5 Major Benefits of Leading a Debt-Free Lifestyle

There are two types of debt: good debt and bad debt.

A good debt is an investment, while a bad debt is a liability. Some examples of good debts are student loans to fund a college education, housing loans to achieve homeownership, and loans to help launch a business venture. Bad debt examples, on the other hand, include all the money a person owes to fund a want, as opposed to a need.

Whether you have good or bad debts, or a combination of both, reaping the benefits of being debt-free this year must be your priority for your mental health and financial security. If you need a guide to learn more about the importance of debt-free living, Lumina Homes will be glad to give you some valuable financial tips.

How to Lead a Debt-Free Lifestyle

Make a checklist of all your debts.

This checklist must include information such as interest payments, due dates, and other fees and minimum payments needed. If you have multiple debts, make sure to prioritize paying the largest debts.

Consider applying for debt consolidation.

Debt consolidation refers to the taking up of an entirely new loan to pay off all your debts with the expectation of having a potentially lower interest rate. This is a good way to lessen your burden and confusion as to which debt to first settle, and which one to leave out indefinitely.

Join the gig economy.

If your current income from a full-time job proves to be insufficient to pay monthly expenses at home alongside your debt obligations, consider engaging in part-time, freelancing work. Invest in learning a new, in-demand skill that could help you win a freelance job online, which in consequence will help you ease the burden of paying each monthly payment required for your debts.

Control your urge to spend more than what you earn.

In simpler terms, live within your means. It's an oft-repeated advice that is worth following. One of the greatest culprits to ballooning debt is a bad spending habit. In essence, only borrow the money you know you have the financial capacity to pay back on an agreed-upon date.

5 Benefits of Being a Debt-Free Person this 2023

Once you get your financial life figured out, having zero debt could be the best feeling that you'll ever encounter. Living a debt-free life means you can achieve the following:

1. It will give you peace of mind

If you have a credit card, it may be tempting to overspend and pander to your materialistic urges. While we are all for self-love through buying us wants every once in a while, too much of it could make us end up in a pool of depressing debt. On the other hand, becoming credit card debt free, for example, will absolutely give you peace of mind and a good night's sleep, so to speak.

2. It allows you to plan your future

When we say you can focus on your future when you're free of debts, this means you don't have to worry anymore about paying for borrowed money that is due soon. This is especially true if you are short of money and paying off a loan on time seems to be a challenge. So if you become officially debt-free, you can focus more on planning for your future, and how you can go about achieving financial security without a massive debt to be constantly worried about.

3. You can start an emergency fund

A practical course of action that you can start once you become debt-free is to set up an emergency fund. Instead of using your hard-earned money for debt payments, it will now be dedicated to setting up a savings account for you and your family. This is so when someone in the family gets sick or during a calamity, you have money to fund the necessary expenses. When you're still living with debts, and an emergency happens, it can take a toll on your mental, emotional, and financial well-being.

4. More of your income is yours to save

If you're in debt, a portion of your money goes to the monthly payments of your outstanding debt. Once you're free from your repayment obligations, you regain possession of all your salary and have a sizeable portion saved up for future use. As you save more and more of your money with no debt to stress you off, you will have a safety net to fall back on should an emergency befall the family. In addition, becoming debt free can also help you retire sooner if you manage to save up substantial sums that would have been otherwise spent on paying your credit dues for all eternity.

5. It will improve your credit score

Last but certainly not the least, becoming fully debt-free will give you a higher credit score. How low or high your credit rating is will have an impact on your creditworthiness should you decide to borrow money from a lending institution to fund a financial goal, such as a car loan or an affordable house and lot. Those who have low credit scores are people who may have missed payments or outstanding balances.

Having said that, becoming debt-free alongside having kept an excellent credit history gives you better chances of being approved for a substantial loan application. In other words, having established your repayment capabilities means you may request and be approved for a higher loanable amount to fund a car purchase or an affordable house and lot for sale.

So if you plan and aim to buy your affordable house and lot in the Philippines this year, becoming debt-free should be your top priority so you can avail of the best deals when you apply for loans through banks, Pag-IBIG, or directly through real estate developers.

If you're looking for a value-priced residential home without sacrificing quality house features and amenities, Lumina Homes is the real estate brand that could help you achieve homeownership without shelling out a ridiculous amount of money for a downpayment and a loan amount that will take forever to pay for.

Irrespective of your chosen financing option, rest assured that Lumina Homes will accommodate you with your home-buying journey. With over 50 housing communities nationwide and a diverse selection of home models, choosing Lumina Homes as your real estate investment partner is absolutely a wise financial decision. Become a part of our ever-growing Lumina homeowners and get your house and lot in a conveniently located community!