How much of your monthly income is going to debt payments?
Whether you look it from a monthly dollar amount perspective, or as a percentage of your monthly income, that figure truly represents this:
The amount of debt we carry, keeps us from doing something else we want to do.
In other words, the longer we stay in the shackles of debt, the longer it will be before we can move on to use our money to achieve our goals.
The Cost of Debt Payments
Think about this. Let’s say that only 20% of your monthly income is devoted to debt payments. On a take home amount of $4,000 that represents $800 every month.
What if you had no debt? If you completely eliminated your debt, what could you do with that $800?
Here are a few ideas:
- Build up your emergency fund so it can cover 3-6 months of expenses.
- Start to save up for retirement in your 401K/403B plan or IRA.
- Start to save for college expenses for your children.
- Save enough so you don’t have to cover Christmas expenses with credit cards this year.
- Save enough so you can replace your car by paying cash for the new car.
- Save enough to pay cash for a much needed vacation.
- Complete that home remodeling project you have been wanting to do for a long time.
- Give more to your church or your favorite charity.
The Consequences of Debt
You see debt is not a tool to help us prosper with money. At best, debt is a crutch that keeps us from walking on our own financial strength.
And at worst, debt is a modern form of slavery that puts the creditors in charge of our income.
You want your money working for you and not for the bank. When we are in debt, compound interest works against us.
When we can devote our money to savings and investments, compound interest works for us.
So do you want to be in control of your money? Do you want to be the person who dictates your financial destiny?
Get rid of your debt payments as soon as you can. And do it with intensity and almost a sense of desperation.
Work extra, get a second job, and cut your budget down to cover the essentials of life.
Yes, getting out of debt involves hard work, sacrifice, and persistence.
But anything in life that is worth something costs us something. We have to pay the price to achieve success.
And that’s 100 times better than paying the high cost of staying in debt.
Question: What financial goals could you achieve if you had no debt payments?
This post is also available in: Spanish
