It was a tough haul, but you’ve finally made it.
You’ve achieved debt freedom.
However, what you do next will determine whether you remain debt-free or begin digging that hole all over again. Having survived climbing out of debt once, most people aren’t anxious to repeat the process. However, you’ll need a strategy to follow to help keep you on track.
Here are some steps to take after paying off your debts to help ensure you won’t have to do so again.
Keep to Your Spending Plan
Whatever it took to get you’re here is what it’s going to take to keep you here. In other words, the spending plan you followed to pay off your debt will continue supporting your current lifestyle just fine. Too many people get excited about the “extra” money they think they have after paying off their debts and blow it.
Instead, keep your spending plan just as it is.
Start an Emergency Fund
Open a high-yield savings account and deposit all the money you were using to pay off your bills into it. Your budget already excludes these dollars; putting them away for a rainy day is the smartest play.
As a result, you’ll be more likely to have cash on hand to deal with emergency situations when they arise — without going into debt. Plus, if the problem turns out to be bigger than your savings account, at least you’ll be in a position to pay part of it in cash so the resulting debt won’t be as large as it would have been.
Most financial experts consider an emergency fund adequate when it contains three to six months of your household expenses — including your rent and/or mortgage payment.
Beef Up Your Retirement Fund
Once your emergency fund is complete, pump that money into your retirement fund. Odds are you veered away from this while you were paying off your debts.
It’s time to give that money back.
Calculate where you would have been had you not been paying off the debt, set that as your goal and funnel the bill money into those accounts. Until it’s back at the level it should have been and let your regular contributions maintain it from there.
Find Some Sound Investments
Once you’ve got your retirement fund back on track, use that former bill-paying money to make some money. Perhaps it’s real estate. Maybe it’s a mutual fund. Whatever it is, do something with that money to make it make more money. Talk to a financial advisor to see what makes the most sense given the amount of money you have to invest each month.
Live a Little
Once you’ve taken care of all of the above, find something you’d like to do to reward yourself for being smart about these steps to take after paying off your debt. Maybe it’s a dream vacation. Maybe it’s a piano. Whatever it is, find something you’d like to do, get a handle on what it’ll cost, put money away until you’ve saved enough to pay for it in cash and have at it.
One Last Thing—
As these Freedom Debt Relief reviews from people undergoing debt settlement will attest, ridding yourself of debt can be a rather arduous task. Always remember and never forget: Credit cards are not your friends. Yes, they are a sometimes-necessary evil, but they should never again be looked upon as a tool for acquisition.
Now, with that said, there’s good credit and there’s bad credit. Good credit is credit you use to advance your financial situation in some way — in other words, you’ll net a financial gain from charging the purchase.
Bad credit is credit you use for anything else.