What to do when you're debt free to avoid going back into debt

Official blog of Refresh Financial

So, You’re Finally Debt Free. What To Do Next

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It finally happened. You made your last payment on your last debt and you’re debt free! You’re free from the stress. Free from the payments. Free to do as you please with a brand new influx of cash.

It’s easy in this situation to begin to spend recklessly and to see this freed up money as a means to living a higher quality life. It’s the fastest way to increase your cost of living and before you know it, you could find yourself in debt again.

A Better Way

There is a better way, though. Let’s say it’s the last month you have to make a payment on your debt and then you’re debt free. Perhaps your monthly payments on all of your debts add up to about $532. When your debts are all paid off, don’t look at that $532 as extra money you can spend each month. You lived without spending it up until now, and you can definitely keep doing it.

Instead, take that $532 every month and put it away. Sure, it’s not the most fun answer. It’s not going to bring any shiny, new things into your house. But what it will do, is buy you a secure financial future.

Emergency Fund

Start saving for up to six months worth of expenses as your emergency fund first. If you don’t already have an emergency fund, you’d be amazed how suddenly having one behind you lifts a huge amount of stress off your shoulders. Maybe your company has seen a few layoffs in past years and you’ve stressed and stressed about what you’re going to do if it happens to you. Now, you have a backup plan. You have six months of expenses saved which means you have six months to find a new job. It’s freeing and fulfilling more than any shiny, new thing you can buy with money.

High-Interest Savings

Once you’ve got six months saved away, start another savings account, preferably high-interest, and put your $532 every month there. Save until you have an amount you can invest and then find yourself a highly recommended advisor to help you invest it. Keep saving that $532 every month, though, and keep adding it to your investments as it grows.

In enough time, you’re not just going to be financially secure, but you’ll actually be accumulating wealth. Imagine that! Wealth!

So, simply by seeing your debt payments as money you have been and can still live without spending each month, you’re going to find yourself in a situation you’d never dreamed was possible. You will not stress about money or losing your job or having to move. You won’t feel defeated by simple car repairs or other unexpected expenses. Instead, you will be relaxed with the knowledge that you have a chunk of money behind you that is consistently growing. You’re going to be secure.

Are you concerned that you might easily find yourself back in debt? Get in touch with us and we will show you how you can ensure that doesn't happen!

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