What To Do After Becoming Debt-Free

While my husband and I aren’t completely debt-free (we’re still working on paying off our mortgage) I can speak to what it’s like to be free of the other typical debts that people often take on. We have no car payments, no student loans, no money owed on credit cards, no home equity loans, etc.

A funny thing happened when we paid those things off. In addition to being thrilled, we…didn’t know what to do with the extra money we now had each month. You wouldn’t think that would be a problem, but it was a strange feeling. (A good strange, but still strange.)

So we thought about it a little while, and realized that a beefy emergency fund was next on the list. Once we were done with that though, we found ourselves back in the “what next?” situation.

Eventually we sat down and hammered out some priorities. We decided on:

  • Beefing up retirement contributions
  • Learning about investing (and starting with small investments)
  • Paying for a home improvement project (which turned into two bathroom remodels instead of just one)
  • Setting up a vacation fund and a couple of other funds
  • Paying off our house

And that’s what I’d recommend doing after becoming debt-free or nearly debt-free: clearly spelling out your priorities, in order. (Doing that while you are getting out of debt works too, if it will provide additional incentive or a greater sense of purpose).

It’s always good to have a plan, especially one that will prevent you from accidentally accumulating a spending habit or failing to reach important long-term goals.

There is life after debt, and it’s fun!


  • You have no student loan debt? Please excuse me while I sob over my acute jealousy.

  • Congrats on paying off everything but your mortgage! I am working towards that myself and have almost eliminated all of my credit card debt, next up is the car…

  • CF, yeah, I “only” borrowed money for one year of grad school, but I paid that off a few years ago :)

    Kate, thanks!

  • I, too , fell into this what I call a “funk” when I first became debt-free.

    I didn’t know what to do with this money. I travelled quite a bit, then got smart and got this money to start working for me.

    Great post

  • David, traveling sounds like a fun thing to do while deciding, at least! Glad you’ve got your money working for you now.

  • Can’t wait to get that feeling!

  • Tomas, let us know when you do! :)

  • glegipon

    Hopefully this works:
    after we became debt free, i made two 1-year goals. 1) to save up a month worth of expenses. 2) to have that month’s expenses available to alleviate the “living paycheck to paycheck” reality we’ve literally always known our whole lives. now after 1 year we finally got there. we have our paychecks direct deposit into an online bank savings account, and every 1st, our monthly expenses (less than our income, thank god) show up in our checking account. now that we’ve experienced 2 months of that (toooo sa-weeet), we have to come up with some more goals. any suggestions besides increase savings to 6 months of income for emergencies? maybe something for after that?

    • Well I would definitely build up an emergency fund, so that would be my biggest suggestion. But sure, why not have a fun goal too? What’s something you’d like to do that you’ve never paid cash for before? That could be a nice goal.

  • glegipon

    we’re wondering what sort of investments can we use. we’re not trying to travel or spend money having fun and we don’t need new cars, new clothes, or new furniture. personally, what would make my life is passing on a legacy to my daughter. for my wife, i think she just wants to own a home (another one, without foreclosing on it.)

    • Ah sorry, was typing on my phone and misread “for after that” as “fun after that”. Tiny screen! For investments, do you have a retirement account set up? You could put a set amount in one of those each month and invest. Maybe speak with a financial advisor who knows your situation about what to invest in. I would recommend looking for someone in your area who is endorsed by Dave Ramsey. (Search for an ELP on his web site.) If it were me I’d keep focusing on the foundations first though.

  • glegipon

    that’s a good idea, just making a real solid foundation first. I’ll focus on that for two years out and keep my nose to the grindstone.

  • Alex

    Some good advice. I’m currently in the process of paying off my credit cards but have also decided to start saving my emergency fund at the same time. I realise it will take a little longer but its great to see my savings account increase as my debt goes down!