[et_pb_section fb_built=”1″ _builder_version=”4.16″ _module_preset=”default” custom_margin=”||||false|false” custom_margin_last_edited=”off|desktop” top_divider_style=”curve2″ top_divider_color=”#e7dff3″ top_divider_flip=”horizontal|vertical” bottom_divider_style=”curve2″ bottom_divider_color=”#5b25af” bottom_divider_height_tablet=”80px” bottom_divider_height_phone=”50px” bottom_divider_height_last_edited=”on|phone” da_disable_devices=”off|off|off” global_colors_info=”{}” da_is_popup=”off” da_exit_intent=”off” da_has_close=”on” da_alt_close=”off” da_dark_close=”off” da_not_modal=”on” da_is_singular=”off” da_with_loader=”off” da_has_shadow=”on”][et_pb_row _builder_version=”4.16″ _module_preset=”default” custom_padding=”||9px|||” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.16″ _module_preset=”default” global_colors_info=”{}”][et_pb_text _builder_version=”4.20.2″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n
By Carmen Chan<\/em><\/p>\n You\u2019ve tackled your credit card debt<\/a>, stayed committed to your debt repayment plan, and after years of dedication you\u2019re nearly debt free. Now that you\u2019re in the green, have you thought about what you\u2019re going to do with the extra cash you\u2019ll no longer put towards debt repayments? What about how you\u2019ll stay out of debt for good<\/a>?<\/p>\n The average Canadian\u2019s non-mortgage debt is now over $30,000, which includes significant credit card debt. That\u2019s a lot of debt to pay off and when you complete this feat, it can be a bittersweet feeling \u2013 a mix of relief and accomplishment with fear of change and relapsing into old habits.<\/p>\n After years of budgeting, tracking your spending, and nickeling and diming, the last thing you want to do is fall back into the old habits that got you into debt.<\/p>\n If you\u2019re wondering about what\u2019s on the horizon once you\u2019re debt free, here are 6 things you should do to ensure you stay on track as you continue into the next phase of your debt-free journey.<\/p>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][et_pb_row column_structure=”1_2,1_2″ make_equal=”on” custom_padding_last_edited=”off|tablet” _builder_version=”4.17.4″ width_tablet=”80%” width_phone=”80%” width_last_edited=”on|phone” custom_margin_tablet=”||-35px||false|false” custom_margin_phone=”||-35px||false|false” custom_margin_last_edited=”on|phone” custom_padding=”9px||0px|||” custom_padding_tablet=”||0px||false|false” locked=”off” global_colors_info=”{}”][et_pb_column type=”1_2″ _builder_version=”4.16″ animation_style=”slide” animation_direction=”left” animation_intensity_slide=”2%” custom_css_main_element=”margin: auto;\t” global_colors_info=”{}”][et_pb_image src=”https:\/\/nomoredebts.org\/wp-content\/uploads\/2020\/09\/debt-free_2colm.jpg” alt=”Making financial decisions without much financial literacy.” _builder_version=”4.20.2″ border_radii=”off|200px|20px|200px|20px” box_shadow_style=”preset2″ global_colors_info=”{}”][\/et_pb_image][\/et_pb_column][et_pb_column type=”1_2″ _builder_version=”4.16″ global_colors_info=”{}”][et_pb_text _builder_version=”4.20.2″ custom_margin_tablet=”45px||||false|false” custom_margin_phone=”45px||||false|false” custom_margin_last_edited=”on|phone” custom_padding=”||1px|||” global_colors_info=”{}”]<\/p>\n Before you hit your goal of clearing your debts, 6 – 12 months ahead of time start planning for what\u2019s coming. You\u2019ll know when you\u2019re getting close to approaching the finish line as your total debts creep closer to a $0 balance.<\/p>\n You\u2019ve been laser-focused on prioritizing monthly payments to your debts, but now you need to shift gears and visualize what comes next and what\u2019s important to you. Ask yourself a series of questions and take notes:<\/p>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=”4.20.2″ _module_preset=”default” custom_padding=”8px|||||” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.20.2″ _module_preset=”default” global_colors_info=”{}”][et_pb_text _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n Maybe you\u2019ve realized you want to save for a down payment, focus on paying off your mortgage, or you want to research retirement savings.<\/p>\n After years of living off of meals at home, you might decide on a bi-weekly dinner date out, or that carefully bumping up your entertainment budget would make you happy. You may have halted any travel plans and you\u2019d now like to plan a trip in the upcoming year. Take stock of your plans and hopes for the future.<\/p>\n Your journey to being debt free doesn\u2019t end once you\u2019ve cleared your debts \u2013 these next steps are just as valuable, will shape your financial planning, and should motivate you<\/a>, too.<\/p>\n Debt repayment is ideally around 5 – 15 percent of your income. But when you’re struggling with debt, you could be siphoning off one-fifth of your income \u2013 if not more \u2013 towards your debt consolidation loan, credit card debt, and other consumer debts.<\/p>\n If you\u2019re living at home with a full-time job and a hefty student loan, you could have been funnelling much more towards your debt than a single-income family with a mortgage. Your debt repayments could have clocked in at as little as a couple of hundred dollars, to large sums of about $2,000 a month. That\u2019s a lot of income that is no longer tied up in debt repayment.<\/p>\n While it\u2019s still unclear what you\u2019ll do with this freed up cash, keep it tucked away so it\u2019s out of reach.\u00a0Create a separate savings account for that cash and automate payments to it until you decide what to do with your freed-up cash. This will stop you from spending the free income on old vices and keep it safe from yourself.<\/p>\n Tips to Stop Impulsive Spending<\/a><\/p>\n During your years of debt repayment, you may have worked with a credit counsellor to track your spending, build a budget, and measure your progress. While it\u2019s tempting to just kick back and relax when you\u2019re debt free, these are essential habits you\u2019ll need to maintain to keep yourself out of debt for the rest of your life. You know the system that works for you \u2013 don\u2019t mess with a good thing.<\/p>\n However, it\u2019s time to reconfigure your budget strategically and realistically. For instance, your budget for discretionary spending can creep up modestly so you\u2019re no longer shopping at second-hand stores, subsisting on beans and rice cooked at home, or skipping out on birthday drinks with friends. If you want a Friday afternoon Starbucks treat, or an extra $20 to go to the movies each month, work these into your new budget but tread carefully; make sure your budget balances out with these new additions.<\/p>\n Maintaining a budget is critical now that you have more wiggle room with your income. You need to strike the right balance \u2013 you don\u2019t want or need to keep a bare bones budget, but you need to find the sweet spot with your spending.<\/p>\n Budgeting Spreadsheet \u2013 Free Download to Help You Juggle Your Numbers<\/a><\/p>\n Because you\u2019re still tracking your spending, you\u2019ll notice straight away if you\u2019re overspending in certain categories or you aren\u2019t hitting savings checkpoints on time. As you tweak your budget, paying close attention to your savings and spending habits in the subsequent months after becoming debt free will ensure you don\u2019t veer off track. Savings is an important expense<\/a> \u2013 make sure to see it that way in your budget.<\/p>\n Plan for a splurge, too \u2013 because you know you\u2019ve earned it. Earmark a one-time expense \u2013 whether it\u2019s splashing out on a fancy dinner or treating yourself to a new outfit\u00a0\u2013 in your budget and make sure it doesn\u2019t exceed the amount you would\u2019ve contributed towards your debt. And remind yourself that this is a one-time celebration.<\/p>\n The first place to reallocate your debt repayment funds to is an emergency savings<\/a> account. While you were in the middle of debt repayment, you might have added $10 or $20 towards this account each month \u2013 or nothing at all \u2013 but now that you\u2019re debt free, it\u2019s time to build up your slush fund.<\/p>\n Calculate how much money you need for living expenses per month, including rent\/mortgage, food, transportation, and paying your essential bills. Aim to save up about six months\u2019 worth of expenses stashed away in a savings account for emergency purposes only.<\/p>\n The debt you may have incurred could have been triggered by an emergency \u2014 a last minute roof repair, replacing your car, or a job loss. This time around, you want to be prepared for whatever Murphy\u2019s Law throws your way.<\/p>\n Now that you\u2019re debt free, you can shift your priorities to new savings goals. You\u2019re no longer aiming to wipe out your credit cards with the highest interest rates or paying off the last of your debt consolidation loan. Your income is now all yours.<\/p>\n Aim to set three to five goals, a mixture of short- and long-term ones. Short-term goals can be achieved within a year or two, such as saving up for a family vacation, buying a new laptop, or putting $1,000 into a TFSA (Tax-Free Savings Account).<\/p>\n Long-term goals look further ahead, such as saving up $20,000 for a down payment, getting a new car, or hitting a major milestone with your retirement savings. These are big plans. While you could barely whittle away at these priorities while you were in debt, you could now be depositing bigger chunks of savings into accounts for these various goals.<\/p>\n Think of how liberating it would feel to see your budget include savings for travel, retirement, or a down payment. Set these up and direct the funds that used to be for debt repayment to these accounts. Some people have as many as 10 savings accounts going and automate their savings on payday pouring a little bit of cash into each fund. When you pay yourself first and funnel the money out of your everyday account, you won\u2019t miss it.<\/p>\n Work various goals into your budget and with dedicated effort you\u2019ll see them come to fruition.<\/p>\n If you kissed your credit cards good-bye because your spending got you into trouble, you have to be careful when you\u2019re back in your creditors\u2019 good graces. If you\u2019d like to rebuild your credit<\/a> history, start small \u2014 with a single credit card and a small limit that you can manage. A secured credit card may be another option if you\u2019re worried about temptation.<\/p>\n Use the card carefully to pay for everyday purchases and pay the balance in full as soon as the bill comes. You can even set up a special credit card payment account to hold onto the cash that you want to pay directly to your card. Do whatever it takes to pay the credit card in full by the due date every single month and you won\u2019t pay any interest.<\/p>\n If you can\u2019t quite see the end of the tunnel yet, maybe a credit counsellor\u2019s<\/a> second look at your budget will help you pin-point where you can make some changes to realize your goal this year. If you\u2019re so far away that you\u2019re not even sure a tunnel exists, let alone a light, you need help to get out from under your debts. Contact us<\/a> now and a counsellor will be happy to help you. Our appointments are free and confidential; what you do afterwards is entirely up to you. No pressure, we promise. All you\u2019ve got to lose is your debt.<\/p>\n <\/p>\n Last Updated on October 18, 2024 <\/span><\/p>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section]<\/p>\n","protected":false},"excerpt":{"rendered":" You\u2019ve tackled your credit card debt, stayed committed to your debt repayment plan, and after years of dedication you\u2019re nearly debt free. Now that you\u2019re in the green, have you thought about what you\u2019re going to do with the extra cash you\u2019ll no longer put towards debt repayments?<\/p>\n","protected":false},"author":3,"featured_media":24414,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"on","_et_pb_old_content":"","_et_gb_content_width":"1080","_lmt_disableupdate":"no","_lmt_disable":"","footnotes":""},"categories":[17],"tags":[],"class_list":["post-23545","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-dealing-with-debt"],"yoast_head":"\n1. Prepare in Advance<\/h2>\n
\n
2. Shield the Money From Reactive Spending<\/h2>\n
3. Stick to Your Budgeting Routine<\/h2>\n
4. Beef Up Your Emergency Savings Fund<\/h2>\n
5. Set New Short and Long-Term Goals<\/h2>\n
6. Put the Brakes on Any New Credit<\/h2>\n
Does Almost Debt Free from Credit Cards Sound Too Good to Be True?<\/h3>\n