Congratulations! You're debt free, now what?
Working your way through a mountain of debt can feel like an uphill battle. When you finally get to the other side, it sure feels like a huge relief. No kidding—being debt free is awesome!
But then it can start to get stressful again.
Now that you’re debt free, what should you do next? What should your new focus be when it comes to your finances? And what should you do with all your newfound extra cash?
Debt free now what?
Whether you used the debt snowball method to tackle your debt or took on debt consolidation, you worked hard to pay off all your debts.
Take a moment. How does it feel to tell yourself, “I am debt free”?
Pretty good, right?
But sometimes, when you’ve been working so hard on a goal for so long, it can also feel a little scary to finally find yourself standing at the top of the mountain.
Where do you go next?
Let’s get started creating your financial roadmap.
Here are eight finance tips to help you answer the question, “No debt now what?”
1. Continue making a budget
The most crucial thing to remember when you’re finally debt free is to not give up on your budget.
A lot of times, people will be so excited about having some extra dough in their monthly cash flow that they completely throw their budget out the window.
But doing this can land you in big trouble because without a budget, it’s all too easy to start sliding back into debt.
The fact is, your monthly cash flow has changed—and your budget needs to, too.
Since you’re done paying off your debt, you now need to reorganize your budget to decide where all that extra cash is going to go each month. This way, you can maintain of lifestyle of debt free living.
Types of budgets
To readjust your budget, consider the 30-30-30-10 budget or the 70-20-10 budget. These are both percentage budgets that are easy to follow if you want to keep saving and include some spending in your life, as well.
But there are many types of budgets you can choose, you just need to find one that makes sense for you.
2. Pad your emergency fund
When staring an intimidating debt balance in the face, some people focus 100% on just paying off their debt. Meanwhile, others also prioritize saving while they’re making debt payments.
Whichever path you chose, now that you can tell yourself, “I am debt free,” it’s time to turn your attention to your savings.
How much to save
As you reorganize your budget, a good place to start is increasing your monthly contributions to your savings account. There’s no “right” monthly sum to put in your savings—how much you should save each month is different for everyone.
But a good rule is to aim to save six months of expenses in an emergency fund. It will prevent you from going back into debt again in case of an emergency; instead of racking up credit card bills, you can tap into your emergency fund.
3. Check your insurance needs
Debt free now what? While padding your emergency fund is definitely a top priority once you’re debt free, don’t forget about other important factors of your overall financial health. Namely, insurance.
Types of insurance
When it comes to insurance, there is a whole boatload of options out there. Life insurance is the most popular, but there are so many other types to consider, too, like long-term disability insurance, long-term care insurance, and more.
When people focus on paying off debt, insurance needs can often fall to the backburner.
Now is your time to reevaluate. Think about the advantages and disadvantages of life insurance and your other insurance needs. With freed-up cash in your monthly budget, now may be a good time to start shopping for new insurance policies.
4. Consider investing
Like saving, a lot of people halt investing while they’re focused on paying off debt. Or they abstain entirely.
Once you’ve paid off your debts, this is a great time to ramp up your contributions again.
How to invest
Haven’t started investing yet? And have no idea where to begin?
Don’t worry! Investing is for everyone—and you don’t need a lot of money to get started. You can begin with real estate, cryptocurrency, or index funds.
If you feel that you're in way over your head and don’t know where to start, check out this guide for beginners.
5. Focus on your retirement accounts
So you’re finally debt free, now what? Perhaps it seems like a long way off, but it’s important to start thinking about your retirement now.
When you were paying off all that debt, you may have slowed down your retirement contributions. That’s okay. But now that the debt is gone, it’s time to get back to prioritizing your retirement savings.
Getting started with retirement
Most experts recommend allocating 15% of your income each month to your retirement account. Of course, the more you can contribute, the better.
Don’t have a retirement account yet? It’s okay. While it’s always better to start saving up early, it’s never too late to start saving for retirement.
Do your research on whether a 401(k) or an IRA is the best choice for you. And if you work for yourself, there are different self-employed retirement plans, too.
6. Plan your financial future
When you’re in debt, it can be completely all-encompassing. As you work away on your monthly debt-crushing goals, it’s easy to let the other aspects of your financial health fall to the wayside.
But once you have no debt, now what?
Make a new plan
This is the time to think about your financial future in detail. Now that your debt is taken care of, you’re free to reevaluate your other financial goals.
For example, maybe you want to save up to buy a house? Save up to start a business? Or get ready to buy a new vehicle soon?
Whatever your plans for your financial future, now is the time to get clear on your next financial goal so you can come up with a new plan and a new budget to make it happen.
7. Organize your financial life
Asking yourself, “debt free now what?” is a good question about your financial future. But preparing for your financial future starts with organizing your financial life today.
How to get your money in order
Start by setting your bills on auto-pay. Not only does this help simplify your finances, but it also helps ensure you won’t forget to pay your bills—and slide right back into credit card debt.
After all, most Americans are living with credit card debt, but you don't have to be like the majority!
You can go further to automate your finances, too, like automating your retirement contributions and automating your emergency fund and savings accounts.
Thinking about, “no debt now what?” is also a great opportunity to set up sinking funds and organize financial paperwork - all the things that may have been neglected during your time of debt payoff.
8. Treat yourself now that you are debt free
Say it loud and proud: “I am debt free.” Being debt free is awesome, isn’t it?
You’re debt free, now what?
You’ve heard it’s time to pad your emergency fund. Up your retirement contributions. Start investing. Get organized. You know the drill now.
But don’t forget to treat yourself!
You spent a lot of time, sweat, and dedication to finally be done with debt—and you deserve to reward yourself. This doesn’t mean undoing all your hard work, of course.
But a big part of maintaining a healthy financial posture is knowing when to be disciplined and when to treat yourself.
So you have no debt, now what?
Plan a celebration
Get out your mood board (and your financial planner!) and start planning something fun. Have a party, or take yourself out to a five-star restaurant and order that expensive bottle of wine you’d normally avoid. Whatever you want!
You earned it.
Being debt free is awesome!
Asking yourself, “So I’m debt free, now what?” doesn’t have to be such a frightening question.
You’ve worked hard to conquer your goal of becoming debt free—and you did it! Now you can start working on and crushing your next financial goals.
Before you do, don’t forget to treat yourself along the way. Then get back at it, building your healthy financial future. And now that you've gotten rid of your debt, try some of our free financial courses to help you succeed.