- Posted by: Administrator
- Category: Finance
Paying off debt successfully requires a lot of determination and hard work, oftentimes at the expense of other financial goals. This can push back your goal of saving for retirement and investing to build wealth.
But what’s next? What comes after debt and your basic financial goals have been met? What long-term goals and benchmarks should you have in place, so you can build wealth?
Here are some guidelines to get started:
1. Reevaluate Your Budget
Now that you are debt free, you need to adjust your budget. While it may seem exciting with the influx of “extra” cash in your budget, it’s key to give every dollar a job.
It can be tempting to spend the money that previously went to debt — but this will quickly lead to major lifestyle inflation and possibly down the road back to debt if you are not careful. Examine your priorities, lifestyle, and long-term financial goals. Now, put every shilling to work in a new and improved budget. And if possible, work towards maxing out your retirement accounts and savings goals.
2. Replenish Your Emergency Fund
Did you have an emergency fund while in debt? Some people don’t as they consider debt an emergency.
Debt can occur for a variety of reasons and to make sure you don’t go right back into debt, you need to create a cushion.
If you lost your job, got in a car accident, or had a medical emergency, a 12-month buffer should be able to tide you over, and also save your sanity.
3. Max Out Your Retirement
Retirement is often one of the biggest casualties when it comes to paying off debt. It’s hard to think about paying for something that could be decades away when you have a large debt balance right in front of you.Once you achieve debt freedom, it’s important to reclaim this financial goal and make it work for you.
This means no more messing around. Max out your retirement account with all avenues available to you. Maxing out your retirement accounts will help you “catch up” a bit from your time spent on paying off debt.
4. Invest Wisely
Paying off debt early is a guaranteed return on investment — you are avoiding annoying interest rates and excessive fees. But once you become debt free, it’s key to start really investing. While many people in the trenches of debt repayment feel as if they are too risk averse to invest much, or even at all, being debt free gives you more wiggle room to take risks.
Start by creating a strong and diverse investment portfolio of stocks, bonds, mutual funds and exchange-traded funds (ETFs). Determine your level of risk and start investing and watch your money grow.
5. Make a Plan for Big Life Goals
Now that you have the basics covered like your budget, emergency fund, retirement and investments, it’s time to save for something fun: big (and sometimes scary) life goals. Debt has a great way of dashing dreams, but now you can let your imagination run wild a bit.
What big, life goals do you want to accomplish, that you haven’t already? Do you want to buy a house? A new car? Are you starting to think of having children? Are you dreaming of a once-in-a-lifetime travel expedition? Or perhaps quitting your dreaded day job?
Whatever your big life goals are, you need a plan. Make sure to implement these things as part of your budget. You can start by creating targeted savings accounts and automating funds each month, to ensure you are staying on track.
After paying off debt, you deserve to live a little and plan for life’s grand adventures. Just make sure you budget for it, while not reverting back to the dreaded d-word.
What’s Next After Big Financial Goals?
Paying off debt can be exhilarating, but it can also leave you with more questions than answers. There is a lot of information on steps to get out of debt, but not a ton of advice on what to do next.
SOURCE: INVESTOR JUNKIE