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You’ve written that final bill to your last credit card company. Maybe you did the dance of joy and had a celebratory glass of champagne.
Congratulations! You’ve accomplished something less than 23% of the population can do by paying off your debt. You’re debt free, and although that is an incredible accomplishment, you’re probably wondering what you should do now.
You’d be right in wondering how to move forward. The last thing you want to do is to revert to your old ways.
Top Personal Finance Experts Reveal Their Best Stay Out of Debt Advice
So I started to write this really intricate and detailed post about everything I did to stay out of debt. Then it hit me!
Why don’t I ask my friends who are THE top personal finance experts out there what is their #1 stay out of debt advice? Here are their words of wisdom and their golden nuggets of guidance.
Sarah Titus from SarahTitus.com
“The first thing I’d say is CONGRATULATIONS! Wow, what a huge feat you just accomplished. That is so amazing, and I’m SO proud of you! <3
To maintain staying out of debt, I’d highly encourage anyone in the situation to start a large savings account. There are always things that come up out of the blue in life, like the time I needed a car and paid cash for it as a single mom. Here’s how I did that! The main thing is not to get back into debt. Avoid it like the plague. Run from it like it will burn you up. The bigger savings account you can create, the more financial freedom you can have in your life.
The other thing you’ll want to do is be sure that your credit score is as high as it possibly can be. I have a series on my blog called Top Notch Credit Score Secrets You Need To Know. It’s everything you need to know to build up your credit score to avoid going through a credit repair agency. It’s completely free and utilizes my 10-year expertise in the banking industry. You can check out the series here. Let’s hope you never need debt again, but *just in case* you do, this will greatly help you be able to get the best interest rate and get approved right away.”
Tai and Taalat from His and Her Money
Make sure you never look back, after getting out of debt! Never forget how you felt when you had debt hanging around your neck. One tip that we like to do is to always surround ourselves with like-minded people. People that won’t encourage us to go back in debt, but encourage us to win with money. Just because you are finally debt free…never stop educating yourself in the area of finances. We love to read books, blogs, listen to podcasts, and watch videos all around the topic of money. This allows us to stay encouraged and inspired to stay on the right course.
Hayley from Disease Called Debt
After making that final payment on your debt, take some time to congratulate yourself on your achievement, you’ll deserve it!
It may be tempting to spend your money freely now that you don’t have any debts to service, but you’ll thank yourself later if you start putting your money to good use as soon as possible. With the money that you now find yourself with, decide how much you want to save, invest and spend.
Establishing an emergency fund if you don’t have one already could be a good starting point, just in case you find yourself experiencing a financial emergency like loss of job or illness. The last thing you’ll want to do is get right back into debt, so put away enough money to cover your income for three months to be on the safe side.
Then, once you have an emergency fund in place, you might want to use the 80/20 rule when it comes to your disposable income.
Use 80% of the money that you no longer have to spend on repaying your debt for retirement savings and investments and use 20% of your disposable income for the things you enjoy. (After all, it’s important to live life as well as plan for a secure financial future!)
Of course, it’s totally up to you how you spend your money once you’re debt free. That’s the best thing about debt freedom, having choices again about what to do with your money.
But so that you don’t find yourself struggling with money in the future, it’s important to think ahead and plan for your finances in the future as well as in the present day.
Bob Lotich from Seed Time
My best piece of advice for someone who is recently debt-free is to always remain vigilant. Never let your guard down because it can be easy to slip back into old habits – stay determined in your mindset to stay debt-free and you’ll continue to see the fruit of your labors.
Michelle from Making Sense of Cents
My top tip is to start an emergency fund. Many people do not have an emergency fund, and it can help you if an unexpected expense happens in the future. Heck, not having an emergency fund may be why you fell into debt in the first place. Emergency funds are always helpful to have because they offer peace of mind and comfort in case something were to happen. You never know, you may have your hours cut at work, something in your home may break, your car may need a repair, and so on. Instead of building onto your stress, you will know you can afford to pay your bills and focus on more important things.
The amount you should have in your emergency fund can vary. For me, I like to have six months worth of expenses. When I owned my home, we had a full year worth of expenses saved up. Now that you don’t have credit card debt, I recommend focusing on building up your emergency fund and having, at least, three months worth of expenses saved, preferably more, though.
Another tip I recommend is making sure that you don’t fall back into debt. If you haven’t yet, you should dig deep and realize why you fell into debt in the first place. By doing this, you are sure to realize what your mistakes were so that it doesn’t happen again. Paying off debt only to fall back into the same debt cycle would be horrible!
Check out my article Over 100 Ways To Make Extra Money so you can start your emergency fund!
Jackie Beck from The Debt Myth
Being completely debt free is amazing. I can’t begin to tell you what it’s like to not owe money to anyone, anywhere. (We even paid off our house.) But I gotta admit, at first we were kind of like “Ok, what next?”. For us, that came down to two things: actually doing the things we’ve always dreamed of and then making sure we STAY debt free.
The stuff we dreamed of was relatively easy. Since our money was no longer going to debt, we redirected it to savings until we’d built up enough to fund that trip to Antarctica and to buy that sports car. Then we pulled the trigger and DID it.
Making sure we STAY debt free is a forever thing though. Luckily, it’s all about continuing the new habits we formed while paying off debt. Basically, we only spend money we already have. Period.
And that’s the best piece of advice I can give to you. Keep doing the things you did that got you to debt freedom. Those things will help you reach your next goals – whether those goals are paying cash for a house or traveling the world. Keep your habits intact.
For us “keeping on” looks like this: We can buy anything we want, so long as we have the money first. So basically, save up first, right? And that’s really no hardship because we’ve discovered that we pay less for things overall this way. There’s no interest to pay, and it’s kind of amazing what “Will you take $x instead? I’ve got the cash right now” can do sometimes. So sticking with that basic tenet of only spending money we already have has served us well. I’m betting it’ll serve you well too.
Of course, we also plan for emergencies by having an emergency fund and insurance, and we continue to save and invest for retirement, the future in general, and fun stuff along the way. If you don’t yet have a fully funded emergency fund in place, I highly recommend that next. No matter what, though, don’t lose track of your goals, and keep on keeping on by only spending money you already have.
Rosemarie Groner from The Busy Budgeter
There’s a huge sense of relief at first. You exhale and think “Now it’s time to enjoy it all!” and it is, but in moderation. You just won a battle, but there’s still a war. You need to make sure that you have enough for retirement and an emergency savings in place to avoid ever having to go back to where you were.
You can add more wiggle room into your budget but make sure that you have a healthy retirement account, a savings account, college savings if you’ll need them.
As you spend a little more than you could before, look for smart ways to spend. Home improvements are a great example of wise spending. Home improvements increase your quality of life now, and you’ll recoup much of the money when you sell later.
Keep your frugal skills sharp. Look for ways to save money without sacrificing. You may find that you keep many of the habits that you adopted to get out of debt. It turns out that we loved packing our lunch and watching Netflix instead of cable. There’s no reason to switch back to your old ways just because you’re out of debt.
Being debt free is exciting, and you should be proud, but it’s just a small taste of what you could accomplish if you keep going.
Kristia Ludwick from Family Balance Sheet
Congratulations! Paying off all of your debt is a huge accomplishment, and you are now on the path to financial independence.
The most important thing is that you don’t become complacent, and you continue to make financial goals and exceed them. With those loans gone, you will likely have extra funds to put towards your savings and other future endeavors. Sit down and create your Life Plan to help you stay focused on your long-term goals and aspirations, including personal and financial. What do you want your future to look like? Do you want to travel? Do you need to save for your children’s education? When do you want to retire? These things will not happen on their own, so you must create a plan. My husband and I answered those questions and more when we wrote our Life Plan. It was such a relief to have our vision laid out for our future.
Many years ago, our finances were on shaky ground, but we used our plan to work through challenges and our future now looks very bright.
Maureen from A Debt Free Mess Free Life
Learn to be grateful for the experience. Yes debt sucks, but there’s a whole host of life lessons inside that experience.
You don’t come out the same person as who you were when you started down the journey to becoming debt free. You have a vast amount of knowledge you can now share with others to help them get out of debt too.
But without cultivating and embracing gratitude for the lessons you learned, it can be easy to revert to old patterns of thinking and behaving. Before you know it, you find yourself right back where you started.
So start each day for being grateful for everything you learned as you made your way through the mud and chains of debt and thank your lucky stars because you can proudly say you’re one of the few who got our of debt.