You’re Debt Free, What’s Next?

By | 2016-09-28
Allan Liwanag is a personal finance blogger who paid off at least $40K debt and saved $70K in 2.5 years. An analyst by day and dedicated blogger by night, he loves to share his thoughts – based on his research and experience – on topics related to family, life, and money. He owns The Practical Saver.

I have been debt free since the start of this year. I consider it as one of my greatest accomplishments. A couple of years ago, I was indebted to the tune of at least $70K and did not think that I would be able to get out of this financial dilemma. Fortunately, I did. It took me 2 and a half years to pay off my debt. Did I say that I was the only one working in our family while I was paying this debt?

It’s easy to assume that once you are debt free, you will always be debt free. The reality is some people go back to where or how they were before. I know a couple of people who became debt free just to find themselves in debt-ridden situations years later.

For me, becoming debt free is different from maintaining a debt free life. I was really happy when I made my final debt payment because I knew my life would never be the same. I promised myself that I would never ever again go back to my old situation. While I have been debt free for just eight months, I can say that I am fulfilling my promise.

A lot of people have come to me and ask me what I have been doing to make sure that I keep myself free from debt. While there’s no standard way to keep oneself free from debt, here are some of the ways I put into action to ensure I keep my promise.

Continue making payments as if you still had debts

Once you’re done with paying off your debt, what do you do next with your money? Do you stash your money in the bank, invest it in the stock market, or something else? Remember that once you make your last payment, you will have more money freed up that you can use for something else.

You may or should continue making payments as if you still owe something to your creditors. What I mean by this is pay yourself by putting the money, which would have gone to your debt, towards your investments, savings, or something else.

You should consider saving for your future and your family by funding your 401(K), Individual Retirement Accounts (IRAs), and college funds. If you missed funding your emergency funds because you focused on paying off your debts, then, this is the best time to do it.

Plan ahead for a better future

There is no better time to secure your dreams than when you are free from debt.

Aside from investing and saving, you need to identify what you want to do in life, what your goals are, and how you want to get there. It is all about strategy and proper planning. If you want to buy a house, then, you need to save for a down payment, improve your credit score, among others. If you need to get a new car, you need to determine how much you are willing to spend, what type of car you need to buy, etc.

One of the things that causes people to go back to their unfortunate financial situation is impulsive buying. Plan ahead and buy wisely to help you avoid from going back to your previous situation. Do not go in a whim and buy things instantaneously.

Revisit and reevaluate your budget

Just because you are debt free does it mean you don’t need a budget anymore. Whether you have a lot of money or have a little of it, a budget is key to a debt free lifestyle.

Coming from a personal experience, it is really tempting to spend the money you previously designated for debt. If you succumb to this temptation, you’ll find yourself changing your lifestyle and may see yourself back in your old situation again.

This budget should note where your excess money should go. Hopefully, it’s not in one of the ‘want’ categories.

Share your blessings

Becoming debt free is a blessing.

When I was a young boy, my father would always tell me that blessings should be shared and not to be kept to oneself. My father was a tricycle driver who earned $1 or less a day to feed a family of 11.

Though he didn’t make much, I saw him sharing food, helping others, etc. I knew from a young age that sharing blessings is important.

Now that I am debt free, I contribute more to church. I buy food, clothing, and other necessities and give those to charities. I believe that sharing is good karma and it’s the least thing I can do to reciprocate the blessings I receive.

As my wife consistently says, sharing even the smallest things you have can mean a lot to other people.

So, what else can you do when you are debt free? What do you think are the biggest challenges you will face when you become debt free?


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19 thoughts on “You’re Debt Free, What’s Next?

  1. Brian @ Debt Discipline

    The biggest challenge can be falling back into old/bad habits. It’s important to realize you need to continue to stay focused on your finances even after coming debt free. You can’t get lazy, because that’s when the bad things creep back in. You’ve worked too hard to get to this point, continue the momentum and build wealth.

    1. Allan @ The Practical Saver

      You are absolutely correct there Brian. I think that there needs to be continuity after paying the debt. Because if there’s none, it is so easy to go to the old ways. I made sure that when I got out of the debt that I continue to have that discipline and consistency with managing my finances.

  2. Amanda @ centsiblyrich

    Staying the path after becoming debt free is crucial, otherwise you can fall back into old spending habits. I really like the idea of continuing to make “payments” to savings/investing even after becoming debt free.

    1. Allan @ The Practical Saver

      It was really tempting to use the money for something else but I realized that if my wife and I spent those money elsewhere that we would end up going back to where we used to be.

  3. ChooseBetterLife

    You’ve done a great job, congratulations!
    I’m curious, though, about your thoughts on your wife’s contribution. You say “I” a LOT. You also state, “Did I say that I was the only one working in our family while I was paying this debt?” While she might not have been bringing home money, having someone to help with shopping, cooking, cleaning, childrearing, and moral support allows you to work more and perform better and it would cost quite a bit to pay someone to perform these duties.
    Please consider whether some of your accomplishments and generosity deserve a “we.”

  4. FinanceSuperhero

    Great article, Allan! I agree with your plan 100%. When working hard for many months or years to become debt free, it can be very easy to grow weary and let your guard down. I’ve even fallen into this trap myself when paying off debts in our journey to debt freedom (i.e. upgrading a car after paying off a student loan). Contentment is quite possibly the best weapon against falling back into one’s old ways.

    1. Allan @ The Practical Saver

      I agree that contentment is one of the best weapons against falling back into one’s old ways. My parents used to tell me that we should be happy with what we have and did not have. Their words spoke clearly about contentment.

  5. Physician on FIRE

    100% debt free for just over a year. Will that last forever? Possibly, but I reserve the right to take on debt if it makes good financial sense.

    If I want to purchase an expensive home someday, it would probably be more tax-efficient to spread the payments out over time, rather than take massive capital gains all at once to buy with cash. Time will tell, but I enjoy being debt-free and keeping a huge percentage of my paychecks.


    1. Allan @ The Practical Saver

      Being debt free is an accomplishment. I would definitely take on a debt if it makes financial sense. Maybe it’s just me but I would rather invest $10,000 in the stock market than buy a car and pay in-full when I can get a much higher return than what a car loan rate would be.

  6. Dollar Engineer

    I became debt free a few months ago and I’ve been building up my emergency fund to a more comfortable level. After that I will continue to put the money to investments. What’s been good is I haven’t really increased my spending now that I have some more cash to use.

    1. Allan @ The Practical Saver

      From what I am reading, you are on your way to building your wealth. Kudos to you. It also sounds good hearing that your expenses haven’t really increased. It sounds like you are setting yourself for a good financial future.

  7. Financial Panther

    Congrats on being debt free! I also recently paid off $87k in student loans within 2.5 years and the feeling has been amazing.

    Definitely agree with continuing to pay as if you had debt. The key once you get debt free is not to fall victim to lifestyle inflation. It’s really easy to see a big pile of money freed up and start spending it all. But if you’ve been paying off debt for a while, and still living decently, then you can just keep living the same and pocketing the rest for yourself.

  8. Michael

    Fantastic post, and very practical set of tips Allan!

    When I became debt free, I had perfected living within my means. However, after a few months of being debt free, I still didn’t have savings to show for it.

    I started automating my savings straight from my paycheck to a savings account. I didn’t see the money in my checking account anymore. This worked well for me.

    1. Allan @ The Practical Saver

      I find that it’s much easier to save when you don’t see your money, that is, getting your paycheck to go straight to a savings account that you can’t easily touch, to an investment accounts, etc.

  9. Mustard Seed Money

    I have now been debt free for the last four years. It is an incredible feeling waking up each morning knowing that I am not beholden to anything or anybody. While this may sound stupid, I don’t know that you could convince me me take on any new debt because I am not willing to risk what I feel now.

  10. Finance Solver

    Your story is so inspiring Allan. You literally went through the bottom and now you’re enjoying the upside ride.

    As you said, becoming debt free is such a blessing, and with all of the FIRE goals that a lot of us have, it’s easy to forget that there are other people in the world. Have to pay it forward / give back to others!

    1. Allan @ The Practical Saver

      Absolutely, right. That is why my family has been giving back to our community as much as we could monetarily and non-monetarily speaking. We’ve been through so much and the least that we can do is give back.


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