By Jacob @DollarDiligence Follow him on Twitter!
There are often times when people become complacent about their debt. One reason is that often the individual payments are comparatively low and affordable. Many people do not stress out or feel overwhelmed about their debt until it becomes unwieldy and cumbersome. And even then, some people don’t buckle down and discharge their financial burden as fast as they should.
However, if you truly grasp the benefits of being debt-free, you would be more enthusiastic and inclined to pay off your debt today, and not tomorrow.
Credit Card Debt Statistics
Americans owe huge amounts in credit card debt; it has exceeded $1 trillion, which is higher than the combined GDP of 15 countries. The following stats highlight the gravity of the situation:
- Median credit card debt of an American household is $2,300 and the average debt is $5,700
- Total outstanding credit card debt is $3.4 trillion, while the aggregate revolving debt is $929 billion
- Households with a net worth of zero or negative owe about $10,308 in credit card loans
- More than 38% of US households owe some kind of credit card debt
Student Debt Statistics
Students in America are under greater financial burden than ever before. The numbers in the most recent report indicates this:
- The total amount of student loans is $1.44 trillion
- 44.2 million students in the country are burdened with loans
- The delinquency rate of student loans is 11.2%
- Average monthly payment on student loans is $351
Here are 3 great reasons for shedding your financial burden as soon as possible.
If you pay off your debt quicker, you will end up saving significant amounts in interest costs. Interest rates on both student loans and credit card debt are high when compared to other debts like mortgages. Credit card interest rates can been as high as 29.99%, and student loan rates can be as high as 15%.
We can do the math, it is not very tricky. For example, if you owe $6,000 in credit card loans carrying an interest of 18% and a minimum monthly payment of $120. If you only pay the minimum amount, it would take you about 7.5 years to discharge your balance with an amount of $4,824 in interest. However, if you raise your payment to $200 monthly, you would save over 4 years and nearly $3,000 in interest costs in comparison to the minimum monthly payment.
Debt can drag you down into an abyss of anxiety, frustration and depression. Not only will it hurt your credit score, it can have detrimental effects on your psyche. It is a gloomy cloud that casts a shadow on your ambitions, relationships and confidence.
However, a massive debt payment can lead to a number of psychological benefits. The sense of stability and composure can restore your self-esteem, which will help you in pursuing other life goals with more focus. Getting free from debt instills a sense of firm determination and resolve, which will promote your financial health.
Even if that is not enough for you, think about the trickle-down effect that can improve your overall health and restore key relationships. The gains of reducing or completely paying off your loans easily go beyond the bank. So, whether you are miles away or approaching the finish line, consider how these benefits can restore balance to your body and mind.
Save More for Retirement
If you manage to pay off your credit card debt and student loans early you will have a better chance of investing in and building your retirement plan. This will enable you to reach financial independence at a young age. The results of a recent survey indicate that individuals who save for retirement in their 20s have better odds of reaching retirement by the age of, let’s say, 50 compared to people who wait until they are in their 30s to start saving.
With hefty retirement savings you will be in a better position to fund your day to day lifestyle.
Take debt by the reins and pay it off today. By paying off debt you will be setting your future self up for a higher quality retirement, more disposable income, and better mental health.