Here’s 5 Reasons Why You Should Pay Your Debts Sooner Rather Than Later

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As a debt collection agency servicing Australian businesses nation-wide, we’ve seen all kinds of situations involving debts.

Whether it’s businesses trying to chase up unpaid invoices or customers trying to dodge payments, we’ve seen it all. Usually, we use our experience to provide advice on how you can recover debts or how to avoid them, but today, we want to take some time to talk to those who haven’t paid their debts.

There are various reasons as to why someone might be in debt or have unpaid invoices haunting them. Debt is one of those things, that for the majority of people, is hard to avoid. You may have bitten off more than you can chew and bought too many products from a company or perhaps you’re trying to make do to keep your business afloat. Whatever the reason, one of the most important things about debt is how you manage getting out of it.

When you’re in debt, it can be tempting to put your head in the sand and ignore it for as long as possible, however, this can cause major stress and long-term problems. So, today, we’re going to tell you why you should aim to pay off your debts as soon as you possibly can.

Why You Should Aim to Get Out of Debt Fast

It’s all well and good to say you should pay off your debts, however, the reality isn’t quite as simple as it sounds and can quite often be a long and arduous process. Paying outstanding debts requires hard work and motivation, so here’s some reasons why you should you want to get debt free:

Reason One: You Can Have Financial Security

The feeling of being financially comfortable is something that, unfortunately, not everyone gets to experience. When we first start accessing money in our late teens and early 20s, we’re often not totally understanding of the responsibilities and consequences that come with it. It’s not uncommon to struggle financially in your 20s, as you develop habits and a greater understanding of how to use your money.

Financial security does mean different things to different people, however, in general, it means that you have peace of mind and are not worried about money. You have enough income to comfortably cover expenses and if an emergency arises you can pay for it. For many people, financial security also means being debt-free.

Now, as you get older and, in many cases, more financially comfortable, you can still have debt and a feeling of security, however, these debts are often pretty standard ones, like mortgages for example. Being free from unnecessary or frivolous debts is often something that can make people feel more financially secure. It means that the money you have left over after you’ve been paid and covered your living expenses can be saved and enjoyed.

Essentially, the less debt you’re in, the more control you will likely have over your finances and therefore, more financial freedom.

Reason Two: You Can Say Goodbye to One of Life’s Big Stressors

As humans we’re pretty inclined to stress about just about everything. And at the top of the list of many people’s causes of stress is, you guessed it, money.

Debt plays a big part in this.

For many, financial insecurity is a large cause of stress, whether it’s a founded or unfounded reason. So, on top of trying to cover your normal living expenses, if you’ve got debts, especially those that were unnecessary to accumulate, it’s just another expense that you’re worried about paying off.

The sooner you can eliminate these debts the sooner you can reduce your stress levels.

Reason Three: You Can Save More Money

As we work with debts and money, we often get asked whether you should save money or pay off debt, and the answer for this is that it is truly dependent on your individual circumstances.

If possible, it’s a great idea to save enough money to have an emergency fund, for something like car issues or rental bond deposit. Once you have your emergency fund, then prioritising debt repayments is the next important step.

Why are we talking about this?

Well, when it comes to paying off your debts, the sooner you can pay them, the sooner you can save money. And we mean this in two ways.

First up, if you pay off your debts, that money you’re no longer using to pay debts can now be used to save and give you more financial security.

Secondly, the sooner you pay off your debts, the sooner your debt decreases, and the smaller your interest charges get. Every loan, no matter how big or small, will have some form of interest attached to it – unless you’ve loaned from a friend or family member who has spared you this headache. As your debt gets smaller, the amount of interest you pay does too, which saves you money. And once the debt is gone, not only is debt out of your life but so is the extra interest you were paying too.

Reason Four: You Can Improve Your Credit Score

Now, having debt doesn’t mean that you will have a bad credit score, but if you’ve managed your debts poorly, refused to pay them or continuously pay them late, then that is going to impact your credit score and ultimately your financial future.

When your credit score tanks so too does your ability to borrow money in the future. Paying off your debt and making your payments on time will do wonders for your credit score and reputation.

It’s easy to disregard the importance of your credit score, but trust us, don’t take it for granted.

Reason Five: You Can Spend Money on The Things You Love

When you’re in debt there is a certain amount of stress and guilt that can stop you from being able to comfortably enjoy yourself and live your life.

Anytime you have spare money you think, oh I should use that to pay off this debt or that debt. This feeling of guilt can get in the way of life’s precious moments. So, the sooner you can prioritise paying off those unnecessary debts, the sooner you’re going to be able to enjoy life.

paper that says "debt free" posted on a corkboard

Avoid Falling Back into Debt With These Tips

If you’ve managed to pay off your outstanding debts, the last thing you want is to end up back into bad debt again, so here are some things you can do to avoid that from happening:

  • Find the root cause for your debt – Debt can happen for all sorts of reasons. You might have overextended yourself a bit too much; you may have misjudged a situation; you might not really understand how to manage your money; or you might have listened to some bad advice. Whatever the cause of your debt, to avoid it happening again, you need to know what this cause is so you can put steps in place to stop it from happening again.
  • Seek professional financial help – If you don’t understand how to manage your money there is no shame in seeking help to do so. We’ve got all various life skills, and some of them you’re better at than others. There is a common misconception that everyone inherently knows how to manage their money, but the reality is that we often pick up the habits of our parents (not only financial habits). If everyone could manage their money efficiently, we wouldn’t have a business – there really is no shame in getting help.
  • Don’t spend beyond your means – this one is probably easier said than done for many people. If you can’t afford it, don’t buy it. It’s easy to fall into spending traps – especially when you’re young and trying to keep up with trends or friends, and now with the added complexity of buy now, pay later options, like AfterPay, it makes money you don’t have right now way more accessible. If you’re thinking about buying something, you don’t actually need with money you don’t actually have – don’t.

Do You Need Help Recovering Debts?

If you own, work for or run a small to medium sized business that is currently struggling to manage delinquent clients or that needs help with controlling credit, then why not give us a call here at JMA.

We have more than 50 years of experience collecting debts, offering credit consultancy services and helping businesses all over Australia. Call us on 1300 664 223 to discuss your options with us.

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