You can do it.
You need to take action and stay positive, and remain focused.
- Read now: Use a debt challenge to crush your debt
- Read now: Learn the pros and cons of paying debt off early
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I have over 15 years experience in the financial services industry and 20 years investing in the stock market. I have both my undergrad and graduate degrees in Finance, and am FINRA Series 65 licensed and have a Certificate in Financial Planning.
Visit my About Me page to learn more about me and why I am your trusted personal finance expert.
12 thoughts on “The Inspiring Joys Of Debt Free Living”
Huge congrats to you on becoming debt free!! That is so awesome. Right now we are in hard core student loan pay down mode, and we are hoping to retire those by 2016- making great progress so far. Can’t wait until we are debt free too!
Congrats! All about changing bad behaviors and focusing on the end goal. Debt freedom is a great feeling!
Thanks Dee. Good luck with the student loan payments – every time you shell out money just remember the debt was for a good cause.
Thanks Brian. Bad habits are the worst. It’s definitely a big accomplishment, not to mention the best decision of my life. Although I do wish I did it sooner.
Congrats you made it. It needs dedication, mind set and lot of concentration to achieve what you did. Now, at your age and being debt free it’s higher time you enjoy your life 😉
OH I agree. I didn’t start travelling until I was 31, but trust me I’m making up for lost time.
Lesson well learned and now you are that much better off. Congrats on reaching debt freedom.
Thanks Mr. Utopia. I feel the exact same way. It was something I went through, now it’s over and I’m definitely better because of it.
I went through a period when I had enormous amounts of credit card debt, way over $100,000. Now I am debt free, other than mortgages. The number one rule is to pay off your lowest balance credit card first. It doesn’t matter what the interest rate is, just the balance level. Once that one is paid off, it wipes off the monthly payments for it and those savings can be used to pay off the next lowest balance credit card. Continuing with this process will get the cards paid off in the quickest way.
That’s great advice Fred. And seeing one credit card balance get paid off is definitely motivation to keep going and get all the others paid off too. Congrats on being debt free.
Though I’m not totally debt free (still in college and eventually have to pay off student loans), I have absolutely no debt outside that and it feels SO good! I feel like my health is overall much better when I have no debt. An emergency savings also helps a ton as well! I also made sure to take the least amount of student loans possible, which I feel that everyone should do when they go to college. The financial strain of student loans (in my opinion) isn’t talked about enough in high school or in college.
This perfectly verbalizes how I felt when I paid off my car and student loan. Thank you!
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