Paying off your debt can seem like a never-ending feat.
Between bills and other expenses, it can seem like the amount you contribute to your debt each month can feel like it’s next to nothing in comparison to the total. So, the moment you finally eliminate your debt is definitely one for celebration.
It can be all too tempting to go crazy with the money you have left over each month that you no longer use for debt. However, just because you’re debt free doesn’t mean that you should use that money frivolously.
Instead, adjust your budget to meet new goals and objectives and put that money to good use. Here are four ways to budget once you’re debt free.
Once you’re debt free, it’s important to take a moment to reevaluate your budget. As I mentioned earlier, don’t just funnel that money into your entertainment or fun category. Instead, use this as an opportunity to examine your other categories and see if there’s anywhere else that could utilize extra income.
2. Budget for Savings & Investments
After debt, saving for your future is the next important financial step. Take what you no longer spend towards debt reduction and put it in your savings, investments, and emergency fund categories. This is especially the case if you didn’t put as much or anything towards some of these categories while you were paying off debts.
Now is the time to focus on establishing and preparing yourself for your future and any unexpected expenses that could potentially set you back in to debt.
3. Set New Short-Term Goals
After you’ve focused on your savings, you can focus on your other, shorter financial goals. Adjust your budget to include those goals and aspirations that you may have been putting off until you were debt free.
Whether you desperately need to renovate areas of your home, need a new car, or are looking to put a down payment on a new home, now is the time to budget for new and exciting items. Work your new goals into your budget and revaluate what income goes where.
4. Give It Back
This particular adjustment to your budget is of course only a suggestion. That being said, being debt free is an incredible feeling and if you ever wanted to give back to your local community and charities or invest in larger causes, now is the perfect time to do so. Once you’re financially secure, the idea of giving or helping someone else usually comes to mind. Once you’re set for the future, consider adding a giving category to your budget.
It’s exciting to think of all the ways you can use your debt-free income. Not being tied to your debt or living paycheck to paycheck, frees up your money to be utilized for other important financial means and goals. Once you’re debt free, be sure to reexamine your budget and adjust it to put that money to good use.
Did you change your budget after you became debt free? What was your next important savings goal?- Kayla