You’ve worked hard, stayed committed to your debt repayment plan, and after years of effort, you’re nearly debt-free. Now that you’re in the green, what are the next steps you should take? How can you ensure you’ll stay out of debt for good? This article will guide you through six essential actions you should consider to maintain your financial freedom.
1. Plan Ahead
Be Proactive
Before you can say you’re completely free from your debts, start planning for what’s coming. Consider asking yourself several questions to understand your future financial and personal goals:
- What are my personal and financial goals for the future?
- What have I longed to do but couldn’t afford as I paid off my debts?
- What is a realistic and comfortable lifestyle for myself and my family?
- What would make me happy?
- What are my priorities for the upcoming year?
- Do I have any other lingering financial concerns I want to address?
2. Protect Your Money From Reactive Spending
Be Disciplined
The newly freed-up cash can be tempting to spend. To prevent impulse spending, consider creating a separate savings account for that cash and automate payments to it until you decide what to do with your freed-up cash.
3. Stick to Your Budgeting Routine
Be Consistent
Even after becoming debt-free, maintaining a budget is crucial. You know the system that works for you – don’t stop using it. However, it’s time to reconfigure your budget strategically and realistically.
4. Increase Your Emergency Savings Fund
Be Prepared
The first place to reallocate your debt repayment funds to is an emergency savings account. Aim to save up about six months’ worth of expenses stashed away in a savings account for emergency purposes only.
5. Set New Short and Long-Term Goals
Be Ambitious
Now that you’re debt-free, you can shift your priorities to new savings goals. Aim to set three to five goals, a mixture of short- and long-term ones. These goals are essential as they will shape your financial planning and should motivate you too.
6. Limit New Credit
Be Careful
If you closed your credit cards because they led you into trouble, you have to be careful when you’re back in your creditors’ good graces. Start small — with a single credit card and a small limit that you can manage.
Conclusion: Staying Out of Debt
Be Persistent
As you can see, being almost free from credit card debt is not the end of the journey. It’s just the start of a new phase. By following the steps outlined in this article, you can ensure that you not only escape from debt but stay out of debt for good.