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.