A friend of mine reached out to me to share some great news. He just got out of debt. This is definitely amazing news and I was excited to hear it. The next question didn’t surprise me when he asked, “What does a person who gets out of debt do next?”
It’s a logical question.
For many of us the goal of paying off debt seems like an insurmountable feat. But, with the right attitude and the willingness to make changes in habits, it can be done. So why do many people wonder what’s next?
This happens because we’re only told to set financial goals.
I’ve talked about goals a number of times in various posts on budgeting and spending habits. There are two types of goals but for some reason we’re taught to only focus on financial goals. However, the main goal that I push is setting a lifestyle goal.
Financial goals are always tied to spending. I need to save for a car, buy a home, send my kids to college or paying off debt. These aren’t lifestyle goals. They are pitstops along the way of you living life. If you decide to spend way above your means, it might mean you’ll be at that pitstop longer than you really wanted. Overspending leads to debt thus limiting oneself from experiencing life.
A lifestyle goal is how you envision living your life. If you could have all the money in the world what type of life would you be living? This is a very lotto fantasy type question. Well, just think of the reasons you or millions of others buy a lottery ticket. It allows you to envision the type of life you’d want to live.
For some reason we can only think about living life when we don’t have the stress of financial obligations. Some of which we place on ourselves.
When you take out the desire to spend to make yourself feel happy. You will be surprised that all you really wanted was to make more memories with those you love.
Okay, we got that out of the way.
So what should you do after you’ve paid off debt?
Make sure you don’t get into debt again!
Now, I understand my friend is asking what to do with all the freed up cash. For one, it’s important to make that money work for you. That means putting it into a savings account and an investment account. Create a solid emergency fund and start to become more aggressive with your retirement planning. That means putting more into a 401(k) and an IRA.
What I’ve seen happen with many people who get out of debt is dive back in it. I’ve done that a number of times. Something happens in our brains once we’ve overcome what seems impossible. We’ve been through it so we know we can get out of it. This can lead into rinse and repeat. Just make sure you repeat the good things not the bad.
What Happens After Debt Repayment
With a clearer mind, you can begin to start thinking about the life you want to live. If you haven’t set a lifestyle goal, set one now.
- Define the life you want to live.
- Understand the cost associated with that life.
- Begin budgeting to achieve that life. Budgets help you reach goals.
These 3 steps can also help you overcome the hurdle of debt.
A lifestyle goal is a big motivator that leads to sounder financial decisions. It might make you buy the used car over the new one. It could mean exploring Europe versus the bar crawls and dinners.
It’ll make you prioritize savings so you get to do more of the things you want rather than working to pay for the things you own. You’ll learn the differences between needs and wants.
If you work towards your lifestyle goal, you’ll never have to ask the question, “What do I do next after debt?” ever again.