4 Things to Do Once You’re Finally Debt Free

After years of being in debt, it’s hard to believe there’s life after debt. Having extra money to spare can be a bit intimidating and many find it difficult to keep from overspending again. To avoid relapsing into debt, here’s what you can do with your extra cash once you’re debt free.

Build up your emergency fund

If you didn’t have an emergency fund built up already or it wasn’t as much as you wanted, now is the time to finally add to it. Your goal should be to save 6 months’ worth of your expenses in case you lose your job, have to take a leave of absence, or have any emergency that would disrupt your monthly expenses. Even better, aim to have 12 months saved up.

Save for retirement

The next thing you should do after creating a hefty emergency fund is to put more money towards your retirement fund. Place the extra in your IRA or 401k to help with your retirement dreams. Your goal should be to max out the contribution limit on all your investment accounts. If you’ve maxed out all of your accounts and you still have money remaining, first of all a round of applause to you, and secondly, take the time to speak with a financial advisor about where to place the remainder of your assets.

Have a little bit of fun

If you’ve worked diligently to pay off your debt you deserve to have a little fun to celebrate your new found freedom. Perhaps you’ve wanted to go on a vacation or buy a new item you’ve been eyeing. It’s alright to indulge. Just know your budget and how much you can spend to avoid overspending and starting all over again.

Take a career step

You may have been so far in debt your options were limited when it came to career choices. If that’s the case, perhaps you want to save your extra income and spend it on college courses to move you towards the career you want.

Life after debt

If you’ve been in debt for what seems like forever it may get some getting used to that you have extra money to spare. Don’t get caught up in having the extra, instead, be strong, make a budget, and make smart financial decisions to avoid falling back into debt. Life continues after you’re free from debt, keep it that way.

What are you doing with your extra income?