Today’s post is contributed by Amy Nickson, a passionate writer on finance. Amy is a professional blogger whom has started her own blog and also works as a contributor for the Oak View Law Group. Please share your opinions by commenting below. Happy Wednesday, Abandoneers!
The Hidden Costs of Leading a Debt-free Lifestyle
We all know that being in debt is emotionally tedious. In such a stressful situation, people always want to do whatever they can to pay off debt. They seek professional debt relief help, or take out a consolidation loan, or transfer the balance to a new card to get rid of their debt. However, the payoff process is time consuming, highly taxing, and requires focus. You have to be financially disciplined to become debt-free.
As the process of becoming debt-free these days is exceedingly difficult to fulfill, people are unsurprisingly quite proud after becoming debt-free. They often forget that even after paying off obligations, they still have to make some costly payments. Costly payments? Which costly payments do people need to pay after getting out of the red? Check out these hidden costs of leading a debt-free lifestyle.
1. You may lose connection with your family
Your family members may not understand your aversion to being back in debt. They may misunderstand you when you are not able to fulfill their wishes, or, when you ask them to minimize expenses. To avoid this situation, you have to talk to your family members before working on the debt payoff goal. How does the debt-free lifestyle help the entire family? Why should your spouse, or even your children cooperate on YOUR singular focus? What kind of financial changes will they have to accept? For example, you may need to sacrifice time with your family in order to work a second, part-time job.
These adjustments can be hard to make for family members and reactions can be negative. Be prepared, but work patiently to help them to accept the changes, in a positive manner.
2. Your retirement may become financially insecure
Persistent payoff may affect one of your most crucial goals: Retirement Savings. To ensure a secure retirement, you need to be diligent in setting aside ever-increasing proportions of your income. Granted, carrying a pile of debt can delay or even destroy your retirement plan, BUT, if you put all of your focus on getting into the black without any thought to savings, you may not be able to leave your work life behind just yet. Limited savings invites enormous problems in your retirement. You simply won’t be able to maintain your present lifestyle, and ironically, could fall into new financial obligations.
No matter how much you owe, pay yourself first.
You need to fund your retirement accounts (401K, IRA, Roth, etc.), an emergency savings account, and other investments while chipping away at your debt obligation. The list doesn’t end here; you have to make long-term investments for your future as well. This sure sounds scary, but the task is not as bad as it sounds. You just need to be a little bit calculative.
Following a budget can help you sort out things easily. Set aside money for all of the fixed expenses first (retirement fund, emergency fund, utility bills, debt payments, mortgage payment, insurance premiums, etc.) But also be sure to set aside money for your own Rest and Relaxation. Doing so will help you avoid becoming demotivated.
3. You have to accept lifestyle changes
To become debt free and to avoid further financial obligations, you have to live within your means. You have to stop living the extravagant life to become debt free. Dining-out, partying, using credit cards excessively, and impulsive shopping need to stop. By doing so, you avoid incurring further debts and can actually start saving additional money.
Once you become debt free, you have to just say “no” to the craving for a lavish lifestyle. Being a debt free person, you may not be able to splurge on desires like frequently eating out, going on luxurious trips, and making unwanted purchases, etc. That said, living within your means doesn’t equate to depriving yourself. You can still find ways to pamper yourself while staying within the realm of affordability.
4. Your health can deteriorate
Prolonged financial stress affects your health. A broken health condition is certainly the worst consequence of a single minded focus on debt elimination. Stress often (if not always) leads to many other health issues. It is supremely important to stay on top of your health while working to balance obligations with building your retirement nest egg. If you don’t, you simply won’t be able to enjoy your work-free days to the fullest.
Every phase of our life has significance and life itself is a great teacher. While you’re in the red, your focus must be how to live within limited means. An extravagant lifestyle causes substantial debts. Being a debt free person, you learn the benefit of saying “no” to every fancy aspiration that leads to financial trouble.
Don’t let your desires control you. Plan with a purpose and make debt avoidance a realistic goal, balanced with savings for your future.
Cubert’s Note: I like where Amy is going here. It’s a rather unique argument to suggest that a single-minded focus on debt elimination comes with its own costs. But when you peel back the covers, you see where a dogged, single-minded focus on debt elimination can alienate those close to you. You could lose track of long-term savings goals, and more frighteningly, suffer some health problems. I suppose the key is balance. Personally, even though we’re now determined to slay our mortgage in the Abandoned Cubicle household, we’re still putting in our 401K and HSA contributions just as always. I hope you enjoyed today’s guest post! Thanks, Amy!