Repaying credit card and student loan debt aggressively is hard work but it becomes addictive after a month or two. You get into the habit of restricting frivolous expenses and this becomes comforting after a while. You start appreciating all the people and things that you have in life. Your wants diminish. You are healthier as a result of cooking your own food and you might even have lost some weight due to the extra bicycling and walking that you are doing to reduce your fuel costs. Throughout this process, your debt freedom day is what is keeping you from slipping.
You imagine your debt free day as something magical where the chains are cut off and you are free. You imagine all the things you can buy with the extra cash flow once the debt repayments stop. It is tempting and you just can’t wait.
The reality is a little different. First you will feel like a big weight has been lifted off your shoulders. It is a great feeling to no longer have debt. The thing that will be different is that the freedom you had imagined where you could buy anything you ever wanted with this extra cash flow won’t come into fruition. Go ahead, buy yourself that needed item that you have been putting off or get yourself a treat as a reward. You have done a great job after all.
Emergency funds, house and retirement
Keep the momentum flowing! Now that you have no consumer debt, start padding your emergency fund if it is not already topped up. You should have 3 month’s worth of cash to cover your needs. If your emergency fund is padded, good for you! Now start thinking about what your next goal will be. Are you looking at buying a house or ever retiring? Make a goal of when you would like to have your down payment by or when you would like to retire. If you want to retire extremely early, it is achievable and now is a great time to keep your frugal momentum going to reach this goal. Allocate monthly funds to your goals and stick with them. As for the rest, spend it however you want now that you are debt free.
This process is what happened to me. I didn’t end up having tons of money to spend after my debts were paid off. I did however sleep like a baby. My frugal ways stayed the same and I invested every extra dollar into real estate in order to reach financial independence before 30.
What will you do once you get out of debt?