Life and Debt: 5 Benefits of Living Debt-Free

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For those who've lived mired in high-interest debt for many years, the Zen-like state of living debt-free can take some getting used to.

Living with credit card balances month after month, carrying a car loan for five or more years, resigning ourselves to long-term student debt and a lifetime of mortgage payments have become so common, it almost seems that’s how things are supposed to be.

But what if we chose a different road?

Though financial, personal and career factors can make the idea of “choice” seem novel or far-fetched, many people can change their spending patterns and start a journey toward a debt-free life. If you’re tired of dreading the walk to the mailbox, exhausted from living on a budget that’s stretched thin by interest and fees, or worried about the stress that chronic debt is putting on your relationships, we have some incentives for you to change your ways.

Here are five benefits of debt-free living:

1. Avoiding interest

According to, the average interest rate on new credit card offers is 14.95 percent. The average credit card debt for those who carry a balance is about $5,000. That’s a lot of interest that Americans are building into their lives and into their monthly budgets. Keep in mind, those numbers are just averages. For folks with bad credit histories, interest rates can be significantly higher, and some households carry much larger balances from month to month.

Becoming debt-free lets you avoid all that. Interest has a way of sapping our budgets and (much too easily) becoming a way of life. Over time, interest on credit cards and other unsecured debt can cost consumers thousands and leave them with little tangible benefit.

2. Saving more

Did you know that statistics compiled by the Federal Reserve, the IRS, and U.S. Census Bureau in 2012 showed that 25 percent of households have no savings at all? The average retirement nest egg is only $35,000.

Of course, avoiding interest and fees on debt leaves more money in our pockets. It’s not a huge leap to assume those able to dodge long-term debt have more choices about how to direct their income and a greater opportunity to save. Not having to shoulder monthly bills inflated by interest can let us more aggressively save for college, retirement, a home purchase, or an emergency.

When we reframe how we think about interest and redefine it as a “tax” on debt (a tax that’s paid to private corporations, no less) then it becomes a bit less palatable and harder to swallow long-term.

3. Being able to seize investment opportunities

Living debt-free carries a very powerful but often-ignored benefit: being able to spend when the moment is right. Those without lingering debt can seize investment opportunities in situations where timing and speed matter. It’s a painful twist of logic, but it’s true: Not having cash can be expensive. It’s not just the interest that costs us; it’s the price of lost opportunity.

4. Having the freedom to make lifestyle changes

Chronic, long-term debt can limit our choices in life. It can keep us saddled to a place we no longer love, stuck in a relationship that no longer works, tied to a job that no longer inspires us — personal costs that few interest rates can equal. But making conscious choices and taking disciplined action to avoid debt at nearly all cost can begin to change this losing equation.

Being able to predict our expenses, plan for savings, and slowly build the resources to fund change in our lives is empowering. And, arguably, it all starts with avoiding debt.

5. Living with less worry

Not measured by any statistic or reflected in any report is the peace of mind that living debt-free provides. Unburdened by interest and late fees, free from the shuffle of trying to stay ahead while that interest compounds, not bothered by fears of repossession and dings to credit scores (not to mention everything a bad credit score means these days) is a real quality-of-life benefit.

For consumers who’ve embraced a lifetime of constant debt supported by easy credit, the Zen-like state of living debt-free can take some getting used to.

Again, it’s important to note that in our post-recession economic reality, many families have no choice but to live in at least a temporary state of indebtedness. Long-term unemployment, stagnant wages, upside-down mortgages and other factors make debt simply unavoidable for some. But if there’s one thing that tough economic times can teach us, it’s that even prosperity can be a precarious thing.

With that truth in mind, living debt-free and having minimal exposure during extreme economic swings is just smart strategy. And when you consider the very real benefits that a debt-free life can offer, the idea becomes even more compelling.

Stacy Johnson

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