Why is it important to have no bad Debt?
Debt is a word nobody wants to hear. There are different types of debt. The good and the bad type.
If you are buying a house, the mortgage is a debt. If you are a student, student loans are debts, if you get a car via a loan, it is debt. These are considered good debts.
However, when it goes out of control or it surpasses your Income - say you overspend with your credit card - then the debt can snowball and becomes a tricky problem.
Here are some situations indicating that avoiding Debt is extremely beneficial to your finances and life as a whole.
Become Stress-Free
Do you like to sleep well at night? If your answer is yes, then you will find an advantage to work and pay off your debts. Stress interferes with your relationships, marriage, friends, family. It brings anxiety, physical pain and serious health issues. Eliminate financial worries is something that can transform your well-being.
Increase Your Financial Security
When you pay off your debts, you get the opportunity to make the most of your money. The extra funds after you become debt-free allows you to either increase your Savings or treat yourself a little. The interest you pay monthly in the hope to reduce your debt could be used in other endeavours. Being debt-free gives you room for financial security and to explore different avenues.
Increase Your Savings
Every little coin counts. So, after you pay off your debts, the possibilities to increase your Savings become your new goal. You can start planning to achieve milestones such as a new car, a dream vacation for your family, a retirement plan. The sky is the limit when you have your finances under control.
Indulge Yourself without Guilt
Wouldn’t it be nice to buy that new gadget you want or a fashionable pair of boots? If you manage your money correctly and you are debt-free, then you can! One of the first lessons you have to keep in mind: you don’t spend more than you earn. Follow this rule and you’ll be able to treat yourself once in a while without harming your budget.
Improve Your Credit
Whenever you have a huge debt, your credit suffers. And what does it mean? It means with negative credits, you will have trouble applying for loans, get better interest rates, buy a house, and get unlimited credit card approval.
Teach Your Children Good Money Habits
Managing your finances well, allows you to teach your kids the value of money. Lead by example is fundamental to prepare your children to understand finance control and it will help them to become better adults when it comes to money. Don’t be afraid to show your own situations as an example.
Increase Your Future Earnings and Your Assets
Controlling your finances leads to new possibilities. For instance, you can become adventuresome and decide to invest in the stock market, after all, you have room to explore. Also, improving your savings will allow you to purchase a car, house, invest in education, which will eventually improve your income. As a professional finance analyst, Latoya Irby mentioned on The Balance: “Debt borrows from your future incomes. Any time you take out a loan or charge something on your credit card, you’re borrowing from the money you hope to earn in the future. Do you want to spend your money paying for something you've already used up and don't get much value from anymore? You never know what changes may happen in your income, so it's better not to mortgage your future.” (Source: The Balance - 9 Reasons Debt is bad for you)
More Fun
Debt-free means more time to invest in your plans and dreams. Take up a new hobby, save enough to travel or just enjoy a good night out with friends with no guilt. Yes, money planning can be rewarding fun. Trust us!
Guess we gave you enough motivation to invest in your budget and to pay-off whatever debts you own. So, how about starting now?
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