Living with debt is something to which most Americans have grown accustomed. The average credit card debt for households that carry a balance is about $16,000, and typical members of the graduating class of 2019 will enter the workforce with over $30,000 in student loan debt. If you find yourself reflected in statistics like this, it can seem like a waste of time to consider life without any debt. However, millions of Americans find a way to become debt-free every year; you can be one of them if you make a good plan and stick to it. If you’re currently on the path to paying off your credit cards and student loans, here are some important considerations for dealing with your finances after debt.
Get Smart about Money
Once you’re debt-free, you’ll have tremendous new opportunities available to you. If you want to make the most of your increased cash flow and lack of debt, you should learn as much about personal finance as you can. Find a trusted financial advisor who can explain options to you about savings, investments, and ways to put yourself in the best position possible when it comes to taxes. Start reading financial newspapers and magazines, and work to increase your understanding of topics such as stocks and mutual funds, as well as your credit rating. Learning more about how to build an effective household budget or how you can leverage mobile devices to manage your finances could be helpful, too. The more you know about money and finance, the better you can use your new debt-free status to improve your quality of life.
You’re Debt-Free Now, so Make Sure You Stay that Way
If you’ve undertaken a disciplined, time-consuming approach to pay off all your debts, ensure you avoid the habits and activities that led to your high levels of debt in the first place. Even people who’ve worked hard to become debt-free can end up mired in debt again if they aren’t careful. To avoid those typical debt pitfalls, establish a household budget to help you live within your means, and reconcile your budget regularly to ensure that your spending and savings plans are realistic. If you’re going to continue using revolving debt such as credit cards, ensure that you pay off the balances each month. Finally, if you find yourself slipping into the habits that previously got you into debt in the first place, consider finding a financial therapist to help bolster your approach to staying out of debt.
Set New Financial Goals
If you’ve spent several months or even years paying off your debts, becoming free from debt opens up tremendous financial opportunities for you. Becoming debt-free likely required you to commit a significant amount of your income each month paying off your credit cards, student loans, and other debts. Now that you’ve paid those debts off, you’ll have additional cash flow to devote to other goals. Consider starting a retirement savings account or increasing the amount you save for retirement each month. You may also want to invest the additional cash flow you now have into mutual funds or stocks or save for an important life purchase, such as a home. Additionally, you should also think about how much money you need to set aside for an emergency fund and start accumulating those funds as well. Finally, if your credit rating took a hit while you were dealing with all your debt, improving your credit could be another great goal to pursue.
Enjoy Your Debt-free Lifestyle
If you’ve managed to pay off all your debts, one thing you should start doing is enjoying the benefits of a debt-free life. Debt and financial issues are some of the biggest causes of stress in most people’s’ lives, so paying off those debts should help remove much of that anxiety. Once you’re debt free, take advantage of your new low-stress lifestyle by enjoying yourself more. Set aside money in your post-debt budget to treat yourself to more nights out, or even vacation travel when it suits you. From time to time, you should also consider making purchases for things that’ll help improve your quality of life, or help you maintain your debt-free lifestyle more efficiently; a new computer or mobile device that enables you to track your finances more closely is a great example of these types of purchases. As long as you’re using forecasted cash expenditures from your budget and not relying upon new credit card debt or some sort of bank loan to finance these activities and purchases, then they’re merely a reward for all your hard work and discipline. Enjoying the fruits of your labor can also reinforce the habits that helped you become debt-free in the first place.
Paying off all your debts isn’t easy, but you can do it if you have a solid plan and work hard. And once you’re out of debt, it’s important to work hard and remain financially independent