Almost everyone can agree that paying off debt is NEVER
easy. It takes a lot of motivation, self-discipline, managing skills and an
unwavering commitment to staying on track and paying off your debt faster.
Either by debt stacking, consolidating your credit cards, working with a credit
counselor or living on a strict budget, the process of getting your life
debt-free can be really stressful and confusing. But when you are making your
last payment and you realize that you’re one final check or one simple click
away from becoming debt free – you’ll know that all of your sacrifices were
absolutely worth it.
So for a moment, imagine you have overcome all the
obstacles. Envision that you’ve gotten yourself debt-free (yay!) and you nailed
your celebratory dances. Now what? What’s the next step?
Well, for starters, you definitely don’t want to get
yourself in debt again – been there, done that, no thanks! But you have this great
budget set up, and it’s now basically producing “extra money” and you don’t
know what to do with it. YOU MUST RESIST THE URGE TO SPEND IT! Now that you are
debt-free, this surplus cash flow is EXACTLY the opportunity you needed to start
building your financial independence and your future. So here are some tips on what you should do next:
Tip #1 – Build a Large Emergency Fund
While paying
off debt, it’s very common for people to consume all extra money they have to
reduce their balance. After that final debt payment is made, keep up and use
that momentum and start saving some (or all) of that extra money to build a
large emergency fund. This is definitely
where you should start.
Most
financial experts recommend a six-month emergency fund. A fund of this size
should be adequate in covering you against an unexpected job loss or major
health issues. Calculate how much money you need in a month to live a
comfortable quality of life, and then multiply it by six. Remember – this isn’t money you're trying to
invest but rather something you will leave untouched until needed during the
hard/difficult times. It’s
best to put it in a separate account for quick reference. You can also
find banks that offer a good savings account with terms that allow you to earn
a little bit of money while you
save.
Let’s hope that you’ll never need this emergency fund, but
having one can let you breathe and live your life a little bit more freely.
Your sacrifices will still pay off!
Tip #2 – Invest a Greater Portion of Your Income
Now, you are debt-free and have a large emergency fund –
sounds pretty good, right? So, now what’s next? Now you can start using a
larger portion of your income for your investments. You can now raise your
investment from 5% to 15% or even 20%. When paying off your debt, you learned
how to lean out your spending habits and become more financially responsible. All the skills and self-discipline that you’ve
developed while paying off your debt can now help you build your investment
income.
Take
advantage of the compound interest that banks may offer, and since there is no
debt to hold you back, you can really make your retirement savings grow bigger
– faster! Who knows, maybe you can even have an early retirement and start enjoying
life stress-free.
Tip #3 – Spend (Wisely) and Have a Blast!
This could be considered one of the toughest/hardest steps
for anyone who has paid a large amount of debt. You might be traumatized from
your recent debt riddled experience, and find it’s harder for you to let go of
money! But if you still find yourself with extra money while consistently
saving 15% or more of your income, investing in your retirement savings, and maintaining
an emergency fund, then by all means REWARD YOURSELF! It’s not a bad thing to
give yourself a little treat. You deserve it!
Go on a vacation. Buy whatever you want. Go skydiving! As
long as you have a plan and it’s not beyond your means, you should enjoy life.
You have to see it for yourself how far you have come through in making your financial freedom come to life.
Conclusion
Finding your
financial success or financial independence is not only about money, savings or
saving some more money. Leave yourself a room to enjoy the good things life has
to offer. Saving money can be set as a priority, but it’s also very important to
remember why and what we are doing this all for in the first place – quality
time with the family, meeting up with friends, and most especially keeping
yourself healthy and mind at peace – you know, the things that make you happy
and inspired. There’s no greater
achievement than having yourself debt free and at the same time not losing your
life and aspirations.
