Getting out of debt is a huge accomplishment- as sadly it’s very easy to get into debt but extremely difficult to get out of. By becoming debt free, chances are you’ve really worked hard to resolve your issues with money and have probably gone without luxuries and extras for a long time to reach your goal. Getting out of debt is lifechanging in so many ways, for a start you free up so much extra money in your budget each month. And possibly most importantly, you free up your mind from worrying about money and debt. Having the weight of debtors chasing you and interest accumulating and the general mess you can feel like you’re in when you’re in debt can take a huge toll on your mental health. So once you’ve made that final payment and are officially debt free you can breathe a huge sigh of relief. Here’s what to do next.
Celebrate and Reflect
First things first, give yourself a pat on the back! You’ve worked hard to achieve this so celebrate your accomplishment in a way that fits in with your new financial goals. You could save a little money to treat yourself to the things you’ve been without for so long, or you could use the money that you would have paid towards debt on something else now that the debt is gone. Think about the challenges you’ve faced, the sacrifices you’ve made and the lessons you’ve learned along the way as this reflection can help you stay motivated to maintain your debt free status.
Build an Emergency Fund
Once you’re free from debt, it’s important to create a safety net/ buffer to prevent this from happening again. You might not have got into debt due to excessive spending or flaunting the cash, for many people it happens just from trying to make ends meet. So prevent this from happening again by getting organised with your money. When it comes to bills, work out exactly how much they cost each month and then transfer this amount plus a little extra from your wages into a separate bills account each month. If you set up the payments to be taken by direct debit then the account will take care of itself, just make sure you put enough in. That way, your bills are paid and separate from your other money and you know what you have left to spend or save. Each month when you transfer a little extra in, the money will grow and eventually you’ll have a buffer of a few months or even a year or more so that if you’re ever in a position where you can’t pay your bills for a little while (eg, a lost job or lost wages due to illness etc) then you know you’re covered.
Save for Your Goals
As well as building a buffer for your bills and expenses, it’s so worth saving for long term goals too. This could be buying a home, travelling the world, furthering your education, starting a business etc. Either way, having financial goals gives you a sense of purpose and direction. Create a savings plan and set up automatic transfers to a dedicated savings account. Talk to financial planners who can advise you about the best way to manage your money to get the best returns.
Invest in Yourself
Consider investing in your personal and professional growth- things like courses to enhance your skills, attending workshops or conferences, learning how to drive or even pursuing hobbies that bring you joy are all so worthwhile. Once you’re debt free and have a little extra money, these are all things you could consider doing.