If you are already debt-free, you already know how great the feeling of not having payments is. You now have money because you no longer have debt. My wife and I are not 100% debt-free. We still have a mortgage on our house. However, we have not had any other debt for the last nine years. We have found there are some things that you can do when you are debt-free or just have your mortgage left.
If you are debt-free with no mortgage, you are in a financial position where you can increase your savings rate. Do not keep your retirement saving at 15% of your gross income. How much you save depends on your goals. If you want to retire at 65 with the same lifestyle that you have now, then save 15%. If you want to reach financial independence sooner or retire with a larger nest egg, then you need to save more. Saving 50% of your income is not out of the question when you have no debt. I recommend reaching financial independence as soon as you can.
Most of your savings should be going into retirement accounts. There are tax advantages when saving your money in your retirement accounts. The more you put in your 401k and IRA, the less federal income tax you have. This means even more money can be saved.
Even if you have a mortgage, when you have no other debt, you can give more to your church and other charities. Let’s say you have been giving 10% to your church while paying off your debt. Once your debt is gone, each time you get a raise, consider increasing your charitable contributions by 1%. In five years, you are giving 15%. How much you give is completely up to you, but this is when it becomes very fun to give!
You don’t have to give all this money to your church. My wife and I give a weekly offering to our church as most people do. We also have a special savings account set up where another portion of our charitable contributions get transferred to each week. This money sits in the savings account until an opportunity arises where we can give the money. If something at church comes up, we have additional money to give. If a hurricane rips through Florida, we have additional money to send to the Red Cross. There are so many good organizations out there that help people.
Most people don’t give 5% to their church, let alone 10%, 15%, or even more. For some, even though you want to give more, your debt is making it so that you cannot give what you want. It doesn’t matter what your favorite charities are. If you have debt you cannot give like you want to, but when you are debt-free, you put yourself into a position to be able to be as generous as you can be. When you don’t have debt, you have money. When you have money, you can give more to your church and other charities.
Have More Options
None of us know when our time is up here. On average, we all have 75-80 years. A third of that is sleeping. Whether you have debt or not, you need to sleep, eat, and take care of yourself. The average full-time worker has 10 hours a day for work and leisure according to the US Bureau of Labor Statistics. When you are struggling with debt, you need to spend all this time making money in order to get out of debt. When you are debt-free, you have so many options for these 10 hours each day.
If you like your job, then your first option is to stay working and doing what you like. If you have a hobby that you love and think you have a good chance of turning it into a business, when you don’t have debt and have a fully-funded emergency fund, you can turn your hobby into a business and not have to incur any debt. You can take more, calculated risks because failing with no debt doesn’t set you back much.
Another option is to work part-time and volunteer more of your time. Maybe you can stay at home with the kids because you are debt-free. You have all these options and more because you don’t have a bunch of payments that are holding you back.
There are many things you can do when you are debt-free. Being debt-free frees up your income so that you can save and give more, and it gives you more options. Being debt-free can give you more confidence to turn your hobbies into a business or to go into business for yourself doing what you already love doing. If you are not there already, one of the best things you can do financially is to get out of debt. Pay it all off as fast as you can. After that, you will discover so many more things you can do when you are debt-free.