Saturday, January 12, 2008

Debt-free Living Leads To Peace Of Mind

By Stephen Losey

If you're not sleeping well at night, you probably have a lot of debt. Owing money is one of the biggest causes of stress-induced insomnia. Becoming debt-free is the only way to reduce that stress.

The simple truth is that finance companies and banks avoid discussing debt-free living because it ends up costing them a lot of money. They make their money by offering credit cards and loans to anyone who can make the monthly payments. If no one wanted to borrow money, or if no one carried balances on their credit cards, they wouldn't make any money themselves. They'd go out of business!

Luckily for them, debt is no longer a taboo subject in today's society. No one thinks twice about getting a loan these days, or running a credit card balance. In the old days, debt was always backed with some kind of asset -- a house or a car, for example. You could always sell the asset to pay back the debt (or a large part of it). These days, however, debt is used to buy intangible things like vacations, which is a dangerous situation, because you're on the hook for the whole debt.

Finance companies make it so easy to get into debt, of course. How many credit card offers with "low introductory rates" have you received in the mail over the last year? How many times has your bank offered to extend you a line of credit based on the equity in your home, even though you haven't paid off your mortgage? How many car companies have offered you low-interest or even no-interest financing in order to get you into one of their vehicles?

Don't follow the crowd and wallow in debt, however. It's hard to live free of debt, but it brings many advantages. The biggest advantage is that it brings peace of mind. When you live within your means and avoid large debt repayments, you'll live a better life. You'll be happier, your family will be happier, your friends will be happier. You'll sleep better. You'll feel better!

It's not easy to switch to a debt-free lifestyle, but it can be done. You start by not incurring more debt -- live within your means by paying with cash and not buying things you can't afford. Then you eliminate your existing debt by freeing up some money and aggressively paying down you debt using the "debt snowball" method.

Now avoid debt for the rest of your life. There shouldn't be any reason to buy anything using debt, except perhaps for a house. But be aggressive with your mortgage: pay it down as quickly as you can -- there's no need for a 40-year mortgage.

It'll take some effort to eliminate your debt, but the way you'll feel once it's gone will make it all worthwhile. Debt-free liiving used to be the norm, but it's a lost art these days. Do your best to recover it!

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