How Debt Prevents You From Living Your Richest Life
Day 24: GOBankingRates wants to help you Live Richer. For a month, we’ll be sharing daily tips for how you can do just that, with advice on budgeting, saving, investing, making the most of your career and managing debt — plus money advice for every phase of your life. Check back each day during our 31 Days of Living Richer to learn everything you need to know to set yourself up for financial success and live the richest life possible.
In addition to causing you stress, being in debt can negatively affect your finances in a number of ways. If you need some extra motivation to pay off your debts once and for all, here’s a reminder of just how being in debt is preventing you from being able to live your richest life.
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It Prevents You From Spending Your Money on Other Things You Want
The longer you hold onto debt, the more interest you will end up paying on it. Your debt gets more expensive over time, so it will continue to eat away at more and more of your income for as long as you have it. This means you’ll have less wiggle room to save for the things you actually want to spend money on, like a tropical vacation or a new car.
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It Can Hold You Back From Achieving Life Milestones
The amount of debt you owe doesn’t necessarily affect your credit score, but if you miss payments or have high credit utilization rates, this can lower your score. A low credit score makes you an unappealing candidate for new lines of credit, so it can be hard to secure a car loan or a mortgage loan. If you want to buy that new car or become a homeowner someday, take the steps now to ensure you are handling the debt you have responsibly before it dings your credit score and prevents you from living the life you want.
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It Can Put You in a Dire Situation
Perhaps you don’t worry too much about debt because you are able to make all of your minimum payments. But what if your financial circumstances were to suddenly change? What if you lost your job or experienced a medical emergency? You may one day find yourself in a position where you are no longer able to even make those minimum payments. This could lead to default, repossession or bankruptcy. If you focus on aggressively paying down your debts while you’re in good financial standing, you’ll have less to worry about if your luck changes.
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Last updated: July 24, 2021