Tips on Becoming a Debt-Free US Citizen

Most people in the industrialized countries are, unfortunately, living from paycheck to paycheck. Although most people think this kind of financial life is normal, it has tons of disadvantages, especially in an economy that is hugely uncertain. According to financial pundits, this approach to finances is one of the reasons why people are still in debt. 

How do you conquer debt?

In industrialized countries, a tiny percentage of the population is debt free. However, it is still possible to have a healthy balance of your obligations. The following are the best tips on conquering unhealthy debts.

  • Investments are king’ in fighting debts

Since it is hard to pay off your mortgage or student loans in a short time, investing in some ventures is encouraged. Although there are tons of ways to invest, the best tax-free investments are ideal. Investing in tax-free investments ensures that one secures their future without having a tax responsibility. Currently, there are more than nine different tax-free investment in the USA. 

Unlike the mainstream investments, these nine different options are tax-free, just like the name suggests. As an investor, you can select tax-free investments depending on your preference and, more importantly, your interpretation of what is profitable. In addition, you should also consider your retirement plans as well as your financial position. Most of these investment plans are a joint effort between the government and the employee that helps the workforce take control of their retirement in terms of monetary.

Alternatively, you can invest in mainstream investments, which, unlike tax-free investments, attracts tax responsibilities. These type of investments are also home to uncertainties, and the investor needs to understand market trends to make a return. The investment niche is also controlled by global financial trends and sometimes geopolitics. Understanding all these factors is a necessity.

  • Rethink your debts: The type of debt matters

“Debt” as an academic discipline is arguably one of the most discussed subject matters. Different experts interpret debts differently. There are more than five reasons why debt is ideal for people in industrialized countries. Although these five points exhibit the importance of debt, there is also a dark side of debt which most professionals refer as bad debt. The difference between bad and good debt is small, but these two important questions should always provide a guide of whether the debt is healthy or not.

First, what is the purpose of the debt? If the debt is for financing a lifestyle, pundits refer that debt as bad debt. If the debt is for financing education or paying for a house, that is a good debt. Second, for a debt to be good or bad, one must consider the payment plan. If the payment plan is solid, then that debt is good. If the payment plan is uncertain, then you should avoid the debt at all costs since it is bad debt.

What are the advantages of being a debt-free US citizen?

First, being debt free is a gateway to financial security. Statistics show that more than 60% of the Americans cannot afford an emergency equivalent to $500. Even though we live in a world of insurance and insurance plans, having an ability to fund emergencies is one of the greatest financial freedoms to any person. Being a debt-free citizen, therefore, gives one the ability to have this financial security since there is no money going to service debts.

Second, being a debt-free US citizen translates to unmatched credit score. According to experts, having a good credit score means that you have financial flexibility and financial institutions are more likely to trust you compared to people with unmanageable debts. In addition to having an excellent relationship with financial institutions, a good credit score means that property owners and employers are more willing to trust you. This trust means that one has unlimited chances to make more wealth.

Other important facts about being a debt-free American citizen include having a focus to wealth creation, enjoying life more, and finally, a settled life.

It is clear from the above piece that getting out of debt by defining good and bad debt is not farfetched. However, investing in tax-free investments is arguably the smartest way to get out of the debt circles.

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