When things get tight in a recession, most people have to cut back on what they are doing. Debt payments are not adjustable. Those payments have to be made regardless of the state of the economy. But when you are debt free, you don’t have those obligations. You have more options than people who are in debt. Learn more in today’s blog.
Having debt can put pressure on your finances in good times. When the economy goes through a recession cycle, you can feel even more pressure. But when you are debt free, you have more freedom. Here are 5 things you can do in a recession when you don’t have debt.
1. Sleep better at night
When economic times get tight, people lose sleep worrying about how they are going to make their payments. You may need to be concerned when you have debt. Lenders don’t have to adjust payments in a recession and if they do, it is likely that you will pay more on your loan. When a lender adjusts the terms on your loan, you may make smaller payments but it will be for a longer time. More payments mean paying more interest. The lender could also require a higher interest rate, costing you even more money. Your lender helps himself or herself to more of YOUR MONEY when payments are extended.
When you are debt free, you don’t adjust the terms on your loans. You don’t have any debts to adjust.
2. Keep your house
Another thing that you can do in a recession is keep your house. No debt means no house payment. The bank can’t repossess a house they don’t have a loan on. House payments typically are large monthly obligations. But when you are debt free, you don’t have the pressure of making a house payment when times get tight.
3. Easily adjust your living expenses
When you have debt, a large portion of your monthly income goes to making the payments on that debt. When hard economic times come, you still have to make those payments. Adjustments can be made, but they end up costing you a lot of money in the long run. When you are debt free, you don’t have debt payments in your budget. That gives you a lot more freedom when it comes to adjusting your living expenses.
There are often many items in your budget that can be eliminated if/when your income becomes lower. TV service is an optional expense, it is not something that you cannot live without. You can adjust your food budget by adjusting your shopping habits and being creative with your menus. Eating at home instead of eating at a restaurant can save you a lot of money every month. There are many ways that you can adjust your living expenses when you are debt free. You don’t have to choose between making your debt payment and eating.
4. Buy big ticket items
When you are debt free and have developed the habits you need to maintain that debt free lifestyle, you are still able to purchase big ticket items, even in recession times. It may be to your advantage to do so if you were already saving money to make that purchase. As times get tough and people stop buying big ticket items, the companies that sell those items will often reduce the price in an attempt to generate cash for their businesses. When companies sell for less, you pay less for your item.
A recession can be a great time to make a needed purchase. You are not adding to your monthly expenses. Just make sure that you maintain adequate cash reserves when you make the purchase. It is better to go without the item than to deplete your reserves to make the purchase. The manufacturers will continue to make the items and add new features to them. Buy when you are ready, even if it is during a recession.
5. Help other people
One of the things that you will be able to do during a recession is help other people. They may be struggling because they didn’t eliminate their debt or they lost their job. That can be a great opportunity for you to help them. Remember: You Reap what you sow. It's good insurance to have!
You don’t have to help everyone. Being debt free does not necessarily mean that you have unlimited resources. But if there is someone that you want to help, you have the opportunity to help.
These are some of the reasons to eliminate debt before a recession comes. They should spark your imagination regarding other things that are important to you. Remember, the important thing is to eliminate your debt as soon as you can.
Anything you tolerate becomes normal to you. When you stop tolerating debt, you increase your ability to function without it. It will take you some time, but the end is worth it!- Dan Heiland
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God Bless your week!