Reason # 1
You need to be able to support your family in case of emergency. Have you ever thought about what you would do if your family suddenly had to endure a medical crisis, a job loss, or another emergency? How would you make all of your monthly debt payments? Would you have to declare bankruptcy? It was scary for us to answer that question. We definitely wouldn’t be able to make our monthly student loan / credit card payment if we had an emergency situation. We had to take an honest look at the financial position we were in and make some changes, fast.
Maybe you think reason # 1 doesn’t apply to you. Let’s say you have enough in savings to cover your monthly debt payments for a while in case of emergency. However, reason # 2 applies to everyone in debt.
Reason # 2
You want to retire someday, or have a college fund for your children, or save for another cause. Have you ever thought about how much you could save if you invested your total debt payment each month instead of throwing your money away? I know that if my husband and I invested our total monthly student loan payment amount for 30 years at 12% interest, we’d be doing quite well! There is an article entitled, “Top 10 Most Ridiculous Payments” on Dave Ramsey’s website. In it, people in Dave’s online “My Total Money Makeover” community listed their highest debt payment. Dave’s staff then informed them how much money they would have in 30 years if they invested that money at a 12% interest rate. One person and her family were paying $1,150 monthly for a leased car that would have added up to $4,059,402 in 30 years if invested! Check out the article here: http://www.daveramsey.com/article/top-10-most-ridiculous-payments/lifeandmoney_debt/.
How much money are you throwing away each month?
*Go to www.daveramsey.com for financial help. I highly recommend reading Dave’s book, The Total Money Makeover.