What do you do after you are debt free?

18 Jan What do you do after you are debt free?

Planning for Debt Free and Beyond

Congratulations! After months and months or even years of sacrificing your student loans are gone, you dumped your credit cards, and paid off the car note. You are debt free! The cycle of debt that you have lived before is starting to break. But now that you have gotten over that mountain and can now see from the top the question most people ask is, “What’s next?” The answer I give you is: plenty. Here are some tips and things to do to keep you motivated and focused now that you are debt free:

Build your emergency fund-You have worked so hard to dump your debt that it is so tempting and easy to exhale, take a deep breath, and put off building your emergency fund. I do not know how many people I know who have said they would build their emergency fund later, but never get around to it, and end up back where they started from when an emergency hit. I challenge you to remain intense and buildup 6 months’ worth of expenses before exhaling. You will be glad you did it once it is done. The importance of an emergency fund can not be understated, so make it a priority to get that in place once you are debt free.

Loosen the budget-After building that emergency fund, this is where you get to enjoy having no payments. Redo your budget and put some more money into lifestyle such as eating out, entertainment, or clothes. Now don’t put it all to lifestyle, but pick something out that you would like to do more and do it! Do not feel guilty about it; you got debt free for a reason, so enjoy your money. You are used to cutting things out of your budget, but now enjoy adding more things in!

Giving-Do you know how much more you are able to give now that you are not sending payments to the bank? It truly is better to give than to receive, so give more to your local church, charity, or individual that you want to help change. Finding a passion that you have and giving to that is such an awesome feeling, plus think about the lives that your giving will impact!

Saving-When it comes to saving, you save both for short-term and long-term purchases. It is great to save enough money to do the things you put off while you were in debt such as remodeling your home, buying a nicer car, or taking a vacation to celebrate your debt freedom. The best part is that you will, of course, be paying for these purchases in cash instead of relying on financing them.

One of the biggest long-term savings you have is for retirement. I recommend putting between 10-15% of your income into your companies’ 401(K) or individual IRA account. That may seem like a lot but think about it, you are debt free, so you can now afford to invest in yourself instead of the bank. Do not try to time the market, the key to building a strong retirement fund is to be consistently saving. If you put $500 a month into your retirement fund (15% of a $40,000 annual income) it will grow very quickly. In addition you can also save for your children’s college fund if you choose to or save for your dream vacation on your special anniversary. Or decide to put extra on your mortgage payment each month and try to pay off your home within the next 10 years.

Climbing up the debt free mountain is tough, but the best thing is that once you get to the top you realize that there are taller mountains to climb. The good thing is that these mountains are lot more fun to climb and include building wealth, changing lives, and impacting your family’s legacy. The thing is that being debt free gives you many more options than you could ever imagine. But enjoy the journey! You can’t sacrifice forever; you must enjoy your money by saving, giving, AND spending. There was a reason that you originally wanted to get debt free so now that you are debt free, pursue that dream!

So what are you doing now that you are debt free? I would love it if you would share what being debt free has allowed you to accomplish.

  • Fiscal Phoenix
    Posted at 18:36h, 18 January

    Love this post! We are gazelle intense and can’t wait until all of the debt is paid off. Looking forward to the time when we will need to decide what to do with all the money that is going to debt repayment currently. Thanks for the good suggestions.

    • Jon White
      Posted at 20:19h, 18 January

      Glad you enjoyed it. The real fun is when you are debt free and you have the options to do what YOU want to instead of your debt controlling where you spend your money.

    • Matt Wegner
      Posted at 16:18h, 28 January

      That time will come before you know it, Phoenix. It’s such a fun position to be in, where you don’t have to owe anyone anything and your money works for you instead of some creditor!

  • SB @ One Cent At A Time
    Posted at 20:18h, 19 January

    After freedom and debt, starts the wealth building part. If we stop making any change to our living habit which brought that freedom in first place, we would certainly become wealthier.

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  • Glen Steinson
    Posted at 17:37h, 27 January

    Setting money aside into an emergency fund may seem very non-productive at the time, but – WHAM! – as soon as that emergency hits (and it will), it sure is nice to have the funds waiting there.

    This was the case recently for me and my wife. A routine trip to the dentist with one of our children went from $150 for cleaning and x-rays to $800 for some ‘extra work’ pretty quick. Instead of grabbing for credit cards to absorb the impact, my wife was able to calmly swipe our debit card and press the ‘savings’ button on the terminal to make the payment in full. Instead of getting terribly upset at the unfortunate situation, we were able to thank the Lord that we had the money ready.

    Great thoughts in your article Jon. I’m also enjoying your podcasts!

    Take care,

    • Matt Wegner
      Posted at 21:34h, 27 January

      Right on, Glen. There’s no better feeling than knowing you can handle a financial emergency without going deeper into debt.

    • Jon White
      Posted at 07:28h, 28 January

      Thanks Glen. An emergency fund might seem unnecessary until you actually have an emergency! But I can’t tell you how many times I have had similar situations as yours Glen in the last few years. Having those $300-$500 dollar expenses isn’t fun, but by having an emergency fund, it turns those expenses into an inconvenience rather than a crisis.

  • Debt Consolidation
    Posted at 02:31h, 07 June

    Dear Jon
    I liked what you said about Loosen the budget-After building that emergency fund, this is where you get to enjoy having no payments
    Follow this kind of items because they are very good, congratulations.

  • Stephen
    Posted at 14:34h, 01 July

    Save. Save. And save. You wont stay debt free unless you have the cash to cover life’s expenses. Cars are expensive. Homes repairs are expensive. Weddings. Funerals.