If you are worried about your financial health and feeling confused and lost about your financial future, then it’s pretty common, you are part of the majority. These days, most Americans are quite comfortable living with debt and think a little debt won’t hurt, will it? It starts with borrowing small amounts to cover unexpected expenses or to bridge a short-term cash crunch between paydays. However, things changed when borrowing becomes a habit and gradually a necessity. You might start making a small purchase on your credit card and end up having thousands of dollars in debt. If you are wondering what exactly is wrong with having a little – or a lot – of debt and why sensible people crave for a debt free life? Read on. Remember, if you want to ensure your financial freedom in the best possible way, you should opt for a debt management plan right away.
Life with debt
Being in debt can have worst impact on your life in more ways than you might imagine. First of all, creditors and debt collectors can make your life miserable with repeated phone calls and thousands of mails. Credit card debt usually gives you an emotional high like you’re getting something for nothing and it can continue to make you spend, even though you can’t really afford the payments. However nothing comes free and you have to pay a price for the debt you create. That price mostly comes in the form of interest. The higher the interest rate are, the more you end up paying for your debt and the longer it takes you to pay off. In addition, monthly debt payments limit the amount of money you would have spent on other things like your retirement fund or Christmas trip .The more debt you accumulate, the more your monthly payments becomes and the less you have to spend on everything else. Credit card, auto, and student loan debt are all taken into account, when you make a mortgage application. Therefore, if your other debt payments are too high, you may get turned down for a mortgage loan. The stress from huge debt can lead to mild to severe health problems including ulcers, migraines, depression, and even heart attacks according to a poll done by Associated Press and AOL.
Part of your credit score is based on the amount of debt you have. Therefore, the more debt you have, compared to your credit limits and original loan balances, the lower your credit score will be. Poor credit will ruin your chances of availing a future loan or getting the job you really want. Last but not the least, the added stress of dealing with financial problems can have a destructive effect on your personal relationships and can cause a marriage breakdown as well.
Life without debt
Debt-free life comes with many benefits. With little or no debts at all, you can significantly increase your personal savings. While facing unexpected economic hardship from a job loss or hug medical bills, the chances of being harassed by creditors or losing personal property to repossession are also quite low. Most importantly, with a debt free life you can ensure future financial freedom. Financial freedom does not mean you will never have to pay someone money again, rather it means you have the power to make more preferential choices about how to spend your money. Having no debt hanging over your head and not having to worry about losing your property to creditors, you can restore your peace of mind. Finally being free from worries about making regular personal and credit card debt payments, you can apply those funds toward discretionary spending or home building or can put aside money in savings. It may seem a little ironic, but becoming debt free can improve your chances to avail future credit as well.
Paying off debt doesn’t happen overnight and it’s not a quick fix. Maintain a disciplined lifestyle, make steady payments and opt for debt settlement or debt consolidation plan, in order to get rid of your balances. It is true the road to financial freedom is not a short trip and it may have a few bumps along the way but reaching the finish line is more than worth the trials of the journey.