What to do Next After Paying off Your Debt
Paying off your debt through debt consolidation loan means that you no longer have to worry about juggling different credit card bills every month. Odds are that the loan will also cost less every month than the minimum payments on those loans cost, so you’ll have some extra money in your pocket. Since you’ve already taken the first steps to getting your finances under control, however, why not use this money to start building wealth? If you’re looking for ideas, try these suggestions.
4 Things You Can do after Paying off Your Debt
- Build an emergency fund. Even putting aside a few hundred dollars is the difference between paying for a car repair or last minute trip out of pocket vs. running up your credit cards. If you tend to live paycheck to paycheck, make the effort to put some of the money you’re saving into an account that you’ll only access for emergencies.
- Start saving for retirement. If you haven’t been contributing to your work’s 401(k) or 403(b) plan because you needed every spare penny to pay off your debt, start contributing now. To get used to the deduction in your paycheck, start off small. Contribute 1% of your pay to your retirement account, then slowly increase it every time you get a pay raise. You won’t notice the difference in income, and after a few years you’ll have a significant amount of money saved for your retirement.
- Save for a car. No matter how old your car is, it will have to be replaced eventually. Rather than getting back into debt when it’s time to trade it in, why not pay cash? If your current car is paid off, just keep making your car payment into a savings account. When you have enough saved, it’s time to go car shopping.
- Buy a house. Paying off your debt means that your credit score will start to increase. That means that you’ll probably be able to qualify for a mortgage within a few months or years. Use the money you’re saving from your debt consolidation loan to save up for the downpayment and moving costs on a new home. You’ll get out of the cycle of paying rent, and in a few years you’ll own your primary residence free and clear.