Your final payment has been made, and you’ve contacted your credit counseling representative to let them know you will be finished with your plan.
Wow! You are officially debt free! It’s so exciting that you can hardly contain yourself.
That one payment you had been struggling to make for years is now yours – all yours. So now what?
Well, for me, I knew I needed to make some new financial goals.
I figured since I didn’t use my monthly payment for four years, I wouldn’t miss it, and should start to save it.
I watched my debt go down month by month, now it was time to watch my savings go up.
The big question was: What should I do with my money?
Again, I’m not a financial advisor. However, I do work for a private club that has a few wealthy members.
They gave me a few suggestions; you can also do your own research on the internet or read some of the financial blogs.
In the meantime, here are three basic things you can do once you’ve paid off your debt.
1. Increase Your Retirement Contribution or Start One: I started a retirement fund at my job almost immediately, but wasn’t putting much into it while trying to pay down my debt. Once it was paid off, I increased my 401k contribution from 4% to 10%, and increased it again to 12%. The great thing about a 401k is you don’t really feel the deduction, as it’s automatically taken from your paycheck, and most companies will match a percentage. This is a long-term investment you’ll be glad you started and it certainly falls under the “pay yourself first” motto. Wouldn’t it be great to be able to retire?
2. Add a Long-Term Savings Account: Put at least 40% of your monthly payment into a savings account for the long term. Do a monthly automatic transfer from your checking to your savings so you’re not tempted to spend it. Once you have a few thousand dollars, you can put it in a CD or a money market account to get a better interest rate. Imagine, a few thousand dollars that isn’t debt? Although interest rates aren’t great right now, you’ll make some money on your savings and will have better investment opportunities once the economy gets better.
3. Increase Your Emergency Fund: My emergency fund was approximately $500 while in the DMP. Since then, I have increased that fund. My goal is to have enough to live off of for six to eight months in case I ever lose my job or I’m prevented from working due to illness, etc. I use this same account for car repairs, unexpected bills, etc. I do an automatic transfer to this account every month. Although it fluctuates depending on what’s going on in my life, it is growing at a steady rate.
These really are some basic suggestions to get you started. If you have children, you should speak to a financial advisor concerning their savings or college savings.
If you can continue to live without the monthly payment you made, then invest it, save it, and watch your money grow!
You are starting a whole new chapter in your financial life – one without debt! What are your financial plans once you are debt free?
You've Paid Off Your Debt, Now What? by Cheryl Bigos
Cheryl Bigos graduated from a CareOne Debt Relief Services Debt Management Plan (DMP) in 2008. She is now blogging about life as a DMP graduate in the My Journey out of Debt blog. She works as a Purchasing Manager in Los Angeles, teaches Pilates, and lives with her boyfriend of four years. Cheryl is looking forward to sharing what she has learned from her experience in the DMP and after! Look for great tips about life ‘after’ debt! Compensated Blogger for CareOne Debt Relief Services.