Surviving the Day After Debt

Debt can feel a bit too much like being stuck in quicksand. It’s almost like the more you struggle, the more you sink. For those stuck in debt, it’s impossible to control the nature of debt itself; you can’t eradicate debt off the face of the planet all by yourself.

The only thing you can control is how you react to your personal debt. If you’ve already conquered debt, you’ve likely felt the sense of accomplishment alongside the overwhelming feeling of weight being lifted off your shoulders.

You deserve a victory lap. You deserve a day in the sun.

However, have you ever considered what happens after you pay off your debt?

Debt has a way of creating financial experts out of the most random arrangement of people. Be ready to use your newfound financial prowess to your advantage long after you’ve successfully fought your way out of debt.

As important as it is to make a plan to get out of debt, you also should create a plan to stay out of debt in the future. The day after your debt is paid off, consider applying the following five suggestions.

Identify Damaging Habits: Take time to analyze your spending habits and figure out what led to your debt. If it was an unexpected emergency or period of unemployment take time to build your savings. If it was the result of reckless spending create a strict budget. If it was the need for instant gratification change your expectations. Be realistic about goals and make a plan. Unless you understand the root cause of your debt you are likely to fall into similar damaging habits.

Establish Wants vs. Needs: Take time to distinguish between wants and needs. Make a list of things you need, such as groceries, and things you want, such as a new TV. Prioritize your spending according to this list. Make sure you are taking care of your basic necessities first. As you determine your wants, you can also set goals. You may not be able to purchase everything right now; however, with proper planning, you can acquire both wants and needs.

Save Smarter: Start saving with a purpose. Begin with an emergency fund; this can come in handy in moments of financial crisis when you find you can’t make money like before. Make sure you have enough money to cover your basic necessities for three to six months without additional income. Once you have reached this goal begin thinking of other savings goals.

Do you want to buy a house or a new car? Determine how much you need for each goal and decide how much you can realistically set aside each month. Some banks even let you open up multiple savings accounts; this is a great way to differentiate your savings to help you stay on track.

Saving is most successful when it is automatic. Set up monthly or weekly transfers. You will also benefit from making your savings account less accessible. Consider opening an account at a different financial institution than your checking account. A transfer period is a great buffer to prevent impulsive purchases.

Credit Repair: If you used debt settlement your credit may be severely damaged. Take time to find out your current score and determine which factors you can improve. There are a variety of websites that offer free credit scores. Now that you are debt free make it a priority to pay your bills on time every month. Be conscious of the percentage of your available credit you use every month, as this can impact your score. Think carefully before opening and closing credit card accounts. Finally, make sure all debts are accurately reported on your credit report.

Track Everything: The best way to stay out of debt is to know where your money is going. You need to find a system that works for you. One option is to purchase a notebook and keep a physical record of your expenditures. You can also create a simple spreadsheet to monitor your expenses. There are also a variety of free and inexpensive programs and apps that can keep track of your spending.

Paying off debt is a monumental accomplishment. However, it is important to consider life after debt. You don’t want bad habits or poor organization to lead you down another cycle of debt. With proper planning and healthy money habits, you can continue to live debt free.