Do you want to know the real Reasons To Become Debt-Free?
When we started this site, our motivation was to provide encouragement, motivation, hope and ideas to become debt-free and live a financially free life.
What has transpired from that has been more than we could imagine. We share ideas for dropping your spending each month from recipes, DIY projects, ways to cut the budget, gardening and so much more. We also share many ideas for increasing your income each month so that you can carry out the 2% rule that we teach to help you reach your financial goals.
Many people seem to understand the value of becoming debt-free as the beginning to a financially free life. But when asked, many people are not as confident in answering the question, “Why become debt-free?”
We’ve also come across some that say, “What’s the point?”
Well, that is a good question!
And although we have talked about many benefits of the debt-free life here and there throughout our site, we thought it would be helpful to lay out our thoughts in one blog post here.
These are our thoughts, but honestly, there are probably many, many more. Leave your thoughts in the comments below.
7 Reasons to Become Debt-Free
You Will Have Less Stress
Imagine yourself as a cute, fuzzy hamster. As you are in your little world, your little cage, looking out of the bars that surround you to the world around you.
You only dream about what lies beyond the bars and the cage you are trapped in. You think, “If I work harder and faster, I can be out of this little world and the whole world then opens up to me!”
So you jump on your wheel and you run faster and harder, then faster and harder, day in and day out. But everyday, you are running the same race and not getting anywhere. You are working hard to “pay the man.”
That’s what debt feels like. It feels like you are that hamster in a cage, trapped, running and working hard to go nowhere. Working to pay that day’s dues.
It frustrating.
It’s a financial prison.
It’s emotionally and mentally draining.
It’s depressing.
This is one consistent thought across the board in the world of debt. When others describe what debt feels like, it is like a financial prison. It’s feels like the mafia is after you to get their money at every turn. You work hard each and every day to pay your bills, not paying yourself nearly enough to enjoy life.
Imagine being free from the financial prison. Since we are talking about financial prison, many years ago, we were on the “death row” of financial prison.
After 4 years of obtaining $108,000 of consumer debt, we were at our end. We owed more each month than we were making and we were 60, 90, even 120 days late in paying our bills. We were avoiding the phone calls from debt collectors and each month, we were deciding which “late” bill to pay based on which one was screaming the loudest.
We were probably a week from bankruptcy before we woke up and decided, “No more.”
In the course of the years to follow – we found debt freedom FAST without a drastic lifestyle change, but rather our 2% rule that allowed us to exponentially pay off our debts!
Debt is Expensive
When we finally decided to escape the financial prison we were in, we put our feet to the ground.
But to do that, we really had to give ourselves a reality check. One of those major checks was looking at how much debt cost. How much were we losing each month?
Then comparing that to what we could be doing with that money each month.
It was gut-wrenching!
It was so sad to see how much our debt was costing us in interest alone – at one point in the heart of our debt load, we were paying $1,200 a month in JUST INTEREST. Imagine that! $1,200 a month literally going into the toilet.
That’s not all that is lost.
Imagine if that $1,200 monthly was invested instead.
Even at an average rate of 4% return, we could end up with over $450,000 over 20 years by investing that money instead!
This is a super, super simplified calculation just to give you an idea of what we were missing out on! There are even smarter investments, but this is just a basic calculation to even begin to get an idea of what we were missing out on.
At the end of the day, debt is expensive.
We encourage you to figure out what you are missing out on each month. Remember, it’s not just what you are spending in interest, it’s also what you could be doing with that money instead.
To figure how much your debt is costing you, you can use this free worksheet and the calculators at bankrate.com
Develop Better Relationships
It is no mystery that money is one of the top three fights amongst married couples. According to Time.com, money issues are 70% off all marital fights – surpassing the other top issues of family and sex fights.
It’s a serious problem. Being debt-free is one solution to help minimize those fights.
Now don’t get us wrong, being debt-free will not eliminate fights about money, but it will greatly reduce them.
Instead, imagine arguing about where to spend your money – on a trip to Italy, or that new boat? I am writing tongue and cheek to be funny, but in all seriousness, your relationship improves on many fronts with less money stress, teamwork and constant communication about the intimate topic of money.
Marriage is also not the only relationship that improves, but that with your friends, family and children. When you don’t have money woes, when you don’t owe family/friends any money and you can be open and honest with your children, it all improves!
Better relationships are priceless – something debt robs from you.
Create More Secure Future
This one should be obvious, but when you are debt-free, your future is more secure. This covers many areas of life, but in the case of losing your job, having unexpected expenses (like medical bills) and your retirement. When you don’t have debt obligations on top of these already stressful circumstances, your future can be a bit more manageable in case of those life comes at your fast moments!
Obtain More Opportunities
We learned this the hard way.
When you are in debt, opportunity knocks, but you can’t answer the door.
What do we mean?
Well, it covers many areas. Once, before we began paying off our debts, my husband’s company moved us to a new state. Shortly after, Alex received an amazing job opportunity with a start-up software company. We couldn’t take it for a couple of reasons.
His current company paid $2k in moving expenses. He needed to work for at least a year, otherwise he would have to pay it back. We could not pay back $2k, let alone barely make it to the next paycheck.
We couldn’t go without a paycheck between job transfers. Even a week lapse would have put us in worse trouble.
We had to have nothing but a secure and stable job to be able to pay our debts. We could not afford the risk to work for a new start-up in case it didn’t work out.
The sad news is that this company took off and was hugely successful. This company was bought out and the original team was paid a mighty buy-out. We missed that opportunity and it would have changed our lives had we been more financially secure.
This is just one example, but we hear of missed opportunities from large to small all over the place.
When you have debt obligations, your world gets a bit smaller with each obtained debt.
Keep your world wide open!
Inheritance
As time goes on, as a society, we seem to be losing this idea of an inheritance for our children. Less and less baby boomers are planning to leave an inheritance for their children. They would rather spend the money than leave a financial legacy and future for their children.
This is unfortunate.
We want, hope and desire to set our children on a good financial path (even hoping they can pay cash for a house if we encourage and help prepare now) and leave them a financial legacy that they can carry on. What a blessing it is for children to receive an inheritance. Even more of a blessing if you can teach them good financial stewardship so that when that money does come, they are prepared to handle it well and not “blow it all.”
The reality of it is that being debt-free allows you to both have an enjoyable retirement AND provide an inheritance to your children.
The financial matters of a family are such an intimate part of a family, that it is unfortunate to see this breaking down today. Debt plays a major role in the slowly disappearing inheritance department.
Fulfilling Dreams and Desires
It would be foolish to state that money isn’t needed to achieve goals, dreams and desires. Money should not be an end-all goal as this can lead to some pretty selfish behavior. But money can be used as a positive tool in reaching those goals when approached with maturity and responsibility!
Whether that goal is to give more, travel more, invest more, start a business, go to college, or all of the above, etc. money can be a blessing in all of that and help you get their easier and faster.
When your money is tied up in your debts, your dreams are on hold!
Financial Freedom
One of the foremost reasons to become debt-free is the financial freedom that it brings. This point is really a collaboration of all of the above points as all require a level of financial freedom, but it’s also important enough on it’s own to emphasize on it’s own.
The lifestyle, feeling, peace and security that you can get with financial freedom is something you cannot put a price on.
One of the most weight-lifting, mood rising, hopeful days of our lives was the day we declared “We are debt-free!”
It was an experience we want all of you to have too!
So how do I become debt-free?
We are so glad that you asked! There are many plans out there and the key is to start!
We personally (along with many others) have found a huge amount of success using the 2% rule to become debt free.
It takes a gradual approach with small monthly changes that don’t require massive lifestyle changes. This approach ultimately leads to a sustainable lifestyle that allows you to pay off your debts at an exponential rate!
We have talked about this in this article. We have gone into the emotional depths of our journey and ultimate success in paying off $108K in consumer debts in our book, which shares the exact steps to follow no matter where you are in your financial journey.
We also encourage you to take our 52-Week Take Back Your Finances Challenge for an overall, high-level financial makeover that sets you on a path to kick debt to the curb!