Paying less interest
Okay, I get it. Money is fun to spend, right? Would you be surprised if I told you that I agree and love to spend money? I do.
Ultimately, my beef with debt is that it forces you to send your money to someone else for something you bought in the past. I’d much rather get to spend it on things I truly want now or will need in the future (like a retirement or a college education for my kids). You have to shift your mind-set from “I don’t want to miss out on fun today” to “I want to have even more fun tomorrow.” It’s one of those “is the glass half empty or half full” type of moments.
By scrambling to pay off your debts now, that means interest does not accumulate as fast. That in turn means your debt gets paid off even quicker. This of course means the money you waste on debt each month will now be freed up for you to spend on whatever you like!
Let’s look at someone with $25,000 in combined short-term debts (a payday loan, a few credit cards, and some medical bills), with an average interest rate of 20%. Take a look at their total interest costs based on some different fixed monthly payments. What a difference $250 makes as you raise your payment from $500 per month to $750. It cuts your repayment period by more than half and saves $18,000 in interest! For what you saved in interest by paying off your debt as quickly as possible, you could go out and pay cash for a new car. If that doesn’t make the case for an opportunity cost of using your money for other things besides paying down debt, I don’t know what does!
