Even as a finance guy for decades, it took me a lot of years to fully comprehend the benefits and value of planning and living a debt free lifestyle.
Sometimes I think the reason I and so many others wanted to resist the idea is because it seemed like an impossible dream or something that could not be accomplished. It can’t happen quickly. I takes years (often decades).
Earlier in adulthood we also have a naturally high debt to equity ratio in our households. It’s not uncommon for younger adults to have the full-monty of debts (I certainly did in my 20’s and 30’s). These would include;
- Student loans
- Credit cards
- Auto loans
- Mortgages
- Home equity lines
- Personal loans
Making things just a bit more complicated, earnings are usually very robust when we are in our 20’s and 30’s. It takes a while to figure out how to keep the earnings growing (some never figure that out). So we are just left with a pile of debt that seems to never decline or worse yet, slowly keeps creeping up to higher and higher levels.
The first step in being debt free is halting all future growth of debt. Even the act of making a personal commitment to be debt free is enough to turn the tide for your future as you will no longer go out and take on new loans. That’s a big but important step. But it is a step worth taking.
Being debt free isn’t the one and only key to happiness but it certainly creates a situation where you have far less stress, more opportunities for exploration and personal growth, and a much higher margin of safety when things go wrong.