Money Management

I'm Debt-Free! Now What?

November 1, 2024
Britt and Laurie-Anne two women laughing and looking at their computers on a couch in a well-styled living room
Britt & Laurie Anne
Two female investors in their 30s with a collective net wealth of over $6 million+
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Debt is a big topic in the personal finance world. Almost 50% of Americans carry a credit card balance from month to month. Not to mention the fact that the average interest rate on credit card debt is over 20%, which makes it extremely expensive and difficult to get out of.

It’s no wonder that a lot of people see a debt-free life as the pinnacle of financial wellness.

So, if you’ve accomplished that, congratulations!! Living debt-free is no small feat.

But if you’ve hit that goal – if you’ve paid off all your bad, high-interest debt – then you may be wondering…what’s next?

Today, I’m going to give you 7 things to do after you’ve paid off your debt to uplevel your finances.

What to do if you’ve paid off your debt:

1) Build your emergency fund

If you’ve been focused on paying down debt, then maybe you’ve neglected your emergency fund while you worked on paying down your debt. 

This is a good time to build up your fund so you’re prepared for emergencies like getting laid off or repairing the roof, which can cost thousands of dollars. As a general rule, you should have 3-6 months worth of necessary expenses in your fund.

2) Start investing

Once you’ve got an emergency fund, it is time to start investing your money! This is your chance to finally grow your money passively!

We typically don’t suggest investing until you’ve paid off all debt with an interest rate above 7% or before you have an emergency fund. That's because the stock market typically has a return of 8-10%, so if you're paying higher interest than that in debt, you'll always be paying more than your investments can give you.

Similarly, you need an emergency fund before you invest because if your car breaks down or your dog eats a sock and needs surgery, you need to have money easily on hand to deal with it. You don't want to have to liquidate your assets and potentially sell at a loss.

3) Save for retirement

No matter how young or old you are, it's important to consistently set aside money for retirement. Trust me, it's going to be here faster than you expect, and you want to be prepared.

As a general rule, if you're in your twenties, save 15% of your pre-tax income each month. If you're just starting to save for retirement in your thirties, you wanna save 20% of your pre-tax income. And if you're starting to save for retirement in your forties or your fifties, you save even more because your money has less time to grow before retirement.

You can use an online retirement calculator to figure out exactly how much money you should be saving each month, which makes it much easier.

4) Improve your credit score

If you don't have credit card debt, then this is a great time to work on building up your credit score. Your credit score is important if you want to buy a house, rent an apartment, secure a car loan, even get hired for a job. Your credit score basically tells people who are considering getting into business with you how trustworthy you are, so it's important to build a good score.

How to improve your credit score!

5) Focus on the future

Now that “present you” is finally taken care of, it’s time to think about what you want the future to look like.

Paying off your debt opens up all kinds of opportunities for the future. Think about:

  • Where do you want to live?
  • What do you want to do for work?
  • What hobbies or passions do you want to pursue?
  • What do you want your lifestyle to look like?

6) Give back

Think back to the last time you gave. Maybe you gave a loved one a Christmas gift this year that they LOVED. Maybe you donated your time to a homeless shelter or money toward helping abuse survivors. How did that giving make you feel?

For a lot of people, giving makes you feel good, and it’s actually linked to life satisfaction, self-worth, happiness, lower rates of depression, and it will even make you live longer.

After all, a big part of why building wealth is important is so you have the power to create the future you want. And giving to causes and charities you care about can be a huge contributor to that future.

7) Treat yourself (responsibly)

Getting out of debt is a big friggin’ deal! You should celebrate the work you’ve put in to build a better future for yourself.

If you’ve been in debt, you’ve probably seen money as a source of stress and anxiety. Now that you’re debt-free, it’s time to enjoy money as something that allows you to do what you want to in life.

Obviously, don’t go overboard; you don’t want to fall back into bad habits or go back into debt. But save up some money to treat yourself, whether that’s a celebratory dinner, a concert you’ve wanted to attend, or a mini-vacation.

Final Thoughts

Now that you’ve paid off your debt, all kinds of new and exciting opportunities are open to you, and I wish you all the best as you enjoy a life of financial freedom.

If you want to learn how to grow and make the most of your money using our 3-step Aligned Money Method, be sure to check out our free masterclass!

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