Our series on why you must get out of debt looked at how credit cards can double the price you pay, at the cost of foregone investments, and why mortgages are the only good debt.

But there’s another reason to get out of debt.

It’s hard to price, but it may be the most valuable benefit of all.

It’s the peace of mind and the freedom to make money that comes with being debt-free.

When you’ve no debts, you literally don’t owe anyone anything. Your money is yours to use as you will.

Sure, you may feel you owe:

  • Your parents for raising you
  • Your friends for the good times
  • A beer to anyone who helped you in the bad times
  • Whoever gave you that spare bed in my third debt article

But financially-speaking, you’re free.

Many people who get out of debt unfortunately use that freedom to go straight back into the mire. They fill the void left by paying off their debts with… more debt.

A better plan is to keep up the momentum to grow your net worth. Redirect your former debt repayments towards saving and investing. Use your new financial flexibility to increase your earnings.

You can start investing with a tiny budget – indeed it’s free with Freetrade.1

The important thing is to get your snowball rolling!

Make money for yourself, not some bank

I’ve heard many times from people how liberating getting out of debt is.

They discover what I relish every day – that my monthly income is going wherever I want it to go, not on paying for stuff bought and forgotten about years ago.

Debt-free, you can save up an emergency fund, invest to create a future income – or just treat yourself to a meal out or new pair of shoes, guilt-free.

And here’s the real bonus – when you’re financially secure, you’re also more likely to look for ways to make money.

Everyone knows the rich get richer. Having compound interest working for you instead of against you is a big reason why.

But I believe there’s also a mental pay-off for being debt-free.

Operating from a position of strength, you are more able to think of money as an opportunity and a tool, rather than as a burden. Your whole outlook on money and the language you use can change. And that’s the first step to getting richer.

My co-blogger The Accumulator had to get out from under his debts before he could begin amassing his passive horde and planning for financial independence.

As someone who has never borrowed money and so started investing with a clean state, I find his journey inspiring.

But I’d choose my debt-free journey over it, any day.

What about my pal Bob / Aunt Bertha / Donald Trump?

Sure, we all know a few people who (seem to) handle their debts and still grow their income faster than their repayments.

I’m not saying debt is always a fatal disease. Rather, that it’s a hugely debilitating one, which can easily catch up and snuff out its victims.

How much wealthier would those income-rich, asset-poor debt jugglers be if instead of shuffling credit card payments, they put their brainpower into growing their investments or creating a passive income stream?

Mortgages: The exception to the rule

If you’ve got any non-mortgage debt – even if you think it’s balanced by assets – pay it off as soon as you can. In every way it’s worth it.

Using debt to buy a property is the only exception. A mortgage is cheap debt, and it enables you to live in your own home today rather than saving half your life to buy one, chasing rising house prices along the way.

Nowadays even I have a big interest-only mortgage, and I truly hate debt.

But do you want to know a secret?

I love my home and overall I’m happier for finally owning my own place.

But I believe I was a better investor when I didn’t have a mortgage hanging over me.

The bottom line on debt

For most Monevator readers, I’m preaching to the choir.

But too many average people have too much debt – and it’s in tough times like recessions that they discover why they shouldn’t.

It can be hard to get out of debt. You’ll have to go without.

But all that really matters in life is health, friends, family, love, and useful work or another purpose you enjoy.

Well, and beauty and truth, as the poet said.

(And personally I’d add Mexican food.)

Last I looked, getting into debt to buy an iPad when you can’t afford it just to have one before your friends wasn’t on a single philosopher’s list.

  1. Open an account via that link and we can both get a free share worth between £3 and £200. You’re growing your net worth already!

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