It may have taken years. It may have required an unprecedented level of discipline and patience. But you finally have your credit cards paid off.
Congratulations! Now, what do you do?
With a good chunk of your high-interest debt no longer weighing you down, you can truly start to work your way toward financial freedom. Here are some key financial moves you can make immediately.
1. Tackle Any Other High-Interest Debt
OK, so you crushed the credit card debt. What else do you owe? Take a look at things like auto loans, student loans and your mortgage and begin chipping away at that debt. Go after the debt with the highest interest rate first. It’s one thing to be free of credit card debt, but to be totally, 100% debt free? That’s an amazing feeling.
2. Assess Your Emergency Fund
When you’re in debt, there’s a good chance you don’t have a lot of liquid savings. But now that those credit cards are paid off, you can start building up funds in case of a major unexpected expense or loss of income. By maintaining an account with at least three months of income, you can handle any financial crisis and know that you won’t go back into debt.
3. Open a Retirement Account
It’s impossible to think about retirement when you’re huddled under a mountain of debt. But now that you’ve shed that high-interest debt, you can start thinking about your long-term financial goals, including your retirement. If your employer offers a 401(k) plan, begin contributing now and seek to maximize the company match. (Usually, this is somewhere in the neighborhood of 5% of your income, though you can always contribute more.) Also consider opening an individual retirement account, or IRA. Opening a Roth IRA, which allows your money to grow tax-free, is perfect for people who are self-employed, but is also a great complement to a 401(k).
4. Find a Good Online Budgeting Tool
If you haven’t already done so, consider using an online service such as Mint or Personal Capital, which allows you to view all of your account information in one place and track your spending — even set up budgets and goals. Using one of these services will allow you to see exactly where your money is going so you can adjust your spending, if needed.