You’re Debt Free! So Now What?

by Meredith Morris

Financial Frequency. myDebt

October 24, 2019 . 3 min read

Is there any feeling better than when you paid off your credit card? Or when your student loan payment has finally ended?  After what could be weeks, months, or even years of budgeting, sacrificing and planning, you’ve finally done it. The card (or cards) is paid off, the loans are finished, and you feel freedom like never before. You are one step closer to getting the financial security you’ve been dreaming about.

Now that your debt is paid off and you have some extra money in your bank account, what should you do

Build Your Liberty Fund

Your liberty fund is that money you put aside to have in case something unexpected happens, like losing your job, finding out you need a new roof, or you end up in the emergency room. This fund gives you the freedom to face those things head-on without the worry of taking on debt.  It can also help keep you out of future debt. If you have money saved in this fund, you then don’t have to put things on a credit card when you need money. This also gives you the freedom to make choices based on what you want, rather than out of fear or necessity.

Ideally, you would save at least 6 months’ worth of living expenses so have that safety net. This fund should cover all of your expenses, like rent or mortgage, car payment, and all other bills for 6 months so you have the financial freedom to keep living your life. 

Protect Yourself

Speaking of the unexpected, one thing that so many people miss in their financial portfolio is life insurance. Life insurance protects you and your loved ones from financial burden if the worst were to happen. Losing someone is already extremely hard, let alone having to worry about how to financially afford to support yourself during such a devastating time. Having a life insurance policy gives you the peace of mind that your loved ones are taken care of.

A whole life policy is also a great option. While it can be a bit more expensive, there is so much more flexibility to how you can use the money that you accumulated in that policy. A portion of each premium you pay goes into what is called “cash value”.  Cash value builds tax-deferred and you can take loans out against it, which can come in handy if you need money later on down the road. The younger you buy the better because that means there is more time to build up that cash value and it secures your ability to get insurance if a sudden health issue arises.

Invest in Yourself

What’s important to you and your future? Maybe you’re looking into Socially Responsible Investing (SRI) options, wanting to build a bigger retirement savings, or start a savings fund so your children don’t have to pay for their education. Whatever it is, know your goals and values and decide how that extra bit of money each month can go to securing the future you’re dreaming of.  If you haven’t done so already, taking the time to clearly define what your values are first, then your goals can help you align your actions accordingly. Without this alignment, it is just too easy to get off track and never achieving what you said was important to you. Once you have identified your values and goals, you will be better equipped to invest in something that aligns with those.  


Okay, this is what we know you all want to hear. It’s okay to treat yourself! You just accomplished something huge and you should feel very proud of yourself. While yes, you should splurge a little bit, just do it responsibly. Is there something you have been wanting to buy for yourself?  Or a get-away that you have been longing to take? A spa day perhaps, getting that cut and color you’ve been putting off or taking a seminar about advancing in your career - whatever it may be you deserve a little treat. Just don’t get carried away. Pick the thing that will make the biggest difference for you and go for that.  

Pay attention to how this makes you feel afterward. The feeling you get can provide some important perspective as to how you may wish to spend future funds.  If you spend this money and the good feeling you get quickly wears off, then pay attention to that. This can be valuable guidance for the next time you have some extra cash and want to buy something. Consider treating yourself to something that also aligns with your values and goals. That “spend” will likely feel way more rewarding in the long run.