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You Paid Off Your Debt, Now What?

By Alyssa Davies on November 24, 2016 No Comments

You did it, you finally made that last payment and your debt is paid in full! Now, you are ready to move on to bigger and brighter things. Money management is something you feel you can finally control and understand, which has become an important part of your new financial life.

But after all of those days, months, and years of waiting for this moment, now that you’re here, what’s next?

Step 1 – Celebrate

First of all, congratulations! Paying off debt is a huge deal, a huge accomplishment, and a huge cause for celebration! So let’s make that step one. Don’t forget to celebrate yourself for all that you did to reach this very important financial milestone. Debt is no joke, and you took control like it was nobody’s’ business.

Step 2 – Adjust your budget

Paying off all of your debt means your lifestyle will suddenly start to change. Rather than a large chunk of your paycheck being allocated towards those payments, you have much more freedom. Now that you no longer need to put that money in someone else’s’ pocket, it’s time to start paying yourself. Rather than letting that extra money fly under the radar, ensure that you put it towards something reasonable. If retirement is in your near future, simply send those automatic payments to your savings.

Step 3 – Set new goals

One important thing to remember once you’ve finished paying off your debt, is that you do not want to let yourself get back to that same point. By setting new goals and keeping consistent motivation on where to put your money, you avoid risk of falling back to old spending habits. Don’t be afraid to plan multiple goals, both short and long term.

Step 4 – Rebuild your credit

More often than not, your debt load caused your credit to suffer at one point or another. Any late payments, heavy amounts sitting stagnant, and increases to your limit can take time to rebuild. So start early. You can do this by paying bills on time and consistently, keeping your credit below 30% of its total limit, and avoid applying for too many new products.

Step 5 – Don’t get ahead of yourself

It can be such an amazing feeling to reach debt freedom, but it can also become overwhelming. Once you suddenly get back to a place where you choose your financial future, you may find it difficult to balance old and new habits. For example, if you restricted yourself from buying anything new while you paid off your debt, you may feel some type of remorse when you finally decide to do so. Work with yourself to find a healthy balance in spending habits, and don’t be afraid to take your time. No one is keeping tabs on your money anymore but you.

Remember, you will never be able to stop monitoring your finances in some sense of the matter. Although you can loosen the reigns (when you are ready), you should always be aware of what’s coming in to your bank accounts and what is going out. The key rule to success is always living within your means. Congratulations, and good luck!

Image Credit: stevepb

Alyssa Davies


Alyssa is a freelance writer and founder of the personal finance blog, Mixed Up Money. She writes about overcoming personal debts, frugal habits, and has been working in communications at a not-for-profit organization for the past two years.

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