Why You Should Start Paying Off Your Debt
I have written a couple of posts now about our journey with paying off our debt. We are currently debt free, besides the mortgage. I did not realize until I started this blog, that there were so many people like us out there. I have been incredibly surprised by the supportive comments and how many other people have said they were debt free also. It truly gives me hope for our society. I read so many articles about how the majority of Americans could not pay for a $400 emergency and that most do not have enough saved for retirement. I hope that our generation will be the one to change that. So, if you are not currently paying off debt, here are a few reasons why you should think about it.
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Peace of Mind
It truly gives you financial peace. When you don’t have to worry about your car or kids play house being repossessed (yes that happens), you have security. It is a completely different feeling knowing you own all of your possessions and no one can come and take them away from you for missing a payment.
You Get to Keep Your Money
I don’t know about you but I like to be able to do whatever I want with my money. I don’t have to pay for anything that I don’t want to (besides the mortgage). I do still have monthly bills but most of those are wants and not needs. Obviously, you will still have bills each month, like power, water, and trash. But it sure is nice not having a car payment, a four wheeler payment, a trailer payment, a 401k loan payment, or any credit card payments. I actually have spending money now that I don’t have an outrageous car payment. I get to go on trips, concerts, or anything else I want to do for fun.
Once you are debt free, you will have more money to save for retirement. Dave Ramsey recommends saving 15% for retirement. If I had to guess, most people if they save at all, save maybe 5% or 6%. I know that a lot of people only save up to the company match if there is one and most of the time that is up to 5%. I know that my husband and I were only saving 6% before starting this journey and that was more than a lot of people we know. Our plan is to start saving 15% once we finish our emergency fund in a couple of months. If we hadn’t paid off our debt, we could not have saved 15% for retirement.
If you have more discretionary income, you are more likely to save for your kids college, wedding, or whatever else you want to help with. This should not come before your own retirement. This may be something you decide you are not going to do for your kids and that is okay too. But if you do want to help your kid through school, it will be a lot easier to do so if you don’t have any debt. Plus, most people don’t realize this but if your child applies for FASFA, the government decides how much you will contribute to your kids college. So, even if you do not plan on contributing, you may not have much say in it unless your kid can pay for it all themselves.
Dave Ramsey’s biggest reason for wanting people to be debt free is so that you have more money to give. Imagine how much money you could give back to your community if you were debt free. Is there a need in your community that you want to help with but can’t afford to right now? Would you like to do random acts of kindness but don’t have the extra money right now? Imagine all the good that could happen in our country if people had extra money.
I know that there is always that person that wants to argue that debt is good and it’s better to invest at this interest rate than pay off a lesser rate. Well, there is always a thing called risk if you have debt. When you lose your job, the payments will still be there. I would much rather own all of my things and my house eventually than worry about losing it all if something happens. It certainly seems to me that this type of mentality is what causes every type of financial bubble we have had. Sure, buy a house you can’t afford because the prices are going up. You can always sell it later for a profit. That didn’t work out so well for thousands of families in 2008.
Look at the student loan crisis that I’m sure is getting ready to explode. We have an entire generation of kids with insane amounts of student loan debt that they can’t afford to pay back. Why would a bank loan an 18 yr old kid thousands of dollars for a degree that won’t have the same return on investment. I personally know several people that have student loan payments over $1000 a month and they only make around $2500 a month! This is not sustainable for our society even though people want to argue it’s “good debt”. No debt is “good”. Being in any debt means that you owe someone money and that restricts what you can do with your own money.
So, whether your want peace of mind, want to build wealth, be able to give, or all of the above, now is the time to start your journey to becoming debt free. Do something today that your future self will thank you for.
If you are ready or at least thinking about paying off debt, I highly recommend reading The Total Money Makeover by Dave Ramsey. This book has literally changed my life. I love it so much, I am constantly giving it as gifts to people.