6 Ways Life is Wonderful When You're Debt-Free


Some people think debt is the norm rather than the exception. To each his own. Just know that this type of mindset can become dangerous, especially if you develop the habit of financing anything and everything.

Credit cards and other loans can put what you want within financial reach, but a life without debt can be rewarding. Here are six ways life is frickin' awesome when you're not burdened by a negative net worth.

1. You Have the Freedom to Work Less

The more debt you have, the more you have to work to keep up with monthly payments. Whether it's a house payment, a car payment, or credit cards, debt holds your freedom hostage and keeps you stuck in a career or job you don't like. Think of how great life could be if you had fewer bills. Rather than working a 40- or 50-hour week, you might get by working only 20 or 30 hours a week. With fewer financial pressures, you can quit a high-stress job and find satisfying work, although you might earn less.

2. You Can Retire While You're Still Young

Even if you know the importance of early retirement planning, debt can limit how much you stash for the future. Eliminating needless debt and reducing monthly expenses frees up disposable cash, allowing you to grow your retirement account faster. A sizable account might be the difference between working into your 60s and retiring young while you're still healthy and energetic. And that's not even considering how good the "everybody envies me" factor is gonna feel.

3. You Can Finally Have a "Real" Savings Account

Not only can debt-free living boost your retirement account, there's also an opportunity to grow your personal fund. Imagine what you could do with a "real" savings account. I'm not talking about $500 or $1,000, but rather tens of thousands of dollars. This is money that can be used for an emergency, home improvements, investments, or a good time. You can take a much-needed (and deserved; do you, boo!) vacation or deal with home repairs without relying on a credit card.

If you're struggling to build your personal account, be honest and consider whether your lack of savings has anything to do with debt payments eating up your extra cash. If you could eliminate $1,000 a month in debt payments (between credit cards, student loans, and automobile loans), you could save $12,000 in just one year.

4. You Will Become a Smarter Spender

I've learned something from my own experience with debt: It is easier to accumulate new debt when I already have debt. Whenever I have a zero balance on my credit card, I'm more cautious and conscious of how I spend my money and use the card. I'll second-guess or rethink the smallest purchases. It doesn't matter if it's only $5 or $10, I'll wait until I have cash to avoid using the card. But the moment I give in and use the card, I stop second-guessing myself and I continue using the card.

I've had debt discussions with others and found that some people feel the same. Maybe it's just our experiences, or maybe there's a connection between existing debt and new debt. Either way, getting rid of debt can make you more aware of your spending habits. Debt elimination can be a long process. Reflecting on the effort it took to become debt free (and the benefits) is motivation to remain debt free.

5. You Will Experience Less Financial Anxiety

Debt keeps you enslaved to a bank. And sometimes, the amount you owe can heighten your anxiety level. This might be the case if payments stretch your budget beyond a comfortable limit. If you get into hot water, you could lie awake worrying about late payments, a damaged credit score, or collection calls. On the other hand, when you live within your means and don't rely on financing, you enjoy an inner calm and better financial security. When you own your stuff outright, you don't have to worry about anybody taking your items, unless, of course, you fail to pay taxes on your home or car. Then, well, you better hide.

6. You Don't Have to Pay to Borrow

One of the best things about avoiding debt is that you avoid interest. Interest is the cost of borrowing, and most banks charge some form of interest when you take out a loan or use a credit card. The longer you carry the balance, the more interest you pay, which can add up to hundreds or thousands of dollars depending on the amount financed.

Borrowers with superb credit may qualify for 0% financing for furniture, credit cards, or automobiles. But these promotions are short-lived and only beneficial if you pay off the balance during the introductory rate period. If not, interest kicks in. In the case of financing furniture, if you miss a payment or don't pay off the balance during the promotion period, you could end up paying retroactive interest. All this equates to extra money you're spending for which you have nothing to show. A fool's game, for sure. (See also: When to Use a 0% Balance Transfer to Pay Off Credit Card Debt)

What would you do if you were debt free? Travel? Retire? Throw the party to end all parties? Let's talk about it in the comments below.

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Guest's picture
Mike Monfredi

Great article. A lot of people talk about wanting to be debt free but don't realize some of the benefits that can actually give you. This puts a carrot at the end of that tunnel.

Another thing I would add is that your money is worth more. Meaning - you're eliminating interest payments and potentially converting that to interest earned (if you're investing). That could be a 10-20% gain in growth.

Nice article.


Guest's picture

I happen to be debt free in my 40's, and it doesn't change the need to have a steady job. You still need health insurance. You still have to pay your property taxes. You still need to save for retirement. Unless you have a few million in an account somewhere you are never truly free.

Guest's picture

Well, if you ask me, the most critical part of structuring your finances and optimizing savings is just having a plan. Whether you use a spreadsheet or a tool like Geltbox or some other website -- you have to get everything out if front of you so you can make smarter decisions. Once you do that, then implementing your disciplined savings strategy becomes critical

Guest's picture
GuestNever Quit

Never Quit
I agree that living debt free is good. I still use a credit card for almost everything but pay the full balance each month. It is just more covenant than carrying cash. For most AlwaysAtWork's point about insurance and taxes is true, luckily for me I did 22 years in the military and have healthcare for life. I will never quit working but it is great to know I can if I want to.

Guest's picture
Allan Mantaring

Yeah you are right that it is very good when we are debt free. We nothing to think, we can what we want and we can relax if we want.

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