Now’s the Time to Shape Your financial future.

First, congratulation! Getting yourself out of debt is not easy. If you have succeeded, know that you fought an uphill battle to get where you are. You should be proud of yourself. However, getting out of debt is a lot like graduating college — it’s hard to see what lies ahead.

It’s tough to find what else to do, especially if you got through your debt by saving consistently. You could take a short hiatus from this financial discipline, but saving is something worth coming back to. In this post, we’ll show you how.

Read on to learn more about what to do after being debt-free and how you can maintain your financial independence for good.

1. Start or Add to Your Emergency Fund After Paying Off Debt

After paying off debt, you’ll have more disposable income coming your way. While it’s tempting to think you can live a bit more lavishly, you could choose to allocate your new financial freedom towards something else. One place to divert some of your funds to is your emergency fund.

Bolstering your emergency fund needs to be one of the first actions you take. An emergency fund gives you a financial safety net of sorts, so you’re prepared for any emergencies that could arise. With a readily available emergency fund, you can pay for unforeseen contingencies without risking debt again.

If you already have an emergency fund, now would be the best time to pay toward it. On the other hand, if you don’t have one, you can start a fund with a bank using some of the money that you were originally allocating towards your debt.

Contrary to popular belief, there’s no maximum value for your emergency fund. You can deposit into it as much and as often as you can — which we recommend — at least until you could cover just about any situation where you might find yourself without income (e.g. unemployment and medical emergencies).

You should, however, have a defined minimum amount to shoot for. We recommend that your minimum emergency fund balance be enough to sustain your family’s needs (food, bills, rent, utilities, and gas) for at least two months. Why two months? Because this is the lowest median length of unemployment according to the US Bureau of Labor Statistics.

2. Reestablish Your Pre-debt Credit Score

Your credit score may have gone down significantly before you started focusing on paying off the debt. Contrary to popular belief, you don’t earn back the percentage points you’ve lost by getting out of debt. Sometimes, it can stay where it was, to begin with — which will likely be a number that won’t impress creditors in the future.

Since you’ve gotten yourself out of debt, you’re in a perfect position to reestablish your credit score. You can do this by speaking with a bank and applying for a credit card. When you have a credit card, prove your financial responsibility by minimizing your credit utilization rate. As a rule of thumb, make sure that your credit utilization rate never goes above 30%. Keeping your balance low and paying it off in full every month is always best.

Having a credit card and keeping your credit utilization low will show creditors and other lenders that you’re financially responsible and unlikely to miss future payments. This will improve your credit score despite your past debt.

3. Start or Add to Your Retirement Fund

Saving for retirement is an excellent financial goal for living comfortably in your golden years. With more money at your disposal and little to no liabilities, you’re also in a position to save up for retirement.

The best way to start a retirement fund is with an institution or bank. Banks will have several retirement fund options beyond the usual 401K. Some of these retirement funds also earn interest per year. The goal is to select one that you like and make regular payments monthly.

It is also possible to open multiple retirement funds with other banks. This way, you’ll be diversifying your savings, adding more strings to your financial safety net.

4. Start a Small Business

Your nine-to-five job may have been instrumental in allowing you to pay off debts, but this doesn’t mean that you should limit your income potential. One way to rake in more money after you’ve paid off debt is with a side-hustle.

Your small business can be anything you’re passionate about. Because you have no more liabilities, you’ll have more financial resources to take the plunge.

The point is that you’ll be starting from a point of abundance and experimentation rather than need. Who knows? Your side business might just be your new nine-to-five once it grows!

5. Invest in Yourself

One of the most rewarding things you can spend money on is education. Education allows you to discover and develop passions and interests you may have put off as you were paying debts. As a bonus, you’ll be developing skills that can open up new prospects for you.

Education doesn’t need to be in the form of a degree or an advanced degree — especially if it means taking out another student loan for it! Rather, think more along the lines of skills and passions.

Do you like to cook? How about a French culinary course? Maybe, you’ve been on the fence about exploring DIY projects. If so, go for a short carpentry or plumbing vocational course.

Whatever you decide to try out, you’ll be glad you made that investment in yourself. It will pay dividends later on in some way, shape, or form.

6. Invest and Diversify

Once you’ve gotten yourself out of debt, it’s time to build wealth. Building wealth takes more than saving up all of your money and working high-paying jobs or trades; it also means generating passive income. One method of generating income passively is through investing.

Choosing your investments can be tricky. These days, you can place your money in other types of assets and commodities beyond stocks. There are mutual funds and bonds. You can also invest in real estate. With cryptocurrency making headlines these days, crypto staking and trading aren’t bad ideas either.

When you do decide to invest, here are some tips for getting started:

First, understand that very little is certain when it comes to returns. The only certainty in the investment game — whatever type of investment you choose to get into — is a risk. When investing, make sure you only put in money that you can afford to lose.

Secondly, you should diversify your investments. An example of diversification is investing in an exchange-traded fund (ETF), an index fund, having some money in cryptocurrency and dipping into the real estate game.

With a diversified investment portfolio, you’ll not only mitigate risks from the failures of one market. You’ll also have multiple streams of passive income. For this, be sure to speak with an experienced financial advisor.

7. Save for Your Children’s College Fund

Being in debt is never fun, and it’s an experience you won’t want your children to face — if you have kids, of course. One of the first brushes with debt your children might face is student debt. In the United States, 43.3 million people have student debts to pay.

To prevent your children from having to take out student loans, you can start saving for their college education. College funds are an excellent way to offset most of the costs incurred in college. Various banks and financial institutions have college fund savings accounts. Choose a college savings plan that:

• Has high yields

• Prevents easy access

• Comes from a trusted bank or financial institution

8. Pay It Forward After You’ve Paid Off Debt

This tip may not make you richer, but why shouldn’t you pay it forward if you’re feeling generous? With more money at your disposal, you’re in a position to donate to charities. Doing this helps out your community.

Donating to charity is admirable. However, we will say this — there’s a reason we placed this as the last item on the list. Only consider donating once you’ve established streams of income and are able to live comfortably without the money you’re donating.

Paid Off Debt? Build Your Wealth!

Everyone gets into debt at some point. It’s a challenging experience, but once you’re out of it, you’ll be in a position where you can build wealth.

Building wealth is the next step once you’ve paid off the debt. By following some or all of the steps we’ve mentioned here, you’ll not just be richer but also debt-free for good!