Finally, you are now debt-free. You have had the discipline to make your monthly contribution, but how do you make sure you never get into debt again? What next after paying your debts? If you don't have a plan, it'll be easy to fall into an overspending cycle. An overspending cycle leaves you with nothing to show for it. Once you have cleared your debt, your financial journey begins. You can now schedule your money towards your goals. Here is what you should do once you are out of debt.
1. Save for a major purchase
If you wanted to get out of debt to save for a major purchase like a home or a car, now is the time to get started. You can make your dream a reality. Start by creating a savings plan dedicated to your goal. Make sure you contribute regularly to your savings plan. It'll surprise you just how fast the savings will grow.
2. Have an emergency fund
If you have been contributing to your emergency fund while paying your debt, you should increase the contribution. However, if you don't have an emergency fund yet, you should establish one and make monthly deposits. The emergency fund will ensure you don't use your credit card for just any financial emergency. Have an emergency fund equal to six months of your net income. Only use it when you have an emergency.
3. Start saving for retirement
The earlier you start putting money aside for retirement, the better. However, it's never too late to start. There are numerous retirement options you can choose to have a smooth retirement. If you are self-employed, look into retirement options such as individual 401(k), Simple IRA, or the SEP-IRA. For employed individuals check for the retirement options offered by your employer. You can arrange for automated paycheck deductions into the 401(k). Whatever retirement option you choose, what's important is that you make consistent contributions. Don't touch the money until your retirement age.
4. Check your insurance coverage
While working to be out of debt, you may have been surviving with the minimum insurance coverage. Now that you don't have any debts, you can increase the amount you contribute towards the insurance coverage. You could also look into long-term care insurance if you are approaching middle age. Don't forget to include vehicle, medical, and dental insurance.
5. Organize your finances
Now that you have paid off all your credit card debt, there's no doubt that you are organized. There is still room to improve. Have your bills on auto-pay so you don't pay late or miss a payment. You should have your financial documents in order. Make sure you cut down on the junk mail and avoid the pre-screened credit card offers to avoid being tempted.
If you are burdened with high amounts of credit card debt and are struggling to make your payments, or you’re just not seeing your balances go down, call Timberline Financial today for a free financial analysis.
Our team of highly skilled professionals will evaluate your current situation to see if you may qualify for one of our debt relief programs. You don’t have to struggle with high-interest credit card debt any longer.