Pros and Cons to Living Debt Free

Along with owning a home, a major dream for most Americans is to live debt free.  There are both pros and cons of living debt free.

Pros of living debt free

Many people may think it is impossible to live debt free, but if you live below your means it may be possible. An important factor in being able to live debt free is knowing the difference between wants and needs. There may be items that we want to purchase but may not necessarily need. It is important to consider how much it is actually costing you when you are thinking of purchasing something. 

Monthly payments may not seem like a lot unless you get too many low monthly payments. When considering purchasing something, some people consider how many hours they will need to work to be able to afford it. When thinking of it this way, you may reconsider your purchase.

Another way to keep your spending in line is to track your spending. For at least a month, keep track of everything you spend money on. At the end of each week or month look at your spending to see which items could be cut down on or completely cut out. This also a good way to allocate the money into your different budget categories. 

If you have equity in your home, that may be helpful if you find yourself in the need of some extra money.

Cons of living debt free

By saving and living below their means, some people have been able to purchase what they need or want without ever needing to borrow money. It may seem like a good idea of not borrowing money, but if you don’t borrow any money during your life you will not have a credit score. A credit score is one of the major things that lenders consider when they are considering to lend you money. It may be beneficial to have a credit card that you use occasionally to have some kind of credit score. If you use the credit card every few months and pay off the balance when it is due to have some kind of credit activity. Even if you intend to live debt free there may be some unforeseen events that come up where you will need to borrow money.

Most of the time, we think it is better to live debt free but there are some cases where it may be beneficial to carry some debt.