Imagine the day you made your very last payment on your debt. You have paid off your mortgage, your personal loans and credit card bills. You can say goodbye to the mounting bills, the stress of living in fear for all your properties, and the anxiety of having your debts on your mind every single day.
It sounds like a really liberating day but before you can celebrate, you need to get one thing straight: you are only debt free. This is not yet financial freedom – or at least not totally. Although it is nearer than ever, you need to keep in mind that the work is not yet over. It is a lot easier now but effort is still required from you.
It is similar to a person who just reached their ideal weight. After months of exercising, dieting and painfully curbing all their wants, they have reached their goal. But what do they do after? They do not go to the nearest buffet or eat-all-you-can restaurant and stuff themselves again. They continue exercising and eating healthy food.
The same is true for you. Once you have paid off your debt, there is still work to be done. So where do you go from here? The obvious answer is to enjoy your debt freedom but at the same time, make sure you stay that way by achieving financial freedom.
Financial freedom is when you live below your means and you are able to purchase the things that you like without having to resort to credit. Depending on the type of debt relief that got you in this position, you should have been placed on a strict spending diet through your budget plan.
You need to take out your current budget and review it. Adjust it to suit the new debt free life that you have. Now that there is more room for you to put on your emergency fund – take advantage of that. If you haven’t done that yet, you need to grow this fund. If you have a couple of months saved up, grow that some more to reach a year.
It is also advisable to keep your emergency fund separate from the savings that you make for a later need. At this point, you should have learned to put aside money to prepare for the future purchases. Appliances break down and furnitures go old. Make sure you have the ability to pay for them in cash and it should not come from your emergency fund. Keep your fund intact for a real emergency. Build up savings for all the things that you intend to buy.
If you have children or you plan to have kids, you should save up for them too. Don’t let them suffer the student loans that buried you in debt.
Bottom line is, you need to have a goal. It keeps you motivated and focused. Now that you know you have the ability to pursue something that you set your eye on, utilize that. Enjoy life and loosen the restrictions a little but never forget what it was like to live in debt. Make the commitment never to be in that same position again. That is how you aim for true financial freedom.