Many people are looking at the future and want to become debt free or avoiding debt. But there are many reasons why it might not be in your best interest to become completely debt free. There are times that not having any debt could put you in a situation that can become annoying and can mean that you end up paying more.
There are some thoughts that you need to consider before you make your decision to avoiding debt. It is possible for debt to be a positive thing in your life and you need to choose if you want this or you want a debt free life.
There are many benefits that come with living avoiding debt and you need to look at both perspectives before you make your decision.
- Stress – it is possible that living with debt can cause undue stress in your life. It will always be there and if it starts to spiral out of control and you have to pay more for your debts than you have money coming in this can have a negative impact on your health. If you have no debt then you won’t feel this stress and you will have few money worries.
- Purchase freedom – you will be able to buy the things that you want because you won’t have money going to the creditors each month. You can spend the money on the things that you want because you can. It gives you a sense of freedom.
- Interest payment – you won’t be paying any interest because you don’t owe money. This means that when you purchase an item it is cheaper than those that put the item on credit. They are in fact paying more for the product than you. You are not making the credit companies rich, because interest payments are the money that the companies are making from your purchases.
You will have more money sense avoiding debt because it shows that you are able to manage the money that you have coming in each month. You are able to:
- Live with the money that you have coming in to your home. You are not spending more than you earn.
- You have the ability to budget and to manage that budget well.
- You might be able to put some money away each month into a savings account to pay for the bigger bills each year.
- You know that if you had the money you would love to be able to buy what you want. But you save for the important purchase and they mean more to you than if you had bought them with credit.
Negative Impact of Avoiding Debt
Surprisingly there is a negative impact that can have on your finances if you live a debt free life. The main effect that it will have is the credit score that you have; this is a record that is held by special companies that show other companies how you handle your money in relation to debt. If you have had no credit then your credit score will be low, this could influence many decisions that could affect your life and your future. There are certain situations where having a low credit score can impact your life now.
- If you were thinking about taking out a loan the interest rate that you would be offered would be high. This applies to mortgages, so even though you might not be looking at the prospect of any other form of credit a mortgage can also be affected by a low score.
- If you ever wanted to start up a business your personal credit score could be used as an assessment as to the potential that you could make great business decisions. If it is low they could assume, wrongly, that your credit history is not favourable.
- Employment can also be affected by a low credit score. An employer might want to check out that the person that they want to higher is financially responsible with their money. Someone with a high score and lots of debt could be seen as a better person in regards to finance than someone with no debt. This seems silly but very true.
Living a life where you earn money and you use this money wisely each month and you choose not to pay credit companies interest can sometimes seem like the dream. But with this come’s some very difficult consequences and ones that you will need to live with. It could mean that you pay more in interest for your mortgage payments, but if you are great with money you can reduce this interest long term by paying more of the debt each month.
Each person will have their own feelings towards debt and the effect that it can have on you long term. The choices that you make are yours alone, and if you are comfortable living with debt then this is your choice to make. The same if you choice to live a debt free life you will reap the rewards most of the time.