Congratulations, you did it! You’ve worked hard, made sacrifices, and now you are debt-free. Take a moment to appreciate this accomplishment and the peace of mind it brings. But now what? What should you do with the extra money you have each month? Here are some money moves to make to ensure your life after debt is bright.
Start Building an Emergency Fund
If you don’t already have an emergency fund, now is the time to start building one. This fund should have enough money to cover at least three to six months’ worth of expenses. An emergency fund will help you avoid using credit cards or taking out loans in case of unexpected events, such as job loss, medical bills, or home repairs.
Start by setting aside a small amount of money each month and gradually increase it as you can. Keep the funds in a separate account from your regular savings to avoid the temptation of dipping into it for non-emergencies.
Invest in Your Retirement
If you haven’t already started saving for retirement, now is the time to begin. The earlier you start saving, the more time your investments have to grow. If you have a retirement plan at work, such as a 401(k) or 403(b), make sure you are contributing the maximum amount possible.
If you don’t have access to a retirement plan at work, consider opening an individual retirement account (IRA) and start contributing to it. You can contribute up to $6,000 per year to an IRA, and this money grows tax-free until you retire.
Save for Other Long-Term Goals
Do you have any other long-term goals, such as buying a house, starting a business, or going back to school? Now that you are debt-free, you can start saving for these goals.
Create a separate savings account for each goal and start contributing a little bit each month. Determine how much you need to save and create a timeline for achieving your goal. This will help you stay motivated and focused.
Live Within Your Means
One of the reasons you may have gotten into debt in the first place is because you were living beyond your means. Now that you are debt-free, it’s important to continue to live within your means.
Create a budget and stick to it. Make sure you are not overspending on unnecessary items and only purchase what you can afford. It’s okay to treat yourself once in a while, but make sure it’s within your budget.
Continue to Monitor Your Credit Reports
Even though you are debt-free, it’s important to continue to monitor your credit reports. Mistakes and inaccuracies can still happen, and it’s important to catch them early.
Request a free copy of your credit report from each of the three major credit bureaus – Equifax, Experian, and TransUnion – once a year. Review them carefully and dispute any errors you find. Monitoring your credit reports can also help you maintain a good credit score, which can be important if you need to take out a loan in the future.
Now that you are debt-free, it’s okay to relax and have some fun. You worked hard to achieve this goal, so treat yourself to something special. Just make sure it’s within your budget and won’t put you back into debt.
Take a trip, buy a new outfit, or splurge on a fancy dinner. Whatever you choose to do, make sure it’s something that brings you joy and makes you happy.
Life after debt is all about building a solid financial foundation for the future. Use the money you were putting towards debt payments to start building an emergency fund, invest in your retirement, save for long-term goals, live within your means, continue to monitor your credit reports, and enjoy life.