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What a wonderful feeling it is! You’ve finally wiped out the debt that’s been weighing you down.
Now, you can start to really focus on your financial future with well-deserved optimism and seize opportunities that may have been off limits when you were buried in debt.
But don’t get too dreamy-eyed. Though eliminating debt is a remarkable achievement, it’s not the end of the journey to building and maintaining wealth.
You have to be pretty careful about your next moves, lest you risk ending up in debt all over again.
Financial experts shared five things to do to start fresh after wiping out debt.
And if you want to start 2025 strong, this seven-day savings challenge is the perfect way to get prepared.
Prioritize Building an Emergency Fund
Once debt is paid off, establishing an emergency fund is essential for financial security.
“An emergency fund acts as a financial cushion, helping cover unexpected expenses, like medical bills or car repairs, without reverting to credit or debt,” said Li Han Tan, co-founder, finance director and principal consultant at WLP Group.
“Ideally, set aside at least three to six months of living expenses. Start by automating transfers to a high-yield savings account each month. This gradual approach helps you adjust to saving regularly while reinforcing positive financial habits.”
Invest in Retirement Savings
Without debt, it’s time to focus on long-term financial health by increasing retirement contributions.
“Consider contributing to an IRA or, if self-employed, a SEP IRA or solo 401(k),” Tan said. “Even modest contributions can significantly grow over time through compound interest, ultimately providing security in retirement.
“If an employer offers a retirement match, prioritize reaching that match amount, as it’s essentially free money toward your future. A tax advisor can help you choose the best retirement account based on your goals and current income.”
Continue To Use Credit Cards (the Right Way)
You may want to swear off credit cards for good if they’re the primary reason you got into debt, but you shouldn’t abstain from credit card usage altogether.
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“Whether it’s the card you paid off or another credit card, it is a good idea to make some charges that you absolutely know you can and will pay off in full and on time every month,” said Sean Fox, president of debt solutions at Achieve.
Why should you use credit cards? It comes down to the big picture of your financial health and how potential lenders perceive it.
“Credit bureaus look at payment history to help assess how a person will handle loan repayment — which comes into play if you ever get a mortgage or other loan,” Fox said.
“Credit can also play a part in your auto insurance premium, apartment you want to rent and even a job you want, so responsible use of credit can pay off in many ways. Remember that debit cards do not factor into credit scores.”
Adjust Your Budget
You probably stuck to a frugal budget to wipe out your debt. Don’t let that habit go dormant.
In fact, double down on budgeting.
“Hopefully, you have been working with a budget to allocate money each month toward your credit card debt. If you haven’t, this is the time to get one in place,” Fox said.
“Use whatever tool you like: spreadsheet, app or even pencil and paper. Take that same payment you made toward your debt and allocate it in your budget to savings.”
Pro-tip: “Include a line item in the budget — in ‘expenses’ — for savings,” Fox said. “This treats savings as a mandatory bill. A good baseline is to save at least 10% of every payment received — more if possible, less if necessary.”
Set Up Simple Systems for Managing Money
Managing money has its inherent complexities, but there are ways to simplify it all: You just have to be on top of it.
“Get in the habit of depositing any cash or checks as you receive them,” Fox said. “Open all mail — including every bill — as soon as it arrives (paper or electronic). Then commit to paying each bill right away, or use a bill-paying filing system that orders and notes bills by payment-mailing or online-payment date. That ‘system’ may be a folder that resides on your desk, an app or an online calendar.”
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