I know, I know. We’re right smack in the middle of the biggest money-spending holiday of the year, and I’m talking about living debt-free. Your credit cards are probably dripping with debt, and you haven’t even had time to think about how to pay them off. But no time like the present, right? When it comes to getting control of your finances, waiting until later is never the right move.
You, but Debt-less
Take a minute to consider what your life would be like without any debt. And I’m not just talking about paying off credit cards. What about no monthly student loan, car, or mortgage payments? Imagine if you owned everything outright, and didn’t have to write those checks each month that barely seem to make a dent in reducing overall debt. Financially speaking, few things would compare to being debt-free except, say, winning the lottery.
I’m not saying it’s always bad to have debt. There is a time and place for borrowing money and assuming financial risk. But that doesn’t mean you shouldn’t have a plan for paying the money back, whether over the course of a few years or a few decades.
Forming a Plan
Instead of just blindly continuing to make your monthly payments, why not figure out what it would take to erase your debt altogether? This is a good exercise to do even if you’re no where near paying off your major loans, like your mortgage.
For example, Tom and Shelley still owe $310,000 on their house, and they pay their mortgage payment of $1840 each month. Sure, they’ll have their house paid off in 30 years, but the total out-of-pocket costs will be $661,942 due to the 5.9% interest their bank is charging them. If Tom and Shelley can pay a little bit more towards their mortgage each month—say, $200—they’ll have their house paid off almost 7 years sooner, plus save $89,000.
Use our mortgage loan calculator to see how much time and money you could save by putting a little extra towards your mortgage.
The Big Picture
Keeping the big picture in mind—even if you’re strapped for cash and maxed out on credit now—will help you reach your financial goals. Think what Tom and Shelley can do with that $89,000 in 23 years, not to mention the $1840 a month they’ll be saving in mortgage payments each month thereafter. How many vacations to Europe is that? How many cars? By envisioning yourself debt-free, even 20 or 30 years from now, provides you with a goal to work towards and helps keep you motivated.