Debt is an albatross that hangs around many peoples’ necks. Consumer credit card debt, student loans, car loans, mortgages, and more all combine to cause a lot of stress for those who are burdened with them. Being debt-free is a financial goal for many people, and those fortunate enough to achieve this milestone are able to live their lives with tremendous freedom. A year or more of debt-free living provides many lessons, including the following:
Unexpected expenses—those that we do not anticipate and cannot budget for—can always be expected. Whether it’s emergency surgery for your beloved dog who accidentally eats a sock or if your car is totaled in an accident, those who are debt-free can easily deal with the financial shocks of these difficulties. A lack of debt means that you can have the surgery or rent a car without having to worry about money. You can deal with and resolve the situation because you have the financial resources to do so.
Beware of Falling Back into Debt
Once you are completely debt-free, it can be easy to fall back into debt. It is possible to rationalize a purchase on a credit card that you know that you can pay off in a few months. To remain debt-free in the long-term, it is important to guard against lifestyle inflation and the danger of falling back into debt. Instead of using credit cards, you now have the opportunity to save up for what you want, provided you can delay your gratification for a bit.
Although it might seem counterintuitive, being debt-free for a year or more does not necessarily mean that your savings account will increase. While paying off debt is often addictive and inspirational for people, the opposite is not always true. People do not always find building their savings to be a motivational activity, and so they neglect it. Like all positive financial moves, saving money is a skill that must be regularly practiced and reinforced until it becomes a habit. Being debt-free means that you have the option to regularly contribute to your savings account, and it is an excellent opportunity to increase your wealth.
Being debt-free is a major accomplishment. Embrace the lessons, and you can continue to improve your financial life!