I’m Out of Debt. Now What?!

by Guest on April 15, 2015

I’m glad you asked. First of all, I want to congratulate you on having eliminated your debts. It’s really difficult to do so. People have debts from many sources. You may have had school loans, expensive credit card debts, hospital bills, tuition costs for your children, or any of a thousand other debt sources. But now it’s gone. Debt is a looming financial problem. It can dwarf all other financial thoughts, and take up all of your spare money. It’s a marathon project to make it go away. And once it’s gone, you have to look around and take a breather. Now what do you do?

Well, in order to get rid of your debt, you will have gained a lot of beneficial financial skills. You know how not to spend money. You know how to save. You know how to live frugally. You know how to plan for the future. Many people just like you never acquire these abilities. Of course, they never get anywhere financially either. You don’t want to be like them. You want a future, a better life for you and your family. So if you have managed to quit your debt, here’s what I would do next:

  • Save up an emergency fund. Flex those same muscles that you used to pay off your debt, and put that same income into a savings account. Try to save up 6 months of expenses for yourself and your household. This may take a year or even more to do. But do it. Emergencies will come. In the past, when big emergencies crept up, you had no other choice but to go into debt to cover them. No more. Now you’re going to have a big buffer between you and spending on credit. Once you’ve got it filled up, you’ll be doing a lot of other things with the money you used to save up this fund.
  • Buy a House, if Possible. This step is controversial, and won’t work for everybody in every situation. But if you are able, this is one of the best wealth building strategies for normal people. For one, your money no longer goes down the rent-toilet every month. When you pay your mortgage, your money is saved as equity and goes with you when you move. Your house will also likely gain value over time, in addition to the money you are save/earning as equity. You may have to save for months for a downpayment, after you’ve completed your emergency fund. Fight the urge to break into the emergency fund, and let this savings goal be something else entirely.
  • Invest. There are a million different ways you can invest. Investment basically secures your buying power and adds to it over time. I like tax-protected accounts like IRAs and you should definitely max out yours every year. You should also think about limited investments in riskier places, like CMC markets and P2P lending where, with experience, you can make more money faster than traditional investment forms.

If you’re able to achieve these three techniques, you will be well on your way to becoming wealthy. Lots of people believe that wealth can never be theirs, but that’s simply not true. But it takes hard work and determination. Stick with it, and once you’ve killed your debt, you’ll have a bright financial future ahead of you.


One of the biggest life lessons that came for most people from the financial crash a few years ago was not an abstract awakening of global finance, but a concrete awareness of their own personal finance. While for some the rapid collapse of a $639 billion financial institution like Lehman Brothers in 2008, the revelation of the United States’ trillions in deficit, or the interconnected economic relationship between different nations was a rude awakening, for many the shock of those difficult years was something much closer to home—how they were one paycheck away from homelessness.

Living Paycheck to Paycheck

Unfortunately, even today after managing to hold on to their jobs or finding another one, a large number of people still live paycheck to paycheck.

In essence, this means that they can’t pay their bills until the next paycheck and if that income flow should stop, then they must find another job immediately, no matter how miserable it might appear to be.

Chronic Stress

Living from paycheck to paycheck results in a state of chronic stress for numerous reasons:

  1. You cannot quit your job even if you feel you are underpaid and overworked, harassed by your boss over petty issues, or have to put up with difficult coworkers.
  2. You feel frightened if something costs more than you anticipated or you have some unexpected expenses to pay.
  3. You may have to rely on high-interest credit cards or personal loans from family, friends, or payday loan places to cover car problems, dental work, a sick child or any other unexpected emergencies.
  4. If you end up falling behind on your bills, you then play a game of rotating bills, figuring out how much time you have before your services are cut off.
  5. You can’t even begin to dream of improving your life—enrolling for more education to get a better-paying job, joining a health club to get back in shape, going on vacation, or getting a reliable car that consumes less gas.

10 Steps to Savings

While it may not be your fault that you didn’t get more education, could not find a better job, or ended up paying high mortgage or rent costs, you’re not entirely helpless when it comes to developing financial self-sufficiency, and here are 10 things you can do to ease out of your situation.

  1. Realize that you are not alone.

Millions of people have experienced a similar situation and climbed out of it. Their stories, strategies, suggestions, and solutions are available with a little research. Go to your public library, read blogs on personal management, and find ways that you could earn extra income. You don’t have to win the lottery to experience some measure of prosperity.

  1. Review your current expenses.

There may be some ways to cut down on expenses that you had not even considered before. For instance, you might be able to ease the strain on your wallet by taking your own packed lunch to work rather than relying on nearby restaurants during lunch or dinner times. If you’re a member of a gym, you might be able to buy home exercise equipment to keep on top of your exercise routine. You might be pleasantly surprised by the number of ways you can save money. While each way may appear to be small and significant, they all add up.

  1. Avoid the perils of retail therapy.

Often people shop for fun and as a pleasant way to spend time with family and friends. Even if you merely accompany other people and do window shopping, you’re only making yourself miserable by looking at all the things you dare not buy. If you’re interest in retail therapy is because you’re a shopaholic, you have to realize that this is not a harmless way of “blowing off some pressure.”

  1. Organize your finances.

Instead of merely trying to figure out how to make enough each month to cope with your living expenses, try to figure out ways that you can put some money aside toward an emergency fund. Another thing you could do to organize your cash flow is put a limit on how much you allow yourself to spend on entertainment—things like going to restaurants and movies or trips with your friends. Managing your money is not about using your ATM receipt as a measure of your financial net worth. While balancing your income and expenses may seem like it will cramp your style, do you really want to spend the rest of your life chained to a desk?

  1. Begin paying your bills on time.

Once you have reached a point in your money management where you have more money than month, then you should consider paying your bills on time. In fact, pay them as soon as you receive them. This will prevent you from forgetting to pay bills, spending time keeping track of when to pay bills, or getting dinged with a late fee every time you send a bill that has passed its due date.

  1. Play the credit game better.

If you have too many credit cards, you may not be able to pay off all your monthly bills and carry a forward balance. Instead, only have enough credit cards to be able to pay off each one in full when you receive your bill. Additionally, if you have a low FICO score, you may be paying much more in interest rates on many things than someone who has a high score. If this is the case, check out credit repair services like Lexington Law on the Better Business Bureau to find out what steps you can take to clean up errors in your credit reports that are causing you to have a low score.

  1. Do more free things.

You don’t always have to spend money to enjoy entertainment or education. You can exercise in the park instead of the gym, listen to free downloadable music on your iPod, or take free online courses from leading universities in the world through MOOC (Massive Open Online Classes).

  1. Learn some basic skills to do things yourself.

If you’re not good at fixing your car, doing home repairs, figuring out your own workout routine, or cooking your own meals, these are learnable skills. You can save yourself quite a bit of money by simply learning how to do things yourself rather than hiring an expert to help you.

  1. Lower your standards of living.

It’s possible that you are spending a lot of money trying to look good. If you’re driving a foreign car, for example, you may be paying much more than someone who has to pay less in car parts by driving an American car. If you’re eating only at the best restaurants, you’re probably paying a lot more than people who eat at family diners. If you’re wearing only designer clothes, you’re generally spending a lot more than someone who gets a more generic line of clothing. While it’s not necessary to live modestly, it may not be wise to try to impress your neighbors if you’re struggling from paycheck to paycheck.

Rising Cost of Living

This dependency on a paycheck-to-paycheck living may not actually be your fault. With the cost of living exceeding the amount most employers are willing to pay for entry level work, it is extremely difficult for millions to make more than enough to pay for food, shelter, healthcare and transportation. Still, there is a lot you can do to end the quiet desperation that comes from living above your means.


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