How does it feel to be completely debt-free? (3 Articles)

SHEENA RICARTE

17 min readDec 16, 2023

~ Saturday, December 16, 2023 Blog Post ~

Article #1: How Being Completely Debt-Free Can Impact Your Life (From CNBC)

By Brett Holzhauer, August 28, 2023

The case for being completely debt free and how it can positively impact your mindset

For some, living debt free is a goal worth prioritizing. Here are some things to consider.

Americans are no strangers to being in debt, so much so that it’s now simply become a way of life for many. According to 2021 Experian data, the total average debt balance across all consumer products was $96,371, reflecting an increase of 3.9% from the year before.

While the total levels of debt have increased in recent years there are still many Americans who are aggressively working to pay down their debts. For some, becoming debt free has completely changed how they view personal finance.

Select spoke to several Americans who are currently living debt free and details on how you can do it, too.

The case for being completely debt free

For many, living debt free is a dream that unfortunately may feel far from reality. Whether it’s a matter of strategic debt, such as a low-interest-rate mortgage or student loans, or high-interest-consumer debt that’s from a credit card, many Americans are accustomed to living in the red.

For some, however, the very idea of owing someone money creates a sense of dread and the feeling of a large weight on your shoulders. This feeling alone is reason enough for many to fully prioritize paying down their debts.

Tara Falcone, chartered financial analyst, certified financial planner and founder of the app Reason, explains how doing paying down your debts can fundamentally change your life and give you a sense of freedom.

“Individuals that are completely debt free absolutely have a different mindset. There’s a greater sense of peace, freedom and opportunity that comes with being debt free,” says Falcone. “Not owing anyone anything or being beholden to anyone offers debt-free individuals more options and control over every dollar they own. When you have no debt, you’re able to, with 100% freedom, decide how and when to spend your money.”

While Jasmin Beltran, a communications and public relations manager at Albert, is now at the top of the debt-free mountain, her journey there wasn’t easy. After graduating from college, Beltran accrued both student debt and credit card debt — between her modest starter salary and New York City living expenses, she was making little headway on repaying them.

At the onset of the pandemic, like many young professionals, Beltran moved home to Arizona, using the opportunity to pay down all of her debts. After six months of saving and paying, she was finally debt free.

Beltran says she has now experienced the same sort of euphoria described by Falcone. “The biggest change for me has been a shift in the way I think about debt and money overall,” she says. “I am definitely more careful about jumping into debt now knowing how quickly toxic debt like credit cards can grow.”

That said, she also remains pragmatic in her views regarding debt: “I’ve learned not all debt is bad debt,” Beltran says. “Things like student loans add value to your life and help you gain more opportunities. It’s about finding the right financial mix for your situation.”

Living debt free has also given Beltran a new sense of freedom — she is now living in New York City once again — this time without roommates — and focuses on investing for the future.

How to become debt free

Dr. Alex Melkumian, founder of the Financial Psychology Center in Los Angeles, says becoming debt free is connected to understanding what’s important in your life. Those striving to be debt free have to manage their expectations and emotions, says Melkumian, since some will not be able to immediately afford buying a house or new car after paying off their debt. He adds that while no strategy is perfect, aiming for perfectionism isn’t the best approach. It’s better just to get started than overthinking what strategy may be best for you.

Here are a few tips to consider when designing your own debt-takedown strategy.

Know what your debt amount is

Once you’ve made the decision to pay down your debt, the first step is to find out exactly where you are and what you’re up against, which may in fact be the most excruciating part of your journey.

“Login to all of your [financial] accounts,” says Falcone. “Open any unopened credit card or student loan bills you’ve received. Then take stock of every debt you have. Write down the balance, interest rate and minimum payment for each. Finally, add all of the balances together to know exactly how much debt you have to pay off.”

Pick a debt paydown strategy

Here are several well-known methods to help you pay down your debt:

Debt snowball: When you roll a snowball downhill, it gains momentum and size. This strategy suggests you eliminate the smallest debt first and work your way up to the largest. While doing this ignores the math of interest rates and other factors, it focuses mainly on the psychology of momentum. Conquering the small debts first will help you mentally tackle your larger debt balances.
Debt avalanche: Best for those who enjoy working with numbers and knocking down your overall debt, this system suggests eliminating your highest interest debt first while making minimum payments on the others. This will help you save the most on interest charges.
Debt consolidation: Instead of having five or six debts to tackle, it can be helpful to put everything in one singular place through debt consolidation. For example, I recently consolidated my car loan and student loans through a personal line of credit, which has saved me money in interest and lowered my stress level when it comes to tracking numerous debts. If you have multiple credit card balances to pay off, consider grouping them together.
Debt counseling: If you’re facing significant debt with limited ways of paying it off, consider credit counseling so professionals can help you settle your debt and get you started on a repayment plan.

You can use a 0% APR credit card to perform a balance transfer and save on interest charges to help pay down high-interest credit card debt. The U.S. Bank Visa® Platinum Card provides one of the best overall intro APR periods: 0% for the first 18 billing cycles on balance transfers and purchases (after, 18.74% — 29.74% variable APR; cardholders must complete balance transfers within 60 days from account opening).

Or consider taking out a personal loan to consolidate any high-interest debt. A Happy Money personal loan is a good choice for those who want to consolidate their debts.

Whichever plan you choose, try to stick to it. This will be your foundation for getting out of debt.

Create a budget and cut out discretionary spending

Creating a budget may sound like such a bore, but it’s one of the most important parts of building a debt paydown plan. By doing this, you can figure out a nearly exact date of when you’ll officially be debt free.

As you create a budget, do your best to cut out discretionary spending, as this particular category of spending is where budgets can get significantly dragged down. Whether it’s regular trips to your local coffee shop or shopping sprees on Amazon, cutting down on non-essential spending will allow you to redirect any cash towards your debts.

Consider using a free budgeting tool offered by Mint or Empower (formerly Personal Capital) to help you create a budget and track your spending.

Once you become debt free, stick to a plan to stay that way

Whether your debt payoff date is a few months away or several years away, enjoy the moment when it finally arrives — but make sure you have a plan to remain debt free.

“Be open to potential financial strategies and options available,” Falcone says. “For example, people with credit card debt are made to think that credit cards are evil and that they should pay for everything in cash. However, once you become debt free, it is possible to use credit cards as a cash alternative to earn rewards for regular spending so long as you pay off your card in full every month. Like any tool, it’s all about how and why you use it.”

Bottom line

While personal finance can be about running numbers to see what makes the most sense for your financial goals, that simplification misses the point — personal finance is personal.

There is nothing wrong with not aggressively paying down low-interest debt as long as you’re taking care of your emergency fund, putting money away for retirement and accomplishing other personal finance goals.

However, for some like Beltran, finding a new sense of peace by being debt free simply supersedes the math. If you aspire to live debt free, following a few steps — calculating how much you owe, choosing a paydown strategy, creating and sticking to a budget and formulating a plan to remain debt free once you’ve achieved that goal — will help make your debt-free dreams a reality in no time.

Sources & other links:

https://www.cnbc.com/select/being-debt-free-and-how-it-impacts-life/

https://www.cnbc.com/select/capital-one-cards-to-lose-lounge-access/

https://www.cnbc.com/select/northwestern-mutual-life-insurance-review-2023/

Article #2: How it Feels to Pay Off Debt (From Credello)

By Caitlyn Callahan, June 27, 2022

At a Glance

When you’re able to stop paying off debt and start building wealth, you can gain control over your financial security and freedom. Paying off debt feels good; you don’t have to worry about making payments or owing someone money. Your financial decisions can be completely your own and based on your own goals. It may make life and managing your money easier; living day-to-day is less stressful and saving for the future is possible.

Even if you have a low income, becoming debt-free is doable and well worth it, so it should be something at the top of your priority list.

In this article, you’ll find more about:

What is it like to be debt-free?

Getting out of debt may have been a long, exhausting process, but you’ve made it. When you’re debt-free, you may experience:

Emotional relief. You may feel liberated and relieved to no longer have the stress of paying off debts. You’ve now broken free from difficult times in the past, and you’re able to move forward with better habits and financial freedom.
Feeling happier. More money in your pocket means you’ll have to make fewer sacrifices and can worry less about debts hanging over you.
Comfort. Now you can have comfort knowing those extra funds are in your bank account, and you don’t have to worry about an unexpected emergency taking out all of your cash reserves or putting you more in debt.
Less stress. No longer do you have to think about how you’ll make your debt payments or when you’ll finally be out of debt. Gone are the days of stressing about how you’ll afford all your bills and other necessary expenses while also making payments on your debt.
Better sleep. Stress and anxiety can lead to insomnia and sleep problems, which can negatively impact other aspects of your physical and mental health. Less stress means better sleep.
Feeling more in control. Not having to make debt payments gives you more control over where your money will go. This can help you improve your money management skills.
Improved relationships. Stress and financial struggles can take a toll on relationships. There’s a reason financial hardship is cited as a major reason for divorce. You may also have had to make sacrifices while paying off debt that friends didn’t understand. Being debt free gives you time to focus on others (as well as yourself) and your relationships.
Physical improvements. Stress from debt can cause physical problems such as headaches or migraines, weight gain, heart disease, diabetes, gastrointestinal problems, and more. When you’re debt-free, you may feel relief from some of these physical symptoms.

What to do after you’re debt-free

If you’ve been paying off debt for a long time, it may feel like a part of you and your routine, so it can be strange to think about what you’ll do once you’re debt-free. While your first step should be to celebrate what you’ve done, your next step is to figure out what to do next, including setting new goals and continuing to use successful spending and savings habits to live the lifestyle you want.

Celebrate

The first thing you should do is celebrate your accomplishment. Regardless of how much debt you had, paying it off in full took work, effort and dedication. Take some time away from worrying about making your payments or stressing about finances to allow for space and perspective on what you did.

Set new goals

Evaluate the progress you made and start thinking about your new goals and the direction you’d like to go in next. Think about your new priorities. Your goals don’t have to be very specific yet, but you should have a general idea of what you want to accomplish. Remember that spending more on non-essential goods can easily get you back in debt while saving or investing those funds can help you reach greater financial goals faster.

Apply new habits

Once your debt is paid off and you have extra money that’s no longer going toward debt repayment, you have a big choice to make: let lifestyle creep set in, which means you spend that extra money on more non-essential items, or put those funds toward savings or investing goals. Choosing the latter can set you up for financial success moving forward.

While paying off your debt, you likely formed solid budgeting, saving and spending habits. Continuing those habits and resetting your priorities as necessary can help you make the most out of life’s opportunities in the future.

The psychological impact of debt

Financial stress takes a toll on a person, both physically, mentally, and emotionally.

Physically, stress from debt can be a cause or contribute to heart disease, allergies, diabetes, gastrointestinal disorders, sleep disorders, and even obesity. Mentally, being in debt can have a tremendous impact on your health. Here are a few ways debt can have a psychological impact on your health:

Stress. Stress can have a powerful impact on someone’s physical and mental health, making it easier to develop mental health problems, heart disease, headaches or migraines, GI issues, and more. Paying off debt, especially if you’re struggling to make ends meet, can put incredible stress on a person.
Increases risk factors. Long-term financial insecurity, poverty, pressure to repay debts, and relationship challenges are just a few things negatively impacted by debt. These are all risk factors for depression, anxiety, and other mental health and psychological struggles.
Behavior changes. Some may experience changes in appetite, nervous or obsessive-compulsive behaviors, impulse spending, and other symptoms caused by financial stress.
Increased usage of drugs and alcohol. Debt may cause someone to turn to drugs or alcohol to help deal with the physical or emotional pain from stress. This could lead to addiction, increased debt due to spending on these behaviors, and other physical and mental health challenges.
Spending more. Someone who is feeling anxious, depressed, or stressed may turn to shopping or making impulse purchases to relieve the negative feelings. The problem is that relief is temporary, but the debt can be long-lasting. It can also be more challenging to stick to a budget, pay bills, and be motivated to eliminate debt, which can result in even more debt.

Is being debt-free worth it?

Getting out of debt is one of the best things you can do for your financial security and wellbeing. You’ll see a variety of physical and mental improvements, and you’ll have the opportunity to set and work toward new financial goals without the burden of debt.

That said, not all debt is created equal. Debt such as student loans, home loans, are small business loans are considered “good debt” because they are helping you generate an income or increase the value of yourself or something you’ve purchased. This good debt can help your credit score because it shows you’re a responsible borrower and a lower risk to lenders.

“Bad debt,” such as auto loans and credit card debt, offers no return, so you should pay that debt off first. Bad debt also impacts your credit utilization, which is an important factor in determining your credit score. This is the amount of debt you use compared to your credit limit. Experts suggest your credit utilization be no more than 30%; otherwise, you may face higher interest rates on future loans.

With no debt, borrowers can’t see if you make payments on time and are responsible with your money. Having no debt can also shorten your credit history, which makes up about 15% of your credit score. Even if you have no debt, regularly using and paying off (in full) a credit card can help build your credit history.

It’s also recommended to have a debt-to-income ratio of less than 43% in order to qualify for lower interest rates and better repayment timelines. This means you should have no more debt than 43% of your annual income. A lower ratio can lead to a higher credit score.

Overall, most people will agree the positives of being out of debt outweigh any negatives. When you need the motivation to get out of debt, remind yourself of how it feels to be debt-free.

Source:

https://www.credello.com/debt/how-it-feels-to-pay-off-debt/

Article 3: What Is It Like To Be Debt Free? (From Debt.com / LinkedIn)

By Debt.com, May 12, 2023

If you’re shackled to a large amount of debt, you’re probably broke most of the time from juggling multiple payments, interest and late payment fees. But did you know that excessive debt obligations are draining more than just your bank account? That’s because having too much debt also siphons joy — by limiting the freedom to change your life for the better.

The biggest motivator for turning over a new financial leaf is being able to live a debt-free life. How good would it feel to leave debt behind and have a new future of debt-free opportunities?

So how does kicking debt to the curb bring more freedom to your life? Find out how the benefits of paying off debt can change your life.

You’ll feel better about yourself

Paying off debt won’t solve all your problems, but it’s one of the best ways to boost your self-image. Once you relegate calls from bill collectors, debt shame and beating yourself up for missed or late payments to the past, you’ll be a better version of yourself.

The psychology of being debt-free is pretty strong. You’ll stand straighter, sleep better and be a more likable person when you’re not stressed over how to make all those payments every month. Plus, you’ll feel great about accomplishing what may have seemed an insurmountable goal before you hunkered down and got serious about eliminating debt.

Freedom to afford better self-care

Remember all those self-care services and items you can’t afford now because all your money goes to credit card companies and banks? Paying off debt frees up money for things like massages, the gym, yoga classes, healthy food from specialty grocery stores, dining out at favorite restaurants and socializing with friends.

Don’t go crazy with the luxuries, of course. And try to pay cash when you can to avoid racking up credit card debt. Adding a dose of self-care to alleviate stress, anxiety, and depression may be just what you need to resist the urge to click “add to cart” next time you get the blues.

You move up the ranks as a dating choice

Nobody fantasizes about finding a soulmate who has bad credit and a bunch of debt. You may have to work hard to pay off debt this year, but once you do it, you’ll become better dating or marriage material.

Having no debt shows potential mates that you’re responsible, dependable and planning for a better future. Good looks and passion fade eventually, but a zero balance is forever sexy.

You may improve your credit score

One factor that affects around 30% of your credit score is your credit utilization ratio, which is the percentage of available credit that you’re using. For example, if your total available credit is $10,000 in credit card limits, and you have $5,000 in credit card debt, your credit utilization rate would be 50%.

Ideally, you should keep your credit utilization rate below 30% for a better credit score, according to major credit bureau Experian. When you pay off debt (and don’t replace it with new debt), you may improve your credit score by lowering your credit utilization rate.

Freedom to pursue milestone goals

Maybe buying a house seems impossible because you have too much debt or past-due payments dragged down your credit score. Perhaps you want to get married, return to school or start a family but can’t get started on milestone goals because most of your money goes toward credit card, student loan or other debt.

Even if paying off debt means you must live frugally or take a part-time job for a while, the sacrifice will be worth it when financial freedom clears the path to your goals. You can start saving all that money you threw at credit card and loan payments each month and eventually save enough to put toward a down payment on a house, pay for tuition, plan a wedding or pursue other important goals.

Freedom to further your education

Paying off debt frees up more money each month to pay for college courses or trade school tuition. Having fewer payment obligations means lower monthly expenses, which may allow you to work part-time or change to a job with a more flexible schedule to accommodate class times.

Even if you must take fewer classes at a time, try to avoid racking up student loan debt so your newfound freedom can continue long after graduation.

Freedom to travel

When you have tons of debt, there’s no money left over for vacations or even a weekend getaway. Paying off your debt, however, can be your ticket to traveling again.

You’ll have more money to save for vacations and more cash available when you arrive for dining out, clothes and sightseeing.

Freedom to find a job you love

Are you staying at a high-paying job you hate because that’s the only way you can afford monthly credit card payments? Or maybe you have high car payments on an expensive vehicle that you can barely afford. Even worse, maybe you owe both of those nagging debts.

When you eliminate debt, you can broaden job search requirements. Monthly expenses are lower, so salary doesn’t have to be the main barometer by which you choose a profession or employer. Want a less stressful job or one that feeds your soul? Get rid of debt for more choices.

Freedom to relocate

Do you long to move to a city with more cultural offerings or natural beauty but stay put in a boring city because you can’t afford to move until you pay off credit card debt or student loans?

If you hammer away at those balances until your debt is gone, you can sock away extra money that went to credit card payments until you have enough to relocate with a tidy amount of emergency savings.

You can save more for retirement

Whatever your age, you’ll eventually retire. So, the sooner you start socking money away for retirement, the better off you’ll be when you wave goodbye to the workaday world.

What if you could eventually save the hundreds of dollars you currently pay each month toward debt in a retirement account? You can even start gradually, saving a bit more as you pay off each debt.

You may be able to retire earlier

Owing a large amount of credit card or other debt as you near retirement age may mean you have to work longer because you can’t afford to retire. Even worse, many people dip into retirement savings to pay off debt, diminishing retirement income.

Around 23% of respondents in a 2019 Bankrate survey cited “debt repayment” as a reason they took early withdrawals from retirement accounts. By breaking the debt habit, you have a better chance of not only saving more for retirement but also needing less of a retirement income.

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