Can you imagine having no debt? What kinds of decisions come with each paycheck when you owe nothing? Your savings account is bursting at the seams, so you can add some more to the world travel budget. But wait, that budget is set for two years of travel already. Your time volunteering and visiting the orphanage you helped fund in Haiti will happen when the kids are on school break, so maybe it’s time to put a paycheck or two into the business you’ve always wanted to start. That could even add money to your money and set up the family for when you’re gone. No worries.
This kind of dreaming doesn’t have to be a dream. Whether you’re in a stage of life where college planning is central, retirement is imminent, or marriage and joint accounts are calendar days away, being debt-free is possible.
Instead of dreams of running away from it all and cracking coconuts on a deserted beach, take a few minutes to think about how you really want to live — maybe with electricity and some great vacations — and see how you can get started today.
Knowing your debt and your spending can free finances and prevent draining them in the future. While being $12,000 to $200,000 or more in debt may not sound great, it can be good, really. Installment loans and credit cards are often bad debts, but home mortgages and college loans generally are good debts because they have lasting value. Try a range of calculations with current and expected income, payment amounts and length of loan. Median debt for a college undergrad, for example, is about $20,000, and a 2009 study found that the average repayment time was 11 years [source: College Board].
If the large debt numbers are overwhelming, try learning about your own small purchases and how they add up. Keep receipts for a month or so, including those small grocery, drugstore and fast food purchases, and highlight items bought as “extras” or treats — the non-essentials. These could be pricey condiments from the international food aisle or electronic gadgets or new lotions and cosmetics or toys for kids. After finding your personal weak spots or spending trends, limit these types of buys to once a month so they become a real treat. Money saved can go to larger debts….. read more »