I have been aggressively paying down my auto loan since the beginning of the year. Every time I am about to waiver and change course I remember my favorite thing about paying off debt. What is my favorite thing about paying off debt?
I don’t believe that debt is religiously evil, nor do I think debt is good or bad so those two things can’t be it. I am not throwing away money since the loan was associated with my vehicle that I need and it is a relatively low interest rate, so that can’t be it.
So what is my favorite thing about paying off debt? The net effect on your yearly income needs!
Paying off Debt is Like Giving Yourself a Raise
My auto loan costs me approximately $220/month. That means, assuming a 20% effective income tax I have to make approximately $3,000 before taxes to keep the note current. By paying off the note early, I am effectively giving myself a raise!
Without even worrying about the money saved with paying an amortized loan quicker, I am helping future Evan out. With a lower net monthly (and yearly) income need I have more money to either spend or throw at another debt and this pumps me up!
While it may be unrealisitic, I would love one day to have a net monthly need of two or three grand.
What is your favorite thing about paying off debt?