Having debt is generally associated with unhappiness. Numerous studies show that indebted individuals experience reduced emotional wellbeing, more stress, mental and physical problems, and lower life satisfaction. In indebted households, for example, spouses report experiencing more conflicts, including around non-financial matters.
As much as reasonably possible, it is wise to live a debt-free life. By going into debt, in a way, we alienate our freedom since we make a commitment that must be kept under the penalty of sanctions. In the past, a prison for debt was the rule.
It disappeared less than a century ago but has been replaced by other forms of sanctions, less infamous but no less traumatic: bankruptcy wage garnishment, even financial supervision.
Above all, getting into debt is pulling the trigger on consumerism-it plunges you deep into the matrix of wanting and buying newer flashy things that you can’t afford. It is relinquishing control over your life and handing the keys to creditors.
It is a destination depression. Life starts when you pay your debts and live within your means.
Is it good to live debt-free?
Millennials today are most concerned about becoming debt-free more than they are about buying a home or getting married. They are struggling with enormous student loans in the North of the globe, but those same fears are also heard in countries where the cost of studying is low.
All over the world, young people have a great desire to live free and make life-changing decisions, such as changing jobs or houses. The draw of a debt-free life includes its many advantages such as:
Improved quality of life
In the absence of debt repayments, your monthly expenses will be reduced. With this income, you can buy the things you want or save the funds for future use. In debt-free retirement, you get to live on less and modulate your lower cost of living. This allows you to live a fuller, richer life.
You can live a simple life with less income, provided you don’t owe anyone any money. Being debt-free allows you to live a more flexible life because you are not at the mercy of debt payments each month.
If you have no debt, you’ll be able to work at a job you like, or you can retire early without worrying about living in squalor. In this case, you would have more control over your lifestyle since you could either live lavishly or frugally based on your resources.
Financial stress may cause health problems, increasing medical costs, which can cause even more stress. A healthy, happier life within your grasp if you eliminate debt and follow your dreams.
As a result, you will experience less stress. Managing your finances will be a breeze, and you will receive alerts when you are about to retire.
More financial options
A debt-free individual can use all of their income to pay for what they need today and tomorrow instead of paying for what they spent yesterday. A debt-free life is empowering. By saving enough money for the future, you will no longer run out of money before the month is over.
Ability to leverage investment opportunities
When you have no loan repayments to make, you have funds available if the right opportunity arises, be it a real estate deal or high-interest treasury bonds.
Better financial health
When you are debt-free, you can invest and earn compound interest and market gains instead of spending your income on bills and debt. Investments and saving after each paycheck create a robust financial picture over time, much the same way credit card debt grows over time.
Peace of mind
Even though being debt-free won’t guarantee a peaceful life, it will eliminate the constant worry over how your finances are handled and allow you to focus on more important things. As a result, you will be able to find contentment and inner peace in your life. You will live longer and happier.
In the end, financial freedom will give you a sense of control and independence. Eliminating debt by default scores your multiple points in the basket of financial stability. It puts you on a path to prosperity and wealth creation.
Debt-free living doesn’t ensure that you’ll never have money problems again. You will still have to live within a budget and determine your spending priorities. However, your income will dictate how much you get to spend, not your creditors.
Freedom and control are the two most significant advantages of not having debt. When you have no debt, your money is actually your money, and you decide where it goes and what it is used for. Pay off your debts and implement financial policies to prevent future debt accumulations and give you back control over your finances.
Does being debt-free feel good?
It is the best feeling in the world at that point in life. Once you no longer have debts to pay off, you get to experience the actual feeling of owning your money-the monthly salary without worrying about debt repayments, penalties for late payments, and budgets that don’t work. Being debt-free actually feels a lot like being rich.
But experts say that it is not your objective level of debt that impacts your wellbeing but your perception; satisfaction or dissatisfaction. Your perception of your financial situation is only slightly correlated with the actual financial situation. We can have a high wealth and not feel rich at all.
Your actual financial situation influences your general satisfaction of life (the measure of happiness most used in the economy of happiness) through the feeling of control you have over your life. A financial situation degraded by debt affects happiness because it is perceived as losing control over one’s life.
Your personality may shape your view of their debts. An optimist will be less afraid of a high level of debt than a pessimist. Conversely, a person obsessed with control will be more embarrassed by high debts.
Then there is the environment: the examples around you dictate what a “normal” or “abnormal” level of debt is. And the possible observation of financial problems with relatives or homelessness on the streets constantly reminds us of the risks associated with debt.
But assets and debts have distinctly dissimilar impacts on our wellbeing. We are happier when we have little or no debt. We feel richer and are perceived as such by others.
Better to have $100,000 in savings and zero in debt than $150,000 in savings and $50,000 in debt. Therefore, it is psychologically relevant to pay off your debts with your savings to feel wealthier and happier.
At what age should you be debt-free?
A Shark Tank investor, Kevin O’Leary, said that the optimal age to become debt-free is 45. By being debt-free and free of a mortgage by your mid-forties, you’ve taken your first step towards prosperity.
You may find it beneficial to eliminate financial liabilities when your income is stable and perhaps even growing-at a young age. That way, you can live comfortably in retirement, for a debt-free life allows your retirement savings to grow without obstructions.
Most careers begin in the early twenties and end in the mid-60s. In other words, at 45 years of age, you should be debt-free and invest the rest of your life in accumulating wealth.
Having debts after 45 will affect your retirement savings, meaning less money grows in them, and more must be paid out to satisfy past due debts. Set yourself on a path for debt-free living from a young age.
Keep track of the numbers. Maybe you owe money on student loans, car loans, or credit cards. Are you fully aware of what you owe? List your debt balances, interest rate, and minimum payments.
Knowing your numbers is the first step to a debt-free life. It is easier to come up with the right payment strategies following the analysis of your personal finances.
Pay off debt immediately. Get a credit card only if you know you can handle it. Make it a rule to pay off all your credit card purchases on the same day if you choose to have a credit card or even more than one. You should never wait until the bill arrives. Budgeting is essential before swiping.
Embrace minimalism. There’s no better way to save money than to think before you buy. Thus, it’s best to think long and hard before making a purchase. Minimal consumerism doesn’t require you to live a hermit’s life. Having fun does not require spending an arm and a leg. It requires practice, just like anything else.
Commit to living debt-free. You must resolve never to get into debt again after becoming debt-free. The idea is to plan and save for major purchases. Maintaining a budget is also imperative, with the ultimate goal to be debt-free.
Debt-free living comes with many benefits. Make sure not to take on additional debt after all the hard work you put into getting there.
The good news is that no one has to live with debt forever. It is possible to become financially responsible and in control as soon as possible – regardless of your income level. Seek to manage and eliminate your debt so you can command your path, rather than having your strings pulled by creditors.
With virtually no debt, you may switch careers, climb the Everest, start a business, or take time off to care for your family. Debt-free is how man was intended to live.