Have you ever thought about what the average family pays each month to service their debt? According to Fair Isaac, the typical family has about 8 to 11 different debts....and the average monthly payment is about $3,000. What could they do with that money if they had no debt....no mortgage, no car payment, no student loans, no credit cards?
Let's look at this another way. How long could a family survive if a job was lost today or a family member developed a life-threatening illness? How about funds to deal with a routine but unexpected auto repair? Could your budget handle the result of forgetting to enter a couple of payments into your check register? What if you had no debt...how would that help in such a situation?
Any one of these possibilities could spell financial disaster....even for someone already on the path to becoming debt free. We all live in fear of these things happening to us and our extended families. But are we prepared? What if we had no mortgage or other debt....how would that affect our lives?
How about if you are currently on a debt-reduction program? Have you thought about the wealth part of the puzzle...accumulating cash and other resources for the future? Just think about it for a moment. If you have $500 in savings, then you have only $500 protecting you from the cold, cruel world outside. How scary is that?
Look at your monthly expense budget and multiply it times three. That's how much money you would need to live for three months if your income dried up. This is not about available credit levels on credit cards or lines of credit to come up with the three month total, but rather the need to have cash on hand accumulating interest in the case of emergency. How would no debt payments help?
Beyond food and shelter expenses, what if your car's license plates expire during an emergency or you have to register the kids for school when you are laid off or you have recurring prescriptions that need filling during a reduction in income. Do you have a three-month emergency fund in savings? If not, then start saving today.
So you have an emergency fund, how would being debt free affect you? What would you do with the extra funds? Buy a second home or investment property? Set funds aside for college? Plan that long wanted exotic vacation? If you still have debt, find a program that is not only designed to help eliminate the debt but will also help build wealth.
If you would like to learn more about how this could be accomplished, give me a call.
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