Paying off debt is a must for anyone who wants to improve their lives. Until you free yourself from overwhelming amounts of debt, you will always be held back by the money that you are wasting – paying for your credit obligations and the interest rates associated with it. Debt has a devastating effect to your future so you may want to consider tackling this financial problem before you make any other plans.
According to the latest household debt and credit development report published on NewYorkFed.org, the consumer debt increased by $129 billion in the first quarter of 2014. By the end of March 2014, the debt is now at $11.65 trillion. The biggest part of this debt still comes from mortgages at $8.17 trillion – which increased by $116 billion from the last quarter of 2013. There was also a considerable net increase in the mortgage balance of $233 billion. Next to this, student loans increased by $31 billion. Now, it has a total amount of $1.11 trillion. On a positive note, credit card debt and auto loans decreased to $2.9 trillion and $85 billion respectively. Not only that, the delinquency rate improved during the first quarter of this year. This shows that consumers may be borrowing a lot of money but they are also paying their dues on time.
However, you cannot erase the threat that comes with having a lot of debts. The total amount of credit is still rising. Even if consumers are paying on time, the fact that the balance is increasing and not decreasing puts us in a dangerous position. Soon, the balance might overtake us and make us unable to pay off our debts.
4 non-financial improvements after you get rid of your debt
Of course, we all know that paying off debt is not as easy as it sounds. But it is a necessary thing to do. According to an article from Bankrate.com debt does not only ruin your credit score and finances, it also affects your psyche negatively. It casts a shadow over a lot of areas in your life – your ambitions, confidence and even your relationships. The article even goes on to say that debt can suck out the happiness that you usually get from spending. At least, this is probably true if you are buying stuff using credit.
If you decide to pay your credit balance down, you will get a lot of benefits in your life. The great thing about it is, the benefits go beyond your finances.
In case you want some motivation to paying off debt, you should consider these 4 non-financial benefits to a debt-free life.
- No stress. At least, you will not have a stressful relationship with your money. Debt brings forth all types of stress in your life that could lead to more serious health problems. If you do not have debt, you do not have to worry about payments that include high interest rates. People who do not have debts are considerably looking a lot better than when they have debts. By reducing the stress in your life, you can lead a healthy lifestyle that will lead you to financial success. That is because you are lowering your chances of getting illnesses that will require you to spend high health care expenses.
- Secure family ties. Another benefit that you will get from paying off debt is family security. Believe it or not, a lot of marriages failed because of financial issues. After the Great Recession, it was obvious that the main financial issue of families involved debts. By eliminating the stress that debt brings into the household you are actually removing the same stress that could drive you all apart. You do not have to succumb to the blame game. Not only that, you can build your financial cushion so that your family will not have to suffer in case an emergency happens.
- Better future. Once you have finished paying off debt balances, you will now be in a better position to build up your wealth. You can start saving more or investing so you can finally pursue your dreams. Debt holds you back because it gets you to waste money on interest. Now, you can grab opportunities that will allow you to improve your financial resources so your family can benefit from it in the future.
- Allows you to be generous. Lastly, being free from debt allows you to become generous in your own way. Now that you do not have to allocate money to pay off debts, you can use some of that freed money to donate to those who are less fortunate than you. That alone will give you so much happiness and fulfillment that cannot be felt with the presence of debt.
An article published on Learnvest.com tells a story of this young woman who freed herself from $30,000 worth of debts. These were mostly credit card debts. When she was forced to face the truth about her financial problems, she decided that paying off debt should be her priority. She changed a lot about her life and habits. After being debt free, she realized she changed so much that she was not totally honest about what she really needed. She can now say no to a lot of her usual expenses and she did not feel deprived at all. She learned that delayed gratification is actually more rewarding in the end. Now that she got rid of her debts, she started saving and has quite an amount in her account. It made her feel good about herself and her future.
You see, the non-financial benefits of paying off debt is actually a lot more satisfying in the end. The lesson you will learn will not only make you wiser, it will also help you avoid a lot of the mistakes that you did in the past.
How debt elimination can help you grow your wealth
But even if the non-financial benefits are better, that does not mean you can underestimate the financial benefits of living a debt free life. To add to your motivation to pay off your credit obligations, here are a couple of things that you will enjoy financially if yo get out of debt.
- You get to save more. The interest rate of debt is much higher than your savings. So if your extra money goes to paying off debt, then you know that you are actually saving a lot more than you think.
- You are able to invest. One of the two factors that will help you accumulate financial wealth fast is investing. We have discussed previously that investing is one way for you to use the extra money that is freed by your debt payments. This is one of the direct ways that you can grow your money so it can start earning for you.
- You are free to pursue opportunities. Not only can you invest, you now have the resources to pursue opportunities. For instance, you can now afford to travel – as long as you budget it properly. That is one way to help you relax and really enjoy your money.
- You can now choose to use your money wisely. Lastly, after paying off debt, your money is not longer obligated to be sent to your creditors and lenders. You can choose where you want to use it without feeling guilty. You can not act on your fantasies and make your dreams into a reality.