7 Steps to Take After You Become Debt Free

Congratulations on becoming debt-free! It is an accomplishment that few people achieve. You should feel proud of yourself for taking the final step to accomplish a debt-free life. Now, here are seven must-do goals after you become debt-free. Are you ready? Let's Go!

Take a breather

The first one is a nice, easy one to do. We say this because, again, you accomplished something very few people do. Taking a breather means, give yourself a little break from the grindstone. That grindstone you have been working on for however many months and or years is now a piece of grit. Most of us who do not have debt did this first, similar to how people during the 20th century did mortgage burnings.

Have a financial plan

Once you come back from that breather having spent very little, it is now time for new plans. New financial plans to be exact. You feel secure in your job and can make some plans for the future. Here are a few steps. 

Take out your last paycheck or look at it online. You saw how certain amounts went to your bank, how much was paid for taxes and social security, and whatever other fees. How much is left? Were there other fees taken out? Do you know why you have each one of those fees? If you do not know, write down each one of those fees and make a list of what you need to find out.

Now, figure out your monthly housing, utilities, insurance, and groceries. These numbers should not be too much different month to month. Subtract those numbers from your net paycheck (after taxes and fees). This is the money that you can use for the next steps.

Whichever method you use, whether it is on a laptop or paper, put down your savings, your paycheck net amounts each time, and the monthly bills. Figure out how many paychecks it takes to pay those first. Then see how much money you have if you did not spend anymore. This is your savings.

Increase your rainy-day fund 6-12 months

You know how much you make each month because you figured that out above. Now you take the monthly net amount before paying your bills but after the taxes and fees and multiply it by six. Note that number. Then multiply that number by two. Note that larger number. The first step is to save for six months of your net income. The second step is to save for 12 months of your net income.

Give Yourself Little Rewards

Each time you set a goal in your financial plan and your rainy-day fund, give yourself a little reward. It might just be a special snack, book, or movie. Whatever it is, you are using it to reward yourself for your accomplishment.

Start investing in your future

Once you have the rainy-day fund for 12 months and you are paying your bills on time and in full, then you can start to invest in your 401K. If your company does not have one, see if they can separate your paycheck to two separate accounts, one for an IRA (Individual Retirement Account) and one for your regular bank. If they cannot do this either, then it will be up to you to find your system.

First, learn as much as you can about the different investment possibilities. You should do this anyway, whether the company has a 401(K) or not. Go to places like Motley Fool or use library books to learn about the different terminologies.

Your goal is to have after the rainy-day fund is fully set aside, is $6,000. Why this amount? This is the IRA personal account money that you can do in a single year. When you have a 401K through your employer, you can invest $19,500 in a single year.

Increase your skill set to get a job with 401(K) benefits

After seeing the amounts that could be saved with an employee 401K, I bet you are slightly confused. Why can't you put in almost 20 thousand into your retirement, you ask? It is because companies rather than individuals get discounts on their taxes to give employees these benefits. Some companies cannot do this because they are too small, or they do not know how to make it.

While you can certainly try to see if your company could create a 401K program, you could also work towards creating a better job for yourself. Use some money for investments to learn new skills. You are investing in yourself and that is important.

Find a Job with a 401K Match

Once you have found a job with a 401K match, start putting in 10% or whatever you feel you can, without feeling the pinch. Then each time you get a raise, increase the amount based on that percentage.

You are now on your way to staying debt-free and investing in your future. Congratulations!