Paying off an interest-free loan in the name of happiness
Hello fellow Protagonists,
You heard correctly. By the end of next week I will be paying off my car loan even though there is absolutely no direct financial benefit to this, as the loan does not accrue any further interest. There was a small upfront payment to take out the loan two years ago, so it was not like it was free money. This is no small remaining figure either.
"Why on Earth would you do that?"
"Just spend the money on something you would enjoy. You are wasting it"
"Invest it and you could make more out of it in the long term."
I can hear people making these points and asking these questions. I have also asked them to myself when weighing up my options.
The main basis of my decision comes from the realisation that there is a huge difference between happiness and pleasure
Pleasure is hopefully something we have all felt at some point in our lives. It is buying the bigger house, a buzz from a game of blackjack and being served our favourite drink on a Saturday night (Do you remember those days, they will return). It was what I felt when I first bought the car. There is nothing wrong with seeking pleasure; I will be out when bars re-open, Old fashioned in hand. It is the understanding that pleasure is short lived.
Happiness on the other hand is a long term state of mind.
Between conversations with the Dalai Lama and Howard C. Cutler it was stated that "Liberation leads to happiness". These conversations are written in the book The Art of Happiness back in 1998. Liberation can mean many things from freedom of imprisonment, slavery and oppression, to a freedom from limits on thoughts and behaviours.
Whenever a relationship is formed where one person owes money to another (individual or corporate business) a master-servant bond is created. Owing money to my bank therefore makes me the servant. I work and earn money in order to pay them and if I do not then they can fine me, or press legal charges. This could also take away part of our liberty as we may avoid choices and changes we want to make, due to the impact this could have on serving our masters (not being able to pay them this month).
This could mean that we are servants to many different people all at once. Our masters could be the bank, a friend we borrowed from, a credit card company, a mortgage provider and through a store card. The fewer masters we have, the more we can focus on ourselves. Maybe it can help explain the feeling we get when we do owe so many people, we can feel oppressed or stuck.
We could argue sometimes that when people feel it is their job that is oppressing them, or keeping them in work, it isn't the case. That feeling may be because of the people, banks and companies we owe the money to and so, need to go to work in order to pay them.
Happiness also comes from how satisfied we are with what we already have rather than what we want. After the end of next week I can tell myself that I do own my car and show a little self-gratitude for that. If we are still paying something off, we do not own it. Well not all of it anyway.
On the financial side of the coin, the money that usually went to pay the car off can now be freed up for other purposes. This will see an extra £140 disposable income, which may not seem like a crazy amount but I would struggle to tell you where else to put the remaining money that would guarantee an extra £140 in my hands per month.
Extra disposable income for any of us can support us during months with unexpected payments that are out of our control in becoming slightly easier to manage, going out for an extra meal or other experience with your loved ones, putting more away for investing and also making it easier to support other people if they need financial help (and you are happy to offer it).
Now looking at all those mental and financial benefits, would I still use that money in any other way than paying off that car?
The money was accrued in the usual boring-but-simple way of applying a savings rate. A little side tip here is to also ensure that you have a small emergency fund left if we do pay off debts as an emergency would mean needing to take out an additional loan, defeating the point.
I have also publicly discussed my goal, hopefully meaning I am far more likely to follow up with it now.
Would you still use the money for something else in my shoes? Remember that there is no right way, but improving the way we feel is right.