For many, being debt-free is an ideal way to live — for good reasons. When you aren’t held back by financial obligations, such as loan payments, you can live a life that is rich in many ways.
Consider the following benefits of being debt-free. You can enjoy:
1. The Freedom to Choose
When you’re overburdened by debt, you find yourself trapped on the debt treadmill. Being free of owing others money puts a spring in your step, because you know that you’re not obligated. Instead of pouring any extra earnings into debt, you can spend the money on whatever you choose, such as traveling or giving to charitable organizations.
2. Relief From Anxiety
There’s anxiety in owing money. Knowing you’re expected to pay a certain amount on bills like credit cards and auto loans can be unsettling, especially if your budget is tight. Worse is the anxiety that comes with having to scrape together your mortgage payment each month. Pay down your debt and you’ll feel an immense relief at knowing that if something happens and your income becomes limited, you won’t have to worry about making debt payments.
3. Increased Savings
No debt also means paying no interest and no interest means you can funnel a significant amount of money into your savings account. Additional savings allows you to build an emergency fund and save for retirement.
4. More Fun
Funding your dreams gets a whole lot easier when you have no debt. With the money you would otherwise be paying toward debt you can create a “fun fund” that allows you to enjoy life and do things like travel throughout Europe or take up a new hobby without having to worry about the expense.
5. Better Financial Health
When you have no debt, your credit score and other indicators of financial health, such as debt-to-income ratio (DTI), tend to be very good. Though this may not seem important since your goal is not to get more loans or credit cards, good credit is useful in many ways. Potential landlords can use your credit score to decide whether to rent to you, and you also get better car insurance rates and avoid paying deposits on utilities and cell phones.
6. Increased Security
Being debt-free makes the prospect of losing your home less likely, and it means that you don’t have to worry as much if you lose your job. If you do become unemployed, you’ll have the security to look for the ideal position rather than grabbing the first thing that comes along because you have to pay off your debt. Living free-and-clear also means that you can leave a job that you don’t like without worrying about your finances.