Congratulations! You paid off some or all of your debt! I bet it felt like this day would never come. But you stuck to it, you made sacrifices, and you reached your goal.

Paying off your debt is a big step in achieving financial security. But once you get out of debt, you may be left wondering what to do next when it comes to your finances. You’re not alone. Many people make it their primary focus to get out of debt, but when it finally happens, they feel a bit lost. But this isn’t the time to get lazy with your finances. It’s important to have a solid financial plan in place as you continue to improve your finances so you can work toward your goals, and avoid falling back into old patterns, like getting back in debt.

You may now ask “what do I do once I’m out of debt?” Here are some tips on what to do with your money once you’ve paid off debt.

Keep your budget

Even if you’ve paid off your debt, it is important to stay on a budget. This can help you to continue to work toward your financial goals. There’s no doubt about it. You have worked hard to pay off your debt. It can be tempting to stop worrying about money constantly and relax when it comes to spending and budgeting.

You may consider cutting the budgeting completely since you’ve finally reached a major financial goal by paying off your debt. You may not want to keep worrying about money, but if you stop paying attention to how you are spending your money then you may end up back in debt. Sure, you may relax how strict you are and increase spending in some categories, but you should not stop budgeting completely.


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Stop Using Your Credit Cards

If it’s credit card debt you’ve paid off, this is the most important thing to do afterwards. After paying off credit card debt, it can be easy to start racking up that debt again. This is a dangerous cycle to get trapped in. If you’ve struggled with overspending and credit card debt in the past, do yourself a favor and stop using your credit cards all together. Set up a budget based on your income and expenses and use cash or debit only. It might feel limiting or scary at first, but this will protect you from going back into debt after working so hard to get out of it. If you need to cut up your cards to stop yourself from using them, do it! And make sure to remove your credit card information from online shopping portals like Amazon.

Rest, Refresh, and Reset — Then Get Back into Action

Take a break from driving toward a financial goal 24/7 (and celebrate that initial win!). Review and potentially redesign your list of goals and priorities.

Then turn the volume back up on your efforts and get back into action — even if you don’t have a very specific goal to hit next. It may be that you simply want to continue to save so that you have the flexibility to choose a new goal down the road, and that’s absolutely fine.

You’re already in the habit of tracking and keeping extra spending in check because you crushed your debt repayment, so now it’s time to redirect the money you used to have to give up to debt repayment to something like a savings or investment account instead.

If you can follow this system — take break and rest for a moment, refresh with a victory celebration, and review and reset your priorities as necessary — then you’ll be well-positioned to make the most of your opportunities in life after debt.

But be careful not to just start spending all of that money every month. It’s really easy to start spending the money without thinking about it, but you should stop yourself before you do that. You’ve lived without that money while paying off your debt, so what can you put it towards now that will help you? The best opportunity here is to start putting it into savings. This can be an emergency savings account or retirement savings. This is especially important if you haven’t been able to save for these things up until now. Automate the savings so that you aren’t tempted to spend the money now that it’s in your account!

Enjoy Yourself

So you’ve made a plan to build your emergency fund, pad your retirement, and began investing. Don’t forget to use your newfound financial freedom to enjoy your life.

Maybe it’s time to plan your dream vacation. This may mean traveling to Europe, taking an annual trip to Tuscany or being able to take a month off of work to go hiking. Or buy that one splurge item you’ve had your eye on.

Now that you’re out of debt, you are in a position now to do the things you enjoy the most. Take advantage of it. You worked hard to get here.

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