There are people out there that think debt is necessary and a part of life. Even worse, there are people that bring and keep debt because they get a benefit such as a tax deduction or they think it will make them more attractive for future loan they may or may not need. If you are looking to become financially free and bring wealth into your life, you would never want to keep any sort of debt on your books. Throughout this article, I want to describe a few myths I’ve heard and why they are wrong and you should always get rid of your debt as quickly as possible.
Tax benefits are a reason I’ve heard for people to keep debt on their personal financial books. The example is the person is keeping student loans because it lets them take a deduction on their taxes. This reason is very uneducated because the amount you can deduct from you taxes is capped. The amount that can be deducted is currently $2,500, which is not worth keeping any amount of debt. If you paid off your student loans, you can save much more money on interest and gain money on the investments you could utilize with the free cash flow.
Raising Credit Score
Another reason people take on and keep debt is because it benefits their credit score. Sure having a good credit score is well and all, but a credit score is not necessary to obtain a loan such as a mortgage, which would be the only loan needed. It is possible to have a zero credit score and get a home loan, be sides that, if you want to be financially free, there is no reason to take on debt for anything ever again.
Credit Cards as Emergency Fund
This is a popular one that people rationalize but could keep you in perpetual debt, and that is using a credit card for emergencies. Sure it can keep your cash flow free, but you will not be able to get out of debt when you pay off a credit card and have another emergency, causing you to fall right back into the debt cycle. The option is to create an emergency fund with cash because you can use cash, stopping you from going back into debt, and allowing you to keep moving forward in your journey of financial freedom.
These are just a few myths that people use to stay in debt, but if you want to become wealthy and take hold of your persona finance situation, then you need to eliminate all debts no matter what. No one ever obtained wealth by using credit cards, and if you use credit cards, you don’t want to become rich. All it takes is hard work and dedication to make the change and leave these myths behind. No matter what anyone says and what taxes are saved, it isn’t worth the stress.