Should you avoid debt at all costs or is debt a necessary way to enjoy a certain quality of life? Each and every person has a different view on this.
Debt is just a financial instrument that can give you leverage. It amplifies the good and the bad. 

For example, if debt is used smartly, it can be used to build an asset like a home for you over the long term.

However, too often debt can get out of hand and can lead to a spiral down of your finances. This is why it is extremely important to know your limitations and manage your purchases prudently.

Unfortunately, many do not learn how to manage debt until it’s too late and get buried under the cost of reckless spending. 

Your debt costs you much more than just the interest you pay. Research shows a clear link between your financial health and your mental health. 

In fact, according to research from the University of Southampton which was published in the Clinical Psychology Review, there is a correlation between mental illness and financial problems. The research concluded that the likelihood of having a mental health problem is three times higher among people who are in debt. 

When you are in debt, it can sometimes feel like you have a lot of constraints on you. You can’t join an exciting startup because you need the safety and security of a steady paycheck. Taking risks that could affect your finances are harder to make because you don’t want to spiral into a debt trap. It may sometimes feel like you are putting life on hold.

This is the emotional cost of debt. And it is very important to recognize it because it can stop you beforehand from getting into too much debt or it also could be the first step in helping you recognize that it may be a problem and that you need to climb out of it.

Paying off your debt is hard and takes discipline and a lot of patience. But the financial and psychological rewards of getting out of debt can be a great benefit in the long run. If you have decided to pay down debt and have multiple outstandings, you will need to prioritize which debts to pay off. There are many ways to do this, one of which is a method called the debt snowball. You can check out our worksheet linked below to understand how that works.