When you’re focused on the goal of getting out of debt, it’s easy to get caught up in the process and not think beyond achieving that goal. But the fact is, if you are consistent and committed to paying off your debt, it will happen. So what do you do then? If you don’t have a plan for what to do with your money once your debt is paid off, it can be all too easy to start a cycle of over-spending that will leave you with little to show for it. Sure, you can relax and have a little fun, but your financial journey is just beginning. Here are several things you need to do once you are debt free. 
Get Serious About Your Emergency Fund
Ideally, you will have been contributing to an emergency fund as you were working to pay off debt. If that’s the case, increase your contributions so you can reach your goal of having six months of expenses in that account sooner. If you haven’t yet started to save for emergencies, you must do it now and deposit as much as you can into that account every month. Why is emergency savings so important? It will help you avoid using credit cards to pay for a true financial emergency, such as major vehicle repairs, a new air conditioner, emergency medical bills, or everyday expenses in case of job loss. Remember, you just got out of debt. The last thing you want to do is get blindsided by an emergency and get right back into debt by having to use a credit card to pay for it.
Investigate Your Retirement Options
The sooner you start saving for retirement the better, but it’s never too late. Look into the retirement savings options offered by your employer along with additional options such as a Roth IRA. If you’re self-employed, look into a SEP IRA, Simple IRA or Individual 401(k). No matter what how you choose to save for retirement, the important thing is to be consistent with your contributions and leave the money alone until you reach retirement age. You already know you have the discipline to pay off debt; apply that same discipline toward saving for your retirement.
Organize Your Financial Life
If you’ve managed to pay off all your credit card debt, there’s a good chance you’re already at least somewhat organized, but there’s always room for improvement. Set up as many bills as possible for auto-pay, so you never again have to risk paying late or missing a payment. Get all your financial documents in order and devise a filing system that works for you. Opt out of pre-screened credit card offers to minimize the temptation to overspend, not to mention cut down on annoying junk mail.
Review Your Insurance Coverage
You may have been getting by with bare minimum insurance coverage while working to become debt free, but now that you have more money every month, you may want to consider increasing your insurance coverage. For example, if you’ve been meaning to get life insurance but couldn’t afford it, now is the time. If you’re approaching middle age, look into long-term care insurance to add security to your senior years. Of course medical, dental and vehicle insurance coverage are all necessities, too.
Start Saving for a Major Purchase
If part of the motivation for getting out of debt was so you could start saving for a major purchase, such as a home or a new vehicle, it’s time to start making that dream a reality. Establish a savings plan solely dedicated to your goal and contribute to it regularly. You’ll be surprised by how quickly the balance grows.
FAQs
Once you become debt free, stick to a plan to stay that way
Whether your debt payoff date is a few months away or several years away, enjoy the moment when it finally arrives — but make sure you have a plan to remain debt free. “Be open to potential financial strategies and options available,” Falcone says.
What would you do if you were debt free? ›
Once you become debt free, stick to a plan to stay that way
Whether your debt payoff date is a few months away or several years away, enjoy the moment when it finally arrives — but make sure you have a plan to remain debt free. “Be open to potential financial strategies and options available,” Falcone says.
What are some possible ways to achieve a debt free lifestyle? ›
6 Ways to Maintain a Debt-Free Lifestyle
- Build a large savings. Working toward a sizable savings account is difficult, but it's also the most important way to stay out of debt. ...
- Pay off credit card transactions immediately. ...
- Buy a cheap used car. ...
- Go to community college. ...
- Rent. ...
- Buy only what you need.
Forex trading allows investors to control large blocks of currencies with a small amount of capital.
- Margin Investing. Investing on margin allows you to buy a higher dollar amount of stock than you actually have money for. ...
- Leveraged ETFs. ...
- Hedge Funds. ...
- Short Selling. ...
- Forex Trading.
Borrowing to invest in a small business is generally considered “good debt" if it helps you make more money and build a successful business. Much like borrowing money for higher education, this form of debt should ideally help position you to earn more money in the future.
What would happen if everyone was debt free? ›
Answer and Explanation: If everyone stopped getting in debt and paid off all their credit cards, saved for everything and spent what they earned this will increase the savings excessively which will decrease the circulation of money in the economy.
What happens if I have no debt? ›
Since you don't have to waste your hard-earned money paying interest, you'll have more money to direct towards financial goals, travel plans or other purposes. More financial security: Monthly debt payments can limit your available cash to save for an emergency fund, invest or even start a business.
At what age should you be debt free? ›
"Shark Tank" investor Kevin O'Leary has said the ideal age to be debt-free is 45, especially if you want to retire by age 60. Being debt-free — including paying off your mortgage — by your mid-40s puts you on the early path toward success, O'Leary argued.
What percentage of Americans live debt free? ›
The study found that six in 10 people could not cover three-plus months of expenses. Thirty-one percent said they had no emergency fund. It's no wonder just 23% of Americans say they live debt free, according to the Federal Reserve.
Can you really live debt free? ›
Becoming debt-free requires commitment and sacrifice, but the long-term benefits are invaluable. When you adopt sound financial strategies and embrace a debt-free mindset, you can achieve financial freedom. Living debt-free is a journey worth pursuing for anyone seeking greater financial stability and peace of mind.
This is called “gearing.” Providing you invest wisely and your assets increase in value, gearing helps you create wealth, as the income (and capital growth) from the investment pays off the debt and exceeds the costs of servicing that debt. Property or shares are often a good strategy here.
What is the only place you should keep your emergency fund money? ›
Bank or credit union account — If you have an account with a bank or credit union—generally considered one of the safest places to put your money—it might make sense to have a dedicated account where you can keep and maintain these funds.
How do the rich use debt to get richer? ›
Wealthy individuals create passive income through arbitrage by finding assets that generate income (such as businesses, real estate, or bonds) and then borrowing money against those assets to get leverage to purchase even more assets.
What is the 36 debt rule? ›
The 28/36 rule dictates that you spend no more than 28 percent of your gross monthly income on housing costs and no more than 36 percent on all of your debt combined, including those housing costs.
What debt should you avoid? ›
Generally speaking, try to minimize or avoid debt that is high cost and isn't tax-deductible, such as credit cards and some auto loans. High interest rates will cost you over time.
Is it good to be completely debt free? ›
Being debt-free is a financial milestone we often hear about people striving for. Without debt, you can focus on building more savings, investing those extra funds and just simply having more peace of mind about your finances. Paying off all your debt, however, doesn't always make sense.
What to do when debt is paid off? ›
Congrats, Your Debt Is Paid Off! Now What?
- Start Retirement Savings. The sooner you start saving for retirement, the better off you'll be. ...
- Tackle Another Debt. ...
- Create a Safety Net. ...
- Save for a Major Purchase. ...
- Use What You've Learned.
With that in mind, here are five frugal ways you can celebrate your financial successes, so you don't erase all your progress!
- Go out for Dessert. As a kid, whenever we'd go out for dessert after a home-cooked meal, it felt like a real fancy treat. ...
- Rent a Movie. ...
- Hit a Matinee. ...
- Buy a Book or Magazine. ...
- Go on a Day Trip.
