If you’re like millions of other Americans who are mired in debt, living life debt-free might be difficult to imagine. Nonetheless, families and individuals continually find ways to pay off their debt and experience what life is like without it. From increased cashflow to the exhilaration of being financially accountable to no one other than yourself, the experience of living debt-free can range from absolutely thrilling to entirely overwhelming as you learn how to manage your spare funds.
If you’re on the path to paying down your loans and overdue expenses, or if you’ve recently been declared debt-free, here are a few things to know about life after debt.
You are Finally Debt-Free, So Stay That Way!
You’ve taken the time to pay down your debt, and you’ve proven that you have the discipline to do so. The last thing you want to do is immediately rack up more debt. Even those who’ve worked with the very best debt relief programs to become debt-free can easily fall back into debt traps if they aren’t careful.
To ensure that you remain debt-free, identify the behavioral patterns that mired you in debt in the first place. Was it overspending? Putting too much on credit? Saying yes to too many investment opportunities? Borrowing more than you needed for a car loan or mortgage?
Once you’ve identified these behaviors, figure out what you need to do to avoid reverting to them. For instance, if you tend to overuse your credit cards, commit to paying down your balances each month instead of letting them carry over. Better yet, withdraw cash and keep it safely stowed in an envelope. Use this cash to make major purchases instead of immediately charging items to your cards. If your downfall, on the other hand, was overspending on luxuries like vacations or meals out, devising a feasible budget can help you enjoy these treats in moderation without draining your savings.
Learn as Much as you can about Your Personal Finances
Once you’ve paid off your debts, you have an abundance of financial opportunities available to you – most significantly, increased cashflow. In order to use this new resource as resourcefully as you can, educate yourself about smart personal finance choices. Find a financial advisor to help you decide how to save and invest, and spend some time increasing your understanding of tools like stocks and mutual funds.
Additionally, sit down with your spouse or partner to devise a budget that creates space for essential expenses as well as emergency savings, investments, and retirement funds. If you are unsure of how much you should allocate to retirement, emergency funds, and other types of savings accounts, do some research or better yet, speak with your financial advisor or accountant.
Set Financial Goals
Now that you have the bandwidth to make strategic decisions about how to use your money, devise some new goals. For instance, how much do you want to save for retirement? How do you plan to build your nest egg? Are you interested in buying a new home or funding a family member’s education? Do you hope to help your children pay for college?
Now that you have the opportunity to do these things, decide which are most important to you, how much you want to save, and how long it will take you to do so, so that you can allocate your income accordingly.
Additionally, address important questions like how much wealth you would like to build, whether you would like to retire early, and how much you would like to have in the bank by the time you hit certain milestones (particular ages, the introduction of new children to your family, etc.). Having a vision – and plan – for these types of lifestyle choices can help you use your money well rather than losing it through mindless purchases or unwise investments. Much like your debt relief plan, having a long-term goal and vision will help you achieve financial security much sooner.
Enjoy Your Debt-Free Life
You’ve worked hard to become debt-free, so know that it’s okay to enjoy it! While you were in the throes of paying off your debt, you likely deprived yourself of privileges like vacations, shopping sprees, and meals out. Now that you have the funds to enjoy these luxuries, you should do so – but keep in mind that you should still create and maintain a budget and keep an eye on each and every expenditure. You don’t want to “treat yourself” straight back into debt!
If living a debt-free life seems unattainable for you, know that it is possible. And if you’ve recently paid down a substantial debt and are overwhelmed by the prospect of having disposable income yet again, don’t worry: You have a multitude of tools at your disposal to help you manage your funds, build wealth, and enjoy your newfound financial freedom. With careful planning and a keen understanding of your goals, you can set yourself up for lasting success and prosperity.