You Paid Off Your Debt, Now What?


So, you spent the last year or 2 working hard, watching every penny and you’ve paid off your debt. It’s been a long slog, but you did it!!! You should be tremendously proud of yourself for this accomplishment cause now you’re well on your way to financial freedom.

For some, that may have been their goal, and that’s great.  That alone is reason enough to do it.  Think of the pressures of debt being lifted of your shoulders…

Amazing feeling for sure.

For others, the goal is to free up funds for other things.

This is what this post is all about.

Now that you have available funds to work with, the sky’s the limit on what you can do. Like I mentioned earlier, the goal of just getting out of debt and starting from scratch is the sole goal (see what I did there). With this mindset, what tends to happen, is that many people with just this goal will, eventually, just get back into debt.

Bam! Take that morale.

The key is to stay out of debt and prepare for the future, while still being able to enjoy the things in life you love.

If you read my article on the 10 ways to reduce your monthly expenses, you’ll know that budgeting is paramount. Just because you’re out of debt doesn’t mean you need to stop budgeting. In fact, maintaining, revising and holding true to your budget indefinitely will help insure you have a solid financial plan.

This financial plan should have a series of realistic goals and how you plan on achieving them. This is your road map of financial goals that will help keep you out of trouble, as well as help build your financial security blanket.

Let’s get into it.

Celebrate your accomplishment of paying off debt. Although this may sound counterintuitive, getting out of debt is a huge accomplishment and you really should take the time to recognise and appreciate yourself for it. Save a little money for a trip or even a night out with your spouse. Do something that you always wanted to doto celebrate.

Remember though, don’t go into debt for this if you cant pay it off before interest is incurred.

Keep that budget going. I said it earlier, but I really can’t say it enough…

Always know your financial state.

Continue to budget your finances!!!

Know exactly where your money is going so that you are always aware of your personal cash flow. You really need to keep a grip on where your money goes.

This doesn’t mean you can’t relax with how strict you are and increase some spending here and there, but you must maintain a budget.

Build your “why me?” fund. No doubt there are many colorful names for this type of fund, but it’s just a matter of saving for a rainy day when something bad happens. If you can avoid going into debt to repair your car, replace your roof, or even a hospital bill, then you are well ahead of the game.

This fund doesn’t have to be built all in one shot, you can trickle charge it monthly until it reaches your safety net amount.

Most experts recommend having at least 3 to 6 months plus living expenses set aside. This should include everything from grocery bills to mortgage payments. One thing to make sure is that you can get at those funds quickly without any hassle.

Think about your retirement. Nobody wants to work into their 70s without a pot to piss in. I’m pretty sure this isn’t a life goal of anybody, but it happens all too often. If you work for an employer that offers a pension, you’re one of the lucky few, but most have to save for their own retirement.

Here in Canada, we have an option to contribute to a registered retirement savings plan (RRSP).  This can be a great option for those with no pension plan or a plan that will be very small when they retire.

If you have a large pension plan the benefits of a RRSP may be offset by the taxes you will pay when you begin collecting. Just a little food for thought, so do your homework on whether it’s an option for you or not.

The initial tax relief is a definite plus though.

Money Growth
Grow your money for the future.

If you can increase your contribution do your pension, then I highly recommend it. This may allow you to either retire early or retire with a more stable income once you stop working. Whatever you do, the key factor here is that you have to think about your retirement and plan for it accordingly.

Set money aside for large purchases. I think this one is pretty self explanatory, but create a savings plan dedicated to a large purchase that you want or need. You would be surprised at how quickly you can save up for an expensive item once you’re not paying down debt anymore.

Invest your money. Investing your money, specifically for dividends and long-term gains, can be a great way to generate some spare annual income.  Regardless of your investing style or time horizon, healthy gains can be achieved if you play your cards right.

Though I personally believe that People should not rely on others to work with their money, even a managed investment account can gain 5 to 20% annually. This can be a great way for your money to work for you.

As a note of caution because I must do my due diligence, it is quite possible to lose some or all of that investment.  Nothing is 100%.

Buy a property to rent to others.  Everyone needs a place to live, it’s a necessity of life. Owning a property to rent to others is another great way to use your available cash wisely. This is something that most would need to get some kind of loan for, and in this case I would consider this good debt.

Real Estate
Real estate investment

Keep in mind though, this should not be something that forces you to live beyond your means.

If you can’t pay for the monthly mortgage with no tenancy, then it’s probably not something to do just yet.

Start a small online business. Starting a small online business can be very cheap and even lucrative in the digital era. There are a million business ideas that can be found online…

You just need to find one that you’re passionate about and run with it.

It’s a lot of work and research, but you can make money from it. By no means is this a passive income (if you do make money); it takes a lot of work. The good thing is, if you’re passionate about it then it can be a lot of fun. 

Take courses or educate yourself to improve your own life. I love to learn new things so I’m always on YouTube watching weird videos about some random new thing. I’ve also taken courses just for the hell of it.  I really do love to learn new things.

My opinion…

The best investment you can make in your life is to learn something new.

The amazing thing about this in our digital age is this can be free most of the time.  Even if it’s not free, it is so worth it. 

What better thing to spend your time on then you.

Reduce your expenses and live within your new means so you can work less at your job. This one is one of my personal favorites because I almost consider this being semi retired.

This wouldn’t be something I would do until I had a steady stream of passive income, or some other source of income.

Right now I’m not there but it really is an intriguing idea to work towards…

Being semi retired relatively early in life.  Maybe then I would have more time to put towards the previous point.

The best investment you can make in your life is to learn something new. Click To Tweet

So there you have it.

If you only followed one thing out of this post, I can’t emphasise enough the concept of staying out of debt. It can be too easy to fall back into the trap of spending money you don’t really have. 

Before you know it, you’re right back where you started.

It doesn’t mean don’t use your credit card but just make sure you could pay it off before you have to pay interest on it. You still have to keep a good credit score.

The budget and money mindset are the 2 main ingredients of staying out of debt. So keep using a budget, crunch your financial numbers often and stay in the black.

If you can think of any other ideas for what to do after you’re out of debt let me know.

Author Profile

I am an avid Forex trader and multi-tiered investor. Over the years I've learned many money management lessons. It took hitting rock bottom, but I took my lessons and persevered. Today I am debt free (mortgage aside) and can enjoy what I have. I believe our money should work for us and is only a tool to enjoy the life we want to live.

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