Living a debt-free life can be an incredible experience. It can also change the way you see and use the money well into your future. Once you get to the point of being debt-free, you may find that living within your means is easier than ever. In fact, you likely will have more money in your pocket than if you had five credit cards in your pocket. Now that you have this extra money, what do you do with it? That question may not be as hard to answer as you think, though.
The following are five things you should do right now, now that you are debt-free and living a life that is not worried about financial loss from credit card debt. Build a retirement plan as soon as possible. The longer your retirement plan is in place, the longer those funds will grow for you and accumulate interest. This will help ensure that your retirement comes sooner and fulfills your needs.
Plan for Emergencies
Many people who are debt-free have money in the bank, but they may not have an emergency fund. These funds should be easily accessible but used only for emergency situations. Having this type of fund in place ensures you will not turn to credit cards if you find yourself in a financial bind.
Put away 3 to 6 months worth of salary, or income brought into the home. These funds are essential to protecting your future should you lose your job. Even though you do not have a debt to worry about, you still need to have enough savings to fill your needs for at least six months, to ensure you have the means of paying your bills if you should lose your job.
As soon as you become debt-free, use the money you have been paying towards your debt as your financial building block. Talk to a financial planner about the benefits of working with them to create an investment portfolio that matches your life goals, risk tolerances, and your personal needs.
Take Care of Yourself
You have made an incredible accomplishment by becoming debt-free. You know you worked hard to make it happen. Now that it has happened, do something for yourself, big or small, that does not put you back into debt but does reward you for your hard work.
As soon as you become debt-free, realize that living a debt free life does require hard work. Create a budget and stick with it long term. Focus on building a strong financial future for yourself, to ensure that you can remain living debt free as long as you can. Most people who plan for situations that are usually unexpected are able to overcome any financial obstacle that comes their way. If you are doing this, know that you are building a strong and healthy financial future for yourself, and for your children, especially if you teach them the right way to manage money from the start.
George Gallagher is a personal finance blogger and accounting professional. He contributes to many online publications, including work with CUStudentLoans and their private student loans program.