I think $10,000 in debt feels way different than $10,000 in savings would.
With $10,000 in debt, it looms over you like a dark cloud or an unwelcome houseguest. Interest rates on debt are typically much higher than they are for a savings account, so just by making a minimum payment of $250 at 14 percent interest, you’ll be treading water for a long time. It’ll take 20+ years to pay that $10k off. That $10,000 might as well be a million dollars, for how it can make you feel.
Impossible to eliminate. Locking you into a job you hate. Miserable.
On the other hand, I’m imagining $10,000 in savings feels quite a bit different, even though it’s the same amount of money. For one thing, it’s your money. You saved it, and it’s now working for you by earning interest and allowing you to purchase things with cash. It probably didn’t take you 20+ years to save, either. If an unexpected expense pops up, you can tap your savings and your regular budget won’t be affected. If it weren’t there, you’d just go deeper into debt.
To me, $10,000 in savings sounds like less money than $10,000 in debt. The debt figure can feel impossible to conquer. Once you have several thousand in savings, it’s easier to say, “That wasn’t so hard! Let’s keep going!”
In about a year’s time, our financial pendulum has swung from several thousand in debt to several thousand in savings. It feels completely different to be in the black.