Monday, March 30, 2009

5 Reasons to Pay Off Debt

You know that I rarely copy other people's idea (probably the 3rd time in 1000 posts) but I really think this is an excellent post and I will give them full credit - This is from the Single Guy Money Blog

Five reasons to pay off debt:
  1. Better Cash Flow. Once you pay off debt, the money you used to send to creditors every month can be used to increase your net worth. You can now use the money to increase your savings account balance or invest more money in the market.
  2. Interest Savings. Once you are no longer paying interest to the credit card or loan company, it gets a little easier to build wealth. Each payment you make to a bank is helping the bank to build wealth. Make those payments to yourself and build your own wealth.
  3. Better Financial Flexibility. It's nice to not have to figure out how to spread out your paycheck in order to cover all of your obligations each pay period.
  4. Better Credit Score. One of the major components of your credit score is the amount of debt you have. It's a very simple correlation; less debt = higher credit scores.
  5. Better Sleep. Once you have paid off a significant amount of your debt, it gets easier to go to sleep at night. You no longer toss and turn trying to figure out how you are going to make ends meet and/or get everyone paid on time.


Shane said...

Take #4 with a grain of salt. I've lived all my life with small debts (except mortgage). "No credit" is as bad as "bad credit". If you ever need a loan, you will need recent history of carrying debts (plural) and regular payments on them.

BSquared said...

Shane, any link you can provide for the No Credit/Bad Credit statement?

I'm just asking because I personally try and limit liabilities to better ensure liquidity if needed in these uncertain times. This includes paying in full with debit cards instead of using credit cards.

I say this knowing I will always have mortgage and student loan payments that establish a positive credit history.

Just trying to further my understanding on the issue