Must-Do Things After You Finally Become Debt Free
August 31, 2021
What are the things you should do when debt-free?
- Take the time to celebrate
- Invest in your emergency fund
- Research retirement options
- Review your insurance
- Keep your credit accounts open
- Follow your passions
The process of paying off your debt can seem endless — years can go by as you slowly chip away at your payments. However, if you ever see yourself nearing the finish line, you’re faced with another hurdle in your financial journey. If you’re at this point, you might be considering what to do with your money once you’re in the clear. So, here are a few important things to do when you’re debt free.
Take the time to celebrate
Don’t let this moment pass by without giving yourself some much-needed recognition. Take some time to celebrate — just make sure you plan for it. Without a plan, you may end up spending too much. You could take a short trip with your friends, or buy an item on your wishlist. As long as you can afford to do so, then why not? If it makes you happy, then spend your money on something nice as a way to congratulate yourself on a job well done.
Invest in your emergency fund
A great part of paying your debt is that a part of your income is now free for you to use. You can start putting this towards several things — like your emergency fund. This is an excellent way to protect yourself from future debt. If you have this on hand, you’re more prepared for a crisis.
Most experts would recommend setting aside funds worth six months of expenses for emergency use. While this might have been hard when dealing with debt, it becomes significantly easier to do after becoming debt-free. Take some time to create a budget, and start putting your money towards this fund.
Research retirement options
When it comes to preparing for retirement, the sooner the better. With some savings and no debt, your situation is perfect for shifting your focus to the future. One good way to start doing so is to research possible retirement plans.
No matter how much you decide to put towards contributions, or how varied your approach to retirement is, the most important thing is that you’re consistent with allocating your money. You’re likely to have become more financially disciplined when you dealt with debt, so apply that same mindset when saving up for retirement.
Review your insurance
Your debt may have been serious enough that you had to get by with the bare minimum insurance coverage. Now that you will start having more money to spend each month, you may want to consider reviewing your current insurance plans. For example, consider increasing your medical insurance or perhaps applying for a life insurance plan now that you can stand to afford the premiums. These are necessities that can help save you from costly accidents in the future.
Keep your credit accounts open
You may find that you’re using your credit cards less now that you’ve paid off your debts. However, it would be wise to keep your accounts open even if you don’t have much need for them.
The history of your credit accounts is something that contributes to your credit score. A good score would open up a lot of financial avenues for you in the future (like a loan you may plan on taking to buy a house, for example). So even if you stop using your credit cards, try keeping those accounts open by connecting them to a small, recurring payment — like your online subscriptions.
Follow your passions
When you’re free of debt, you’ll find that you start having more time and financial freedom on your hands. Now is the perfect time to pursue the things that matter to you.
For example, if you’re interested in crafts, you could start buying new equipment and supplies for new projects. If you dream of traveling to different countries or tourist spots, then you can start putting aside money for a future trip. The possibilities are endless!
Similar to paying off your debt, you’ll find that figuring out what to do with your extra money takes some discipline and planning on your part. Knowing the things to do after you’re debt-free can help keep you happy and financially free for the years to come.
Another good way to protect yourself from financial mishaps is to seek guidance from a professional — like Benito Keh. Contact him today and learn more about how you can improve your financial planning.