Most Americans live their lives on borrowed money, constantly spending a little more than they make, leaving them with a growing debt. These debt payments, and the added interest they must pay on their debt, decreases the amount of money that they have available to spend on future needs. Paradoxically, borrowing to buy depreciating items, decreases one’s net worth.

Stop the madness this year. No more spending more than you make. No more borrowing money to buy stuff like cars, appliances, toys, and vacations. It’s time to grow up and live your financial life in a responsible manner by increasing your retirement savings, and eliminating interest payments. Deciding to become debt free can transform your life. The side effects are incredible. There are many great reasons to become debt free and here are eight of them.

1. Increases your spendable income

Every time you borrow money, you are committing some of next year’s income to make those so-called easy monthly payments. Using future income to finance this year’s stuff, means you will have less money available to spend next year on your wants and needs. You are also agreeing to pay extra for the items bought on credit. You pay the purchase price + interest. Waiting until you have saved enough to pay cash for the item will not only save you the added interest cost, but you may also be offered a cash discount.

2. Improves your marriage

Seventy percent of all the people who divorce claim that a major reason for their break up was arguing about money. Eliminating debt removes one of the sore spots that creates these arguments. I have found when couples begin the journey to eliminate their debt and regain control of their finances, money arguments dramatically decrease. One couple I was coaching told me that within a month of starting a financial makeover program, they had completely stopped arguing about money. Previously, it was a weekly event.

3. Relieves stress

Debt increases stress levels. If you can’t make your car payment, you could lose your car. If you can’t make your house payment, you could lose your house. The higher the debt, the more this possibility worries us. When we were over $500,000 in debt, my wife was worried about making the loan payments if I lost my job. After we paid off all our debts, that worry was gone. We were no longer at risk of losing our house if my income stopped.

4. Enables you to become financially independent sooner

Financial independence is achieved the moment monthly passive income exceeds monthly expenses. Without debt, monthly expenses are far less and therefore, less passive income is needed to reach financial independence. I have a friend who was planning to keep his home mortgage into his retirement. He intended to work five more years to accumulate enough savings to retire with enough passive income to sustain his current lifestyle, including his mortgage. I showed him a different plan. If he used some of his savings to completely pay off his house, he could retire immediately. He had already accumulated enough passive income to retire without a mortgage. After considering my plan, he retired one month after our conversation.

5. Provides a good example for your children

What are your actions teaching your kids about debt? Do they see you financing your cars and making monthly payments, or do they see you paying cash for your cars? Are they learning to pay cash for a vacation ahead of time, or are you teaching them to put the vacation on the credit card to pay later? How you handle debt will highly influence how your children will handle debt. What do you want them to do? Would you like them to be able to decide what to do with their income each year or would you prefer they had to use some of each year’s income to pay for past indulgences? Be a positive example to your kids. Teach them the responsible way to handle money; save first, then purchase the desired item only when they have enough to pay cash. Guide them toward a great financial future. It is within your power to break the cycle of debt in your family this year. Remember, they are watching you, and they learn by what you do, not by what you say. So, be a good example.

6. Provides a taste of freedom

I have lived with $500,000+ of debt, and I have lived with no personal debt. I did not realize how much the debt was weighing on me until it was finally gone. You will likely have the same feeling. Several thousand years ago, Solomon said, “Just as the rich rule over the poor, so the borrower is slave to the lender.” This is an age-old problem. Borrowers are slaves to their lenders. If that sounds a little extreme, stop making your house payments and see what happens, or stop making your car payments and see what happens. The true owners will come to claim their goods. You don’t truly own an item that you used debt to acquire until it has been paid in full. The lender is the true owner. In Solomon’s day, if you didn’t pay your debt, you went to prison. Now if you don’t pay, you just lose your stuff. Don’t be a slave in a free country. Own your things. You will not believe how free you will feel.

7. Will reduce your risk of financial failure

Life has enough risks without adding the risk of not being able to pay your debts. If something tragic happens to you, you are at risk of losing anything you have purchased with debt. Bankruptcy only happens to people in debt. Many people buy things with their credit card, fully intending to pay it off at the end of the month, but something unforeseen happens to stop the process. They end up with a debt they didn’t anticipate at a huge interest rate. When spouses don’t communicate about intended purchases, they may find that they both spent the money they had been saving. Having spent twice what was saved, they are now in debt. There is an element of risk involved every time money is borrowed. Do you really want that added risk in your life?

8. Eliminates feeling guilty about overspending

We can all get carried away with Christmas shopping. Then January’s visa bill arrives and we realize we overdid it. Great guilt can be associated with that huge visa bill, followed by a heated discussion. You can also get carried away at a car lot and end up owing thousands of dollars for the truck you have always wanted but couldn’t afford. If you don’t borrow the money, you won’t feel guilty about the purchase later. Save up first and buy things you can afford.

I hope these eight great reasons will motivate you to start down the path to become debt free. It will likely take several years to accomplish this goal, so don’t put this off. Yours can be a new debt free lifestyle. Stop borrowing money and begin paying off what you owe. This one little change will give you a brighter financial future.

Cory Fawcett is a general surgeon and can be reached at his self-titled site, Dr. Cory S. Fawcett.  He is the author of The Doctors Guide to Starting Your Practice Right, The Doctors Guide to Eliminating Debt, and The Doctors Guide to Smart Career Alternatives and Retirement.

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