I woke up this morning and realized that my mortgage will soon be gone. No longer will I have money deducted from my account each month. My house will be 100% mine. I also will not have any other common forms of debt: student loans, car loans, credit card balances, or any other type of loans. I will be completely debt-free.
I don’t need a car loan because I decided to buy a 2001 Honda Civic two years ago. In these two years, it has only cost me $500 in repairs and has depreciated in value by about $300. And, the gas mileage is often over 35 mpgs! I absolutely love this car, especially since I bought it outright for $2,500 cash.
Student loans used to be a way of life for me as well, but I was able to pay these off back in 2011 (was it that long ago already? Crazy!).
So now that I will soon have absolutely no debt, that means that I will also have absolutely no debt payments each month. So what bills are left to pay? Here is a list of my standard bills each month:
- Gas: $140
- Phone: $60
- Utilities: $100
- Food: $160
My absolute necessities will only cost me $460 per month. Now that is pretty cheap! Of course, I might need some clothes once in a while, and I still intend to have some fun and also give money to my favorite charities, but as for my absolute essentials – the bill is only $460. That is fricken awesome!
The Benefits of a Low-Cost Life
So if I really wanted to, I could spend only $460 each month. What does this really prove though? That I am a cheapskate that isn’t willing to part with his money? Well, sometimes yes, but there is a bigger picture here. While I am occasionally sick in the head and enjoy depriving myself of spending money, the master purpose is in the long-term advantages.
In my experience, as my debt has begun to disappear I have continued to get braver at work. You may not think about it, but when you have less debt and can live on practically nothing, you really don’t have much worry about losing your job. And, when your worries are minimal, you are free to do what you’re best at and will likely get promoted more quickly, which will then increase your income (it’s funny how that works isn’t it? When you don’t really need the money, that’s when you get it).
Investing is Less Challenging
When you have a solid income coming in and have very few expenses, you have quite a lot of discretionary funds to invest. Due to the large amount of excess money, you really don’t have to seek out the high-risk, high-return investments. Instead, you can invest the majority of your extra funds into boring ol’ Bond funds, Index funds or Mutual funds. Your odds of growing rich are greater and the risk is minimal.
Raises Are Magnified
Do you recall your reaction to your most recent 2% raise? The majority of the workplace would probably scoff at the “piddly raise” that was issued because it isn’t keeping up with the general cost of living! But, what if you live on 20% of your overall income? Your cost of living would not increase by that much (when considering the dollars), but your large income would. Let me illustrate with some dollar figures.
Let’s say you can live on $500 a month and you earn $4,000 a month.
- $500*1.02 = $510
- $4,000*1.02 = $4,080
You see? Your cost of living has only risen by $10 a month, but you now earn $80 more a month than you did before the “piddly” 2% raise! When your cost of living is low, your raises inflate your overall earnings immensely.
Are you trying to live on less? Do you see the benefits of eliminating your debts?