Striving to live without debt can seem impossible sometimes, especially if you’re surrounded by those who think nothing of being thousands of dollars in credit card debt. The bad financial habits of your friends and family members can have a detrimental effect on your ability to be responsible about your spending. After all, it can be hard to resist when it seems like everyone you know is taking fabulous vacations or buying great new cars. A debt-free lifestyle can also seem hard to achieve if you already owe money. While there are certainly a number of concrete steps that you need to take if you’re going to live your life without owing money to anyone else, your mindset is also important.
A surprising number of people think about owing money as being a kind of natural state of being. They assume that they’ll never be entirely debt-free, and rather than looking at the kind of money they’re losing in interest, they simply think of those payments that they send off each month as the cost of owning the things that they want. Thinking about debt in a different way can help strengthen your motivation to get rid of it.
First, it means that you are never truly free. The necessity to keep paying that money each month can limit you in many ways. Second, you are probably losing more money than you realize. On some types of loans, you might not even be paying enough to cover the rising interest. Finally, considering money as units of your time and your life rather than as some abstract concept can really hit home how much of it you’re wasting. How much did it take you to earn the $200 that you sent off to the credit card company this month? How many hours of your life did you spend to pay off a bill that is much higher, thanks to interest, than it was when you initially made the purchase?
Your first step can just be exploring ways to make your payments more manageable or reduce interest. For some of your loans, this might involve refinancing. You may be able to refinance student loans with NaviRefi, lowering your monthly expenses and giving you the opportunity to get a payoff plan in place that will help you get out of debt sooner. It might be possible to refinance your car as well. As for your credit cards, do you ever get new card offers that offer you a balance transfer for a low or 0% interest rate? Those introductory offers don’t last forever, but they can really save you some money for the period of time that they’re in operation.
If you’re contemplating a debt-free lifestyle, one thing to think about is your home. If you’re a homeowner or you hope to become a homeowner, a mortgage is the one type of debt that you may want to keep. You get a tax deduction when you have a mortgage. In addition, if you pay it off early, you might actually have to make what is called a prepayment penalty. Similarly, although you want to protect your assets, paying cash for a house instead of getting a mortgage isn’t always the smartest financial strategy. Different financial experts will give you different advice regarding what to do about your home, and this is one area where you may need to simply make a decision based on what feels more psychologically satisfying to you.
Another useful thing to think about is how you feel about money. Is it a source of anxiety to you, or are you happy-go-lucky about it? Do you think of it as something that makes you more secure? How much would you need to feel truly financially independent? What’s the lowest amount of money in the bank you can feel comfortable about having? Answering these questions can help you identify some of the beliefs that underlie your potential bad money habits and other behaviors and get a better handle on them. For example, maybe you’re pretty easy going about money, but when you examine this more closely, you might realize that this causes you to make careless decisions about your spending which in turn does create anxiety.