Stop making these 7 money mistakes!

You’re Debt Free. Now What?

  April 3, 2024  |    #Eliminate Debt

You’re debt free. Now what?

Congratulations, you’ve conquered your debts! Now that you’re debt-free, it’s time to harness this newfound financial freedom by exploring savvy strategies to build wealth, secure your future, and live life to the fullest.

A reader asks, and we answer about what to do when you’re debt free

A blog reader emailed us for advice about her debt free life. Here’s the situation:

My spouse and I sold our house. Once we close, we’ll use the profit to pay off all our debt. That will leave us with leftover money and extra money each month. My question is how do we proceed from here to prepare for retirement?

Kudos on unleashing your inner financial wizardry. Selling a house to squash debt takes guts – and maybe a sprinkle of madness – but it’s a genius move. Now, onto the next chapter of your debt-free saga: retirement prep! Here’s our playbook to ensure your golden years shine brighter than a disco ball on payday.

What to do when you’re finally debt free

1. Understand why you got into debt

Alright, let’s dive into this debt-free pre-game like it’s the ultimate warm-up before a financial marathon. Picture it: you’re gearing up for the financial Olympics, and trust me, this pre-work is your ticket to the podium, not some last-minute cram session like your college all-nighters. Because let’s face it, flunking out of debt freedom isn’t an option – it costs way more than a few points off your GPA.

Now, onto the intriguing mystery of how people stumble into debt. It’s like a classic tale, where spending exceeds earning, a narrative as old as time – or at least as old as credit cards. But hold your horses because the reasons behind these financial shenanigans are as diverse as a box of chocolates (but sadly, without the sweet satisfaction).

Your journey into debt might be a wild rollercoaster of practical decisions, emotional impulses, or a chaotic mix of both. Maybe you’re feeling like the lone ranger of financial ruin, or perhaps you’re cozying up in the crowded stadium of debtors, sharing nachos and tales of woe. But here’s the plot twist: unless you unravel the mystery behind your debt, you’re just treating the symptoms, not curing the disease. It’s the kind of step that feels a bit like self-help therapy for your wallet, but ignoring it could land you right back in debt’s waiting arms. And trust me, that’s a sequel nobody wants to star in after the blockbuster finale of selling your house to escape debt’s clutches.

2. Reward yourself

Ah, the post-debt glow-up – you’re like a financial phoenix rising from the ashes of credit card statements past. But hold your horses because while you’re basking in the glory of newfound financial freedom, there’s another adventure waiting just around the corner. And what better way to kick off this epic sequel than with a celebration? Cue the confetti and pop the non-alcoholic bubbly – it’s time to party frugally.

Now, before you go splurging like a lottery winner on a yacht, let’s keep it real with some modest merrymaking. Treat yourself to a massage, snag a snazzy new outfit (on sale, of course), or indulge in a guilty pleasure like that shiny car accessory or the latest edition of the pixelated adventures you’ve been eyeing. And hey, if you’re feeling fancy, why not paint the town red with a celebratory dinner or throw a low-key soirée? Because, let’s be honest, nothing screams financial victory like grilling burgers in the backyard with friends.

But here’s the real cherry on top: shout your success from the rooftops! Not only is bragging about your financial conquests totally free, but it might just inspire your pals to join the debt-free club. After all, when you share your goals with the world, you’re not just spreading the joy – you’re unleashing a tidal wave of positive vibes that’ll come crashing back at you like a cash-filled tsunami. So go ahead, celebrate responsibly, and let the world know that debt-free life is where it’s at – queue Beck.

3. Make your extra hard to reach

The classic “out of sight, out of mind” approach to money management is the best because, let’s face it, when those extra dollars start burning a hole in your pocket, it’s like trying to resist the siren call of a 24-hour donut shop. So here’s the plan: stash that sweet surplus in an arm’s length away bank account straight out of the Stone Age – no debit card, no online bill pay, and definitely no sneaky transfers allowed. We’re talking about an account so old-school that you practically need a quill and ink to make a withdrawal.

Picture this: you stroll into the bank like a boss, strut up to the teller window, and with a dramatic flourish, you request your hard-earned cash – none of this click-and-swipe nonsense. It’s like a financial quest every time you need some moolah, keeping those impulsive spending urges at bay like a medieval moat defending a castle.

I know what you’re thinking – isn’t this a tad extreme? Well, sure, it’s like putting your money on lockdown, but desperate times call for desperate measures, right? Besides, by making it a bit of a hassle to access, you’re less likely to blow it on a whim. And fear not, my friend, because, in just a few steps, we’ll unveil the grand master plan for what to do with that carefully guarded treasure trove. So buckle up, secure that vault, and get ready to turn those savings into financial gold.

4. Decide what you want

Picture this: you emerge victorious from the debt dungeon, a triumphant warrior clutching your sword of financial freedom. But hey, let’s not get too comfy on that victory laurel, shall we? It’s time to dust off your inner life coach and whip out that imaginary crystal ball, because we’re about to play a little game of financial fortune-telling.

So, what’s your grand plan? Are you content to settle for a life of budgeting spreadsheets and coupon clipping, or are you ready to unleash your inner financial rockstar? Take a page from our playbook: after some soul-searching (and possibly a few rounds of rock-paper-scissors), we declared our mission loud and clear – to gallivant across the globe and retire in style, sipping cocktails on a beach somewhere while our investment accounts do the heavy lifting.

Sure, our humble abode might feel like a cozy shoebox, and our cars have more miles on them than a cross-country road trip, but who cares? We’re living our best life, with passports full of stamps and investment accounts fatter than a Thanksgiving turkey. So here’s the deal: find what lights your financial fire and chase it with the fervor of a dog chasing a mailman. Whether it’s globe-trotting adventures or building a retirement fund that would make Warren Buffett raise an eyebrow, keep that vision front and center. Because when you’ve got your sights set on the prize, there’s no limit to how far you can go – financially speaking, of course.

5. Spend consciously

Unconscious spending is the the stealthy ninja of financial foes, silently draining your bank account faster than you can say “impulse buy.” It’s the reason why your neighbor’s family of four somehow owns enough cars to start a dealership, and why you find yourself blowing a small fortune on groceries every week, one impulse purchase at a time.

But fear not, intrepid spender, for there’s a light at the end of the budgetary tunnel! By embracing the power of conscious spending, you’ll become a financial Jedi, making decisions so savvy even Yoda would be impressed. Picture it: instead of mindlessly swiping your card at every turn, you’ll weigh each purchase with the precision of a diamond cutter, ensuring that every dollar earns its keep in your wallet.

And the best part? When you’re in control of your spending, you’ll notice a magical transformation – suddenly, your cash flow will flow more freely, and you’ll feel like you’re swimming in money like Scrooge McDuck in his money bin. So bid adieu to unconscious spending, my friend, and say hello to a brighter, wealthier future where every financial decision is a victory in the battle against the budgetary dark side.

6. Save and invest

The financial black hole of negative equity sucks you in faster than a vacuum cleaner on turbo mode. But fear not, weary traveler, for it’s time to flip the script and focus on the sunny side of the street – positive equity, baby!

Now, saving and investing might sound about as thrilling as watching paint dry, but trust me, it’s the secret sauce to financial success. Think of it like planting seeds in a money garden – the sooner you start, the sooner you’ll be sipping mojitos under the shade of your investment tree.

And hey, if you need a little extra motivation, just think of the three money magic tricks: time value, compounding interest, and dollar-cost averaging. It’s like Hogwarts for your bank account – except instead of casting spells, you’re conjuring up wealth with a wave of your financial wand.

So how do you get in on this money-making action? Fear not, my friend, for I come bearing a treasure trove of saving and investing tips. And hey, financial independence is like a choose-your-own-adventure book – there’s no one-size-fits-all approach. So whether you’re stashing away pennies in your piggy bank or diving headfirst into the stock market, just remember: every little bit counts on the road to riches.

Some savings and investing accounts

1. Company-Sponsored Retirement Accounts

The golden ticket to financial freedom is a retirement plan, or as I like to call it, the Willy Wonka factory of adulthood. If your employer offers one, consider it the equivalent of scoring a lifetime supply of chocolate – sweet, satisfying, and best of all, it’s good for you!

Now, I know what you’re thinking: “But won’t contributing to a retirement plan leave me eating ramen noodles for every meal?” Fear not, my frugal friend, for there’s a fine art to balancing financial responsibility with, you know, actually enjoying life. It’s like walking a tightrope, except instead of a safety net, you’ve got a cushy retirement fund waiting to catch you if you fall.

And hey, here’s the kicker: by funneling your hard-earned cash into your retirement plan, you’re not just securing your future – you’re also giving Uncle Sam the ol’ sliparoo. That’s right, contributions are made with pre-tax dollars, meaning you’ll be laughing all the way to the bank while the taxman sheds a single tear.

So go ahead, my friend, seize the day and open that retirement account. Because while retirement might seem like a distant mirage on the horizon, trust me – before you know it, you’ll be living the dream, sipping margaritas on a beach somewhere while your retirement fund does all the heavy lifting.

2. Individual Retirement Account

The Roth IRA is the the financial equivalent of a superhero cape, swooping in to save the day with its tax-deferred investment growth powers. And hey, if you’ve got some leftover loot from selling your house, why not toss it into this magical money machine?

Now, I know what you’re thinking: “$5,500? That’s barely enough to buy a decent used car!” But hey, Rome wasn’t built in a day, and neither is a retirement fund. Besides, think of it as the ultimate investment in your future – like planting a money tree and watching it grow, one tax-deferred leaf at a time.

And here’s the best part: there’s no age limit on dreaming big. If you’re over 50, you can supercharge your contributions to a whopping $6,500 a year. It’s like upgrading from a regular superhero to a super-duper superhero with extra powers and a sidekick named Compound Interest.

So go ahead, my financially savvy friend, open that Roth IRA and start socking away those dollars. Because while tax-deferred growth might not sound as thrilling as, say, bungee jumping off the Grand Canyon, trust me – when you’re lounging on a beach in retirement, sipping cocktails with little umbrellas, you’ll thank your lucky stars you listened to me.

3. Personal Insurance Account

Ah, the “hard-to-reach” account – like the Batcave of your financial fortress, hidden away from the prying eyes of impulse purchases and spontaneous splurges. And what better way to put it to good use than as the guardian of your personal insurance, aka your emergency savings account?

Now, I get it – saving three to six months’ worth of living expenses might sound about as appealing as watching paint dry on a rainy day. But fear not, my frugal friend, for this is your ticket to financial peace of mind, the kind of security blanket that’ll make even Linus jealous.

And hey, here’s a little secret: while parking your cash in a money market fund might not make your heart race with excitement, it’s like the tortoise in the race against inflation – slow and steady wins the financial race. Besides, even if it doesn’t beat inflation, just knowing you’ve got a cozy cushion of cash waiting for you in case of emergency is worth its weight in gold – or at least in peace of mind.

So go ahead, my financially prudent pal, sock away those dollars in your emergency savings account and then promptly forget it exists. Because when life throws you a curveball – whether it’s a flat tire or a surprise visit from your in-laws – you’ll be ready to tackle it like a financial ninja, armed with nothing but your trusty emergency fund and a healthy dose of humor.

4. Savings Account

The sweet taste of financial freedom is like biting into a freshly baked cookie after months of staring longingly through the bakery window. But hey, now that you’ve conquered Mount Debt, it’s time to tackle those other pesky financial goals that have been lurking in the shadows, waiting for their moment in the spotlight.

First up: deferred expenses. Because let’s face it, when you’re knee-deep in debt, the last thing on your mind is splurging on a shiny new catalytic converter – unless you’re into that sort of thing. But fear not, my thrifty friend, for now is the time to address those neglected car repairs and overdue maintenance tasks. Think of it as giving your trusty steed a spa day – because hey, even cars deserve a little TLC now and then.

And speaking of big-ticket purchases, let’s talk real estate. Sure, owning a home might seem like the ultimate adulting milestone, but don’t rush into it like a bull in a china shop. Take your time, do your research, and for the love of all things financial, don’t forget about those sneaky hidden costs – closing fees, maintenance, insurance, the list goes on. Renting might not sound as glamorous, but hey, at least you won’t have to deal with leaky roofs or surprise plumbing emergencies.

But hey, if you’re dead set on owning a piece of the American dream, just remember one golden rule: buy below your means. Trust me, there’s nothing worse than being house-poor, unless you enjoy dining on ramen noodles every night while staring longingly at your mortgage statement.

So go forth, my financially savvy friend, and tackle those deferred expenses and homeownership dreams with the gusto of a squirrel hoarding nuts for winter. Because when it comes to your financial future, a little bit of planning goes a long way – and maybe a sprinkle of humor too.

5. Education Savings Accounts

The age-old parental conundrum? To pay for college or to retire in style? It’s like trying to juggle flaming torches while riding a unicycle – entertaining, but potentially disastrous if you drop the ball.

Now, don’t get me wrong – helping your kids achieve their college dreams is a noble goal. But let’s not forget about your own financial future, shall we? Because trust me, there’s nothing worse than spending your golden years counting pennies while your offspring are drowning in student loan debt like sailors in a sea of paperwork.

So here’s the deal: if your kiddos still have a few years until they don their caps and gowns, it’s time to cozy up with the holy grail of college savings – the 529 Plan. Think of it as the financial equivalent of a Hogwarts acceptance letter – magical, life-changing, and potentially worth millions in future Galleons.

But hey, even if college is just around the corner, fear not – there’s still hope for your bank account. Invest a mere $3 in the #MoneyConscious Student, because hey, who needs expensive textbooks when you’ve got a budget-friendly guide to navigating the treacherous waters of student finance?

So go ahead, my financially savvy friend, strike that delicate balance between college dreams and retirement realities with the finesse of a tightrope walker in a tutu. Because when it comes to your family’s financial future, a little bit of planning and a whole lot of humor can go a long way.

Be money conscious

Welcome to the thrilling world of being #MoneyConscious – where every grocery trip is a strategic mission, every gas price hike feels like a personal affront, and every negative GDP report is like a cliffhanger in a financial thriller. But fear not, my financially savvy friend, for with a dash of humor and a sprinkle of savvy, you’ll navigate these choppy economic waters like a pro.

Now, I’m not saying you need to splurge on a subscription to The Wall Street Journal – I mean, who has the time to decipher all those stock market graphs anyway? But a little knowledge can go a long way. So keep your finger on the pulse of the economy, like a financial ninja lurking in the shadows, ready to pounce on any opportunity or dodge any financial curveball.

So take our advice, my friend, and embrace the money conscious lifestyle with open arms. Because while it might seem daunting at first, trust me – the rewards of a secure financial future are worth every penny-pinching moment. So go forth, armed with knowledge and a sense of humor, and conquer the world of finance like the financial rockstar you were born to be.

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Avoid these 7 mistakes to get on the fast path to wealth.