Remember the moment when you received a credit card statement, that pesky, annoying piece of paper sent every month to remind you about the debt you have accumulated, and realized that the minimum balance due was $0, and that number matched the total amount of debt you had?
Quite refreshing indeed is the only way you can describe that feeling when you’ve paid off debt. The question that arises is what to do after that moment.
The answer is quite simple: save, save and then save some more.
But beyond that task, you have to consider a few other options as well.
When you talk about debt and paying it off, most of us are (or should be) focusing on unsecured debt, in the form of credit cards or loans that aren’t attached to something. If you’ve managed to pay off one credit card, think about the next line of credit you should be attacking. The general rule of thumb is to start putting as much as you can toward one bill, while paying the bare minimum to the others and then work your way up from lowest balance to highest.
If the debt you have paid off is all you have, the worst possible avenue you can take is to go right back into the bad habits that got you in trouble in the first place, as if to suggest that you’re out of the woods when it comes to spending money the wrong way.
That said, you can treat yourself to say you’ve done a good job, but make sure that gesture is modest at best, something like a little weekend drive to the beach to relax for the day or even a mini shopping trip to buy one new outfit.
Saving, of course, ranks as the most important element you can focus on post debt payoff. The idea that you no longer have one extra monthly payment means that money should be budgeted and prioritized to end up in your savings account. That means you’ll have to reassess your financial goals and needs, and ultimately start building your savings account again, the true direction that everyone should take once that have extra income now that a portion of debt has been paid off completely.
If you minimum payments was $150, that means you should be allocating that to an emergency fund, not using it to go out to eat more frequently or upping your cable bill, buying a new phone when you don’t need one and things of that ilk.
Being out of debt is a wonderful feeling but as quickly as you lost it, you can assume more of it or get right back to that same position. Being able to avoid it means to not only recall where you’ve been but take steps necessary to save and spend smart, even if you’re no longer in debt.
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