If you’re shackled to a large amount of debt, you’re probably broke most of the time from juggling multiple payments, interest and late payment fees. But did you know that excessive debt obligations are draining more than just your bank account? That’s because having too much debt also siphons joy – by limiting the freedom to change your life for the better.
The biggest motivator for turning over a new financial leaf is being able to live a debt-free life. How good would it feel to leave debt behind and have a new future of debt-free opportunities?
So how does kicking debt to the curb bring more freedom to your life? Find out how the benefits ofpaying off debtcan change your life.
You’ll feel better about yourself
Paying off debt won’t solve all your problems, but it’s one of the best ways to boost your self-image. Once you relegate calls from bill collectors,debt shameand beating yourself up for missed or late payments to the past, you’ll be a better version of yourself.
The psychology of being debt-free is pretty strong. You’ll stand straighter, sleep better and be a more likable person when you’re not stressed over how to make all those payments every month. Plus, you’ll feel great about accomplishing what may have seemed an insurmountable goal before you hunkered down and got serious about eliminating debt.
Freedom to afford better self-care
Remember all those self-care services and items you can’t afford now because all your money goes to credit card companies and banks? Paying off debt frees up money for things like massages, the gym, yoga classes, healthy food from specialty grocery stores, dining out at favorite restaurants and socializing with friends.
Don’t go crazy with the luxuries, of course. And try to pay cash when you can to avoid racking up credit card debt. Adding a dose of self-care to alleviatestress, anxiety, and depressionmay be just what you need to resist the urge to click “add to cart” next time you get the blues.
You move up the ranks as a dating choice
Nobody fantasizes about finding a soulmate who has bad credit and a bunch of debt. You may have to work hard to pay off debt this year, but once you do it, you’ll become better dating or marriage material.
Having no debt shows potential mates that you’re responsible, dependable and planning for a better future. Good looks and passion fade eventually, but a zero balance is forever sexy.
You may improve your credit score
One factor that affects around 30% of yourcredit scoreis your credit utilization ratio, which is the percentage of available credit that you’re using. For example, if your total available credit is $10,000 in credit card limits, and you have $5,000 incredit card debt, your credit utilization rate would be 50%.
Ideally, you should keep your credit utilization rate below 30% for a better credit score, according to major credit bureau Experian. When you pay off debt (and don’t replace it with new debt), you may improve your credit score by lowering your credit utilization rate.
Freedom to pursue milestone goals
Maybe buying a house seems impossible because you havetoo much debtor past-due payments dragged down your credit score. Perhaps you want to get married, return to school or start a family but can’t get started on milestone goals because most of your money goes toward credit card, student loan or other debt.
Even if paying off debt means you mustlive frugallyor take a part-time job for a while, the sacrifice will be worth it when financial freedom clears the path to your goals.You can start saving all that money you threw at credit card and loan payments each month and eventually save enough to put toward a down payment on a house, pay for tuition, plan a wedding or pursue other important goals.
Freedom to further your education
Paying off debt frees up more money each month to pay for college courses or trade school tuition. Having fewer payment obligations means lower monthly expenses, which may allow you to work part-time or change to a job with a more flexible schedule to accommodate class times.
Even if you must take fewer classes at a time, try to avoid racking up student loan debt so your newfound freedom can continue long after graduation.
Freedom to travel
When you have tons of debt, there’s no money left over for vacations or even a weekend getaway. Paying off your debt, however, can be your ticket to traveling again.
You’ll have more money to save for vacations and more cash available when you arrive for dining out, clothes and sightseeing.
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Freedom to find a job you love
Are you staying at a high-paying job you hate because that’s the only way you can afford monthly credit card payments? Or maybe you have high car payments on an expensive vehicle that you can barely afford. Even worse, maybe you owe both of those nagging debts.
When you eliminate debt, you can broaden job search requirements. Monthly expenses are lower, so salary doesn’t have to be the main barometer by which you choose a profession or employer. Want a less stressful job or one that feeds your soul? Get rid of debt for more choices.
Freedom to relocate
Do you long to move to a city with more cultural offerings or natural beauty but stay put in a boring city because you can’t afford to move until youpay off credit card debtorstudent loans?
If you hammer away at those balances until your debt is gone, you can sock away extra money that went to credit card payments until you have enough to relocate with a tidy amount of emergency savings.
You can save more for retirement
Whatever your age, you’ll eventually retire. So, the sooner you startsocking money away for retirement, the better off you’ll be when you wave goodbye to the workaday world.
What if you could eventually save the hundreds of dollars you currently pay each month toward debt in a retirement account? You can even start gradually, saving a bit more as you pay off each debt.
You may be able to retire earlier
Owing a large amount of credit card or other debt as you near retirement age may mean you have to work longer because youcan’t afford to retire. Even worse, many people dip into retirement savings to pay off debt, diminishing retirement income.
Around 23% of respondents in a 2019 Bankrate survey cited “debt repayment” as a reason they took early withdrawals from retirement accounts.By breaking the debt habit, you have a better chance of not only saving more for retirement but also needing less of a retirement income.
