Many Gurus have said – you should be debt-free. I understood it partially. I implemented some of the “Baby” steps to reach that stage. But, I faltered. Then, came COVID-19. We all are facing an unprecedented situation. And this has really opened me to, you know, the idea of being debt-free, and how much that reduces your risk. So the thing I really wanted to talk about in this blog post was you know the importance of being debt-free!
Imagine, for a moment, that you’re debt-free. No monthly payments. Your monthly expenses are around INR 30K. You have a paid-for house. You do not have a car loan and you pay your credit cards in full every month.
In my case I would have been able to live for more than one year without any serious cash issues just using my emergency fund to fight off the COVID-19 lockdown, if I had known at all. If I had no debt at all.
Now, imagine a second situation where you have your mortgage your car loan, a personal loan and a credit card debt on top of it. And what you’re trying to do is as juggling through all of that. You are trying to stay ‘afloat’, tensed about when this quarantine is going to end. The pressure is mounting and you think, how in the world did you find yourself in this situation?
Being debt-free is a seminal idea.
I understand this probably more than ever. When Dave Ramsey said “Debt is not a tool”, I thought to myself, I am highly educated, he is probably speaking for the more “simple” folks. I can manage this. Turns out, I was wrong. So let me point out a few pointers on why being debt-free has always been a seminal idea. It is the most important factor if you want to be rich and lead a more fulfilled life.
I cannot stress this enough. Life is simply less stressful (pun intended). Of course you have other things to worry about. But, one less thing to worry about! You just live a peaceful life.
You have a better relationship with your spouse
Did you know that money (debt) or the lack of it, is the number one cause of divorce in modern society? When you are always worried about the next bill, you find it difficult to take your significant other to an expensive date night. Isn’t this money you could have used to pay down some of your debt. That takes the fun of date night. You could’ve bought something thoughtful for yourself or your partner without feeling guilty about it. Being debt-free offers that lifestyle.
You live a healthier life.
Stress affects our bodies in different ways. It causes inflammation. It reduces the immunity of your body. EMI-free life causes less stress. We tend to make healthier choices. No debt equates to more disposable income. You can buy organic food, not eat “cheap” junk food.
You become more creative
Let’s look at the benefit to your mental state. When you have debt, you are living in a flight or fight response. Some in the back of your mind (literally, amygdala), you are thinking about how you are going to meet the next month’ EMIs. The amygdala (part of our ancient brain) is responsible for the fight or flight response is always looking out for a Tiger to eat you.
We do not always realize it, but we are always in a fight or flight mode when we have a lot of debts and we’re always thinking whether we can pay the next bill or not or whether a check would cash through. And when you don’t have to face that flight or fight response, you can focus on your personal development. You can put your mind towards creating a better future for you!
You are not bound to a job
You’re not bound to a job. If you want, you can take up a more flexible job that allows time to pursue your passion.
When you have no debt and low living expenses, then you can go and say to the boss that is harassing you, I quit. Simple as that. You can then wait to find that opportunity which is a perfect match for you, where you do something that you like and be happy doing it.
This post is basically about being our why you should be debt-free.
However, I feel that I should also share the number one technique that I use personally in my life. To achieve a debt-free status, have an “Emergency Fund“.
Before the COVID panic occurred I had an emergency fund of around three months of living expenses. After this, I’m going for a full year. This is important because the world has changed in profound ways.
You never know when the next pandemic is going to hit and the world locks itself down. Nobody knows how long the next lockdown is going to be. Have an emergency fund, with at least 6 to 12 months of your living expenses. That is what I’ll do. This will stop you from getting back in debt, once you have no monthly commitments.
Debt is modern-day slavery. Get rid of it.