I love the point that Clever Dude made in a post earlier today. Essentially, if you want to give yourself a big, tax-free raise, pay off your dang debt!
Sure, it’s not always easy to get out of debt, depending on the debt load you carry and your income.
But, when you aren’t paying $200/month to Citi, $150/month to your student loans, $300/month for your car…suddenly, my fictitious example person has an extra $650 per month that’s no longer going toward debt.
How much money per month and per year can you free up, if you weren’t paying off debt? Crunch those numbers!
Instead, that money can be used for emergency savings, saved over time to buy a car with cash, invested, or it can even be used to increase your basic standard of living. And, it can give you a pretty good peace of mind to know that, hey, we really can live reasonably well off $18,000 per year take-home pay, instead of requiring $22,000.
If you hate your current job, but it pays the bills, imagine the freedom you’d have to switch to a more satisfying career–even if you have to take a pay cut. If you don’t have debt, that pay cut could be a non-issue.
Our debt is a monthly car payment. Once we get rid of it, we’ll free up a good chunk of my husband’s take-home pay–more than 10 percent!
So, once we get rid of our car payment, it’s like my husband just got a big raise, without us having to pay taxes on it.
I like it!
The thought of having $10k in the bank and a paid-for car by year’s end keeps me motivated to stay on track with our attempts at living frugally and saving every last cent. I’d love to be able to stretch Shane’s check even further, and getting our car paid off would be a great thing–for our stress levels as well as our bank accounts.
We’re going to stick to the plan of getting our six-month emergency fund together as quickly as possible, and after that, I think we’ll take nearly the same intensity to get rid of our car loan once and for all. I crunched some numbers, and in the best-case scenario, we can have that puppy paid off by early 2009.