Paying off consumer debt was never at the top of my list. We paid our bills and we were doing okay.
Until that day in 2015 when my husband decided he wanted to leave his managerial role and step back into an hourly position. It was a blow to our budget and really opened our eyes to how much debt we had.
We never really thought much about the overall balance we were carrying. We could manage the $50 credit card payment or the $250 car loan payment. However, when we finally added up the debt and saw an amount exceeding $83,000 in consumer debt alone we knew something needed to change.
Is it the right time for you to pay off your debt? Paying off debt takes a lot of hard work and dedication as well as the need to stay motivated. It is a journey you will be on and will change your life for the better.
Why do I need to prioritize debt repayment?
Debt is risky and leaves you vulnerable. You can not make the most of your money when it is tied up with debt collectors. If you were to suffer from a job loss or serious illness it will be harder for you to stay ahead of your bills. Your credit card bills may go unpaid if you don’t have an adequate emergency fund and end up in collections.
Enjoy Your Hard Earned Money
How much are you paying on minimum payments alone to your debts? Credit cards, personal loans, student loans, car payments etc are all types of debts (and your mortgage too!).
When you are making payments every month you are giving your money to the creditor rather than saving the money for yourself or spending it on things you value. Just imagine – your $500 car payment could fund a pretty nice vacation in 6 months! Hello, Hawaii!
Improve Your Credit Score
Your credit score is important if you want to take out a loan for a home or another large purchase. By paying down your debt you will shift your debt to income ratio. This normally has a positive impact on your credit score. While I don’t encourage debt I do know that a credit score is important for different things like buying a home.
When you sit down with your budget for the first time it is eye opening how much money is being sent off to pay the debt. Every time you send in a payment you are reminded of the debt. This causes stress in your personal life, marriage, with your family etc. You may not feel stress over it but when you start paying down your debts you will feel a sigh of relief!
Reduce the Number of Bills You Pay
This goes back to the stress factor. If you have multiple credit cards, loans, car payments etc you are spending a lot of bills every month. It is difficult to manage all of those accounts and keep track of everything. By reducing the number of bills you have to pay each month you free up money for your goals and have less stress. Win! Win!
Own Your Assets
Have you ever thought about owning your house outright? Your home isn’t truly yours until the last payment is sent to your lender. When that last payment is sent in you no longer have to worry about foreclosure. When your car is paid off, it can’t be repossessed. You no longer have to worry about someone taking your valuable assets.
You are No Longer at the Mercy of the Lender
When you owe money to anyone – the bank, a family member, credit card company – you are at the mercy of the lender. Depending on the terms of your loans your interest rate can be raised. You have a minimum payment due on a specific date and it can fluctuate based on their mathematical equations. Once you prioritize debt repayment and your loans are paid you are no longer the slave to the lender. You are truly free.
Have A Reason
While paying off debt can do wonders for your credit score and your financial health you must have a reason why you are doing it. Paying off large sums of consumer debt is not easy. It is a long road that not many people understand
In the USA we are trained very young that a credit card is normal, a car loan is normal, student loans are necessary. A mortgage is a non-negotiable if you want to be a homeowner
However, as I have gotten older and learned more about personal finance I now know that none of this is true. The ultimate freedom comes with paying off debt.
However, it will be impossible for you to prioritize debt repayment if you don’t have a big reason why you are doing it.
Of course, all of the reasons I listed above are important reasons to get out of debt. Is there something more?
Do you want to retire early?
The early retirement movement is growing. It’s referred to as “financial independence / retire early or F.I.R.E.” and a lot of millennials are working toward retiring well before their parents. Maybe this looks like retiring in your 30’s so you can homeschool or retiring in your early 50’s to spend time traveling with family.
Do you want to travel more?
Think about your monthly debt payments. Now, take that money and apply it toward travel. Depending on the amount of debt you have you can afford a pretty nice vacation every year with the amount of money that is going to the banks.
Related: Should I be traveling while in debt?
Do you want a stronger marriage?
Debt causes stress which leads to tension in marriages. Money fights and money problems are a leading cause of divorce. If you can take care of your debt early on in your marriage and get on the same page financially you’ll have a much stronger marriage.
Do you want better health?
I already touched on the stress that debt can cause. Anxiety is another big health factor that large amounts of debt can have. Your overall health will improve when you are less stressed and worried about your debt. You’ll have a weight off your shoulders and will be able to feel the freedom.
Do you want to be more generous?
Giving is a wonderful thing but it is difficult when you have so much money going out every month. You’ll be able to bless others more often or with larger sums when you are no longer sending the money to the bank.
When you prioritize debt repayment you give yourself options.
Paying off your consumer debt is difficult. Making the decision to prioritize debt repayment is difficult.
However, when you are finally making your way through the debt and starting to see how much of a difference it makes in your life you’ll start to understand the freedom it brings. By not owing anyone a penny you’ll have complete control over your money. You will no longer be a slave to the lender. You will be financially free.