The rich rule over the poor, and the borrower is a servant to the lender. – Proverbs 22:7

Consumer debt steals from your ability to build wealth.  When you are straddled with debt, you lose the flexibility to use your money the way you want.  The buy now, pay later philosophy has become the new norm, but if you want to be wealthy this should not be for you.  When you pay later, this keeps you in a never-ending cycle of using present income to pay for past obligations.

You can’t build wealth by always paying back.  Your money must be dedicated to future wealth building as well.

In addition to building wealth, now more than ever is the time to get your financial house in order.

The economy and markets are changing and you do not want to be stuck holding the bag.

There are many benefits to paying off debt, but this article will highlight three reasons why now is the time to do it.

Higher Interest Due To Inflation

As of April 2020, inflation is currently 8.3%, the highest it has been in 40 years.

Inflation is reported to increase if the Federal Reserve does not respond quickly and aggressively to slow it down.  The Federal Reserve’s blueprint to lower inflation is to increase interest rates.  We have enjoyed years of record-low interest rates which made borrowing easy and more accessible, but that era is over.

The Federal Reserve is expected to increase interest rates several times this year, with the next projected increase in June.  When the Federal Reserve raises interest rates, debt becomes more expensive.

Related Blog – How To Manage Your Money During Inflation

This higher interest rate affects everything from mortgages, car loans, personal loans, and credit cards.  If you have debt with a variable interest rate, meaning it can be adjusted over time, then it will cost you more to pay it off. Some examples of financial products with variable interest rates are credit cards, adjustable-rate mortgages, and lines of credit.

Higher interest rates mean you will pay more interest and less principal; making it longer to pay off the balance.

Your debt is another person’s passive income. – Anthony O’Neal

Unless your debt is paying for itself and generating income for you, get rid of it.  Do not become someone else’s passive income source.

Also, if your debt has a variable rate and you are not able to pay it off, consider a fixed interest rate option such as a personal loan or a balance transfer with a 0% interest rate.  This can be a temporary solution to control your expenses every month.  Ensure that you read the fine print and understand the cost of refinancing before you complete the transaction.

With inflation on the rise and the government slow to act, you could be paying more interest and more money for regular goods and services at the same time.

Get rid of the debt and maximize your cash flow now.

Positioned For The Economic Correction

The economy has been unstable.

From the rising price of goods and services, the fluctuating stock market, increased government spending, and the extremely competitive housing market, there are many indicators of an economic correction on the horizon.

When the market corrects or crashes, the value of prices declines dramatically.  This can be bad news or good news, depending on how you are positioned.

In every market correction, there are winners and losers.  There were many millionaires created from the 2008/2009 market crash.  The winners were positioned to invest in assets while others are trying to survive.  If the market indicators are there, why not position yourself to win in any economy?

Consumer debt hinders your ability to purchase assets.  When you pay off debt, you immediately increase your cash flow to purchase investments when the opportunity arrives.

Related Blog Post – Why I Don’t Save For Emergencies. I Do This Instead.

“When preparation meets opportunity equals success.”

Greater Peace of Mind

64 percent of Americans are anxious about their finances according to a study conducted by Policy Genius.  The top two contributing factors were inflation and job/career concerns.  While you cannot control external forces, you can manage your money better to eliminate debt and increase your cash flow.

The pandemic highlighted the uncertainty of job security.  Job security does not exist. Most times people rely on jobs to not only sustain their lifestyle but to pay off items that exceeded their current income.  When you supplement your income with debt, this keeps you reliant on a job that is not reliant on you.

Reducing anxiety and having a greater peace of mind is priceless.  Eliminate debt to lighten your financial obligations so you can focus on the things that matter.

Conclusion

If you have debt, acknowledge it and develop a plan to eliminate it.  Put yourself in a position to win when the opportunity presents itself.  That opportunity will be here before you know it.  That’s getting your Finances On Point.