Paid Off Debt

You’ve Paid Off Your Debt! Now What?

Now’s the Time to Shape Your financial future.

First, congratulation! Getting yourself out of debt is not easy. If you have succeeded, know that you fought an uphill battle to get where you are. You should be proud of yourself. However, getting out of debt is a lot like graduating college — it’s hard to see what lies ahead.

It’s tough to find what else to do, especially if you got through your debt by saving consistently. You could take a short hiatus from this financial discipline, but saving is something worth coming back to. In this post, we’ll show you how.

Read on to learn more about what to do after being debt-free and how you can maintain your financial independence for good.

1. Start or Add to Your Emergency Fund After Paying Off Debt

After paying off debt, you’ll have more disposable income coming your way. While it’s tempting to think you can live a bit more lavishly, you could choose to allocate your new financial freedom towards something else. One place to divert some of your funds to is your emergency fund.

Bolstering your emergency fund needs to be one of the first actions you take. An emergency fund gives you a financial safety net of sorts, so you’re prepared for any emergencies that could arise. With a readily available emergency fund, you can pay for unforeseen contingencies without risking debt again.

If you already have an emergency fund, now would be the best time to pay toward it. On the other hand, if you don’t have one, you can start a fund with a bank using some of the money that you were originally allocating towards your debt.

Contrary to popular belief, there’s no maximum value for your emergency fund. You can deposit into it as much and as often as you can — which we recommend — at least until you could cover just about any situation where you might find yourself without income (e.g. unemployment and medical emergencies).

You should, however, have a defined minimum amount to shoot for. We recommend that your minimum emergency fund balance be enough to sustain your family’s needs (food, bills, rent, utilities, and gas) for at least two months. Why two months? Because this is the lowest median length of unemployment according to the US Bureau of Labor Statistics.

2. Reestablish Your Pre-debt Credit Score

Your credit score may have gone down significantly before you started focusing on paying off the debt. Contrary to popular belief, you don’t earn back the percentage points you’ve lost by getting out of debt. Sometimes, it can stay where it was, to begin with — which will likely be a number that won’t impress creditors in the future.

Since you’ve gotten yourself out of debt, you’re in a perfect position to reestablish your credit score. You can do this by speaking with a bank and applying for a credit card. When you have a credit card, prove your financial responsibility by minimizing your credit utilization rate. As a rule of thumb, make sure that your credit utilization rate never goes above 30%. Keeping your balance low and paying it off in full every month is always best.

Having a credit card and keeping your credit utilization low will show creditors and other lenders that you’re financially responsible and unlikely to miss future payments. This will improve your credit score despite your past debt.

3. Start or Add to Your Retirement Fund

Saving for retirement is an excellent financial goal for living comfortably in your golden years. With more money at your disposal and little to no liabilities, you’re also in a position to save up for retirement.

The best way to start a retirement fund is with an institution or bank. Banks will have several retirement fund options beyond the usual 401K. Some of these retirement funds also earn interest per year. The goal is to select one that you like and make regular payments monthly.

It is also possible to open multiple retirement funds with other banks. This way, you’ll be diversifying your savings, adding more strings to your financial safety net.

4. Start a Small Business

Your nine-to-five job may have been instrumental in allowing you to pay off debts, but this doesn’t mean that you should limit your income potential. One way to rake in more money after you’ve paid off debt is with a side-hustle.

Your small business can be anything you’re passionate about. Because you have no more liabilities, you’ll have more financial resources to take the plunge.

The point is that you’ll be starting from a point of abundance and experimentation rather than need. Who knows? Your side business might just be your new nine-to-five once it grows!

5. Invest in Yourself

One of the most rewarding things you can spend money on is education. Education allows you to discover and develop passions and interests you may have put off as you were paying debts. As a bonus, you’ll be developing skills that can open up new prospects for you.

Education doesn’t need to be in the form of a degree or an advanced degree — especially if it means taking out another student loan for it! Rather, think more along the lines of skills and passions.

Do you like to cook? How about a French culinary course? Maybe, you’ve been on the fence about exploring DIY projects. If so, go for a short carpentry or plumbing vocational course.

Whatever you decide to try out, you’ll be glad you made that investment in yourself. It will pay dividends later on in some way, shape, or form.

6. Invest and Diversify

Once you’ve gotten yourself out of debt, it’s time to build wealth. Building wealth takes more than saving up all of your money and working high-paying jobs or trades; it also means generating passive income. One method of generating income passively is through investing.

Choosing your investments can be tricky. These days, you can place your money in other types of assets and commodities beyond stocks. There are mutual funds and bonds. You can also invest in real estate. With cryptocurrency making headlines these days, crypto staking and trading aren’t bad ideas either.

When you do decide to invest, here are some tips for getting started:

First, understand that very little is certain when it comes to returns. The only certainty in the investment game — whatever type of investment you choose to get into — is a risk. When investing, make sure you only put in money that you can afford to lose.

Secondly, you should diversify your investments. An example of diversification is investing in an exchange-traded fund (ETF), an index fund, having some money in cryptocurrency and dipping into the real estate game.

With a diversified investment portfolio, you’ll not only mitigate risks from the failures of one market. You’ll also have multiple streams of passive income. For this, be sure to speak with an experienced financial advisor.

7. Save for Your Children’s College Fund

Being in debt is never fun, and it’s an experience you won’t want your children to face — if you have kids, of course. One of the first brushes with debt your children might face is student debt. In the United States, 43.3 million people have student debts to pay.

To prevent your children from having to take out student loans, you can start saving for their college education. College funds are an excellent way to offset most of the costs incurred in college. Various banks and financial institutions have college fund savings accounts. Choose a college savings plan that:

  • Has high yields

  • Prevents easy access

  • Comes from a trusted bank or financial institution

8. Pay It Forward After You’ve Paid Off Debt

This tip may not make you richer, but why shouldn’t you pay it forward if you’re feeling generous? With more money at your disposal, you’re in a position to donate to charities. Doing this helps out your community.

Donating to charity is admirable. However, we will say this — there’s a reason we placed this as the last item on the list. Only consider donating once you’ve established streams of income and are able to live comfortably without the money you’re donating.

Paid Off Debt? Build Your Wealth!

Everyone gets into debt at some point. It’s a challenging experience, but once you’re out of it, you’ll be in a position where you can build wealth.

Building wealth is the next step once you’ve paid off the debt. By following some or all of the steps we’ve mentioned here, you’ll not just be richer but also debt-free for good!

About the Author

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Client Credit Report Authorization

You hereby authorize and instruct Debt Reduction Services, Inc. (DRS, dba Money Fit by DRS) and/or its assigned agents to:
  • Obtain and review your credit report, and
  • Request verifications of your income and rental history, and any other information deemed necessary for improving your housing situation (for example, verifying your annual property tax obligations and homeowner’s insurance fees)
Your credit report will be obtained from a credit reporting agency chosen by DRS. You understand and agree that DRS intends to use the credit report evaluate your financial readiness to purchase or rent a home and/or to engage in post-purchase counseling activities and not to grant credit. You understand you may ask any questions pertaining to your credit report. However, while DRS will review the information with you, the company is not able to furnish you with a copy of your credit profile. You hereby authorize DRS to share your information from your credit report and any information that you provided (including any computations and assessments produced) with the entities listed below to help DRS determine your viable financial options.
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  • Counseling Agencies
  • Debt Collectors
  • Landlords
  • Lenders
  • Mortgage Servicers
  • Property Management Companies
  • Public Housing Authorities
  • Social Service Agencies
Entities such as mortgage lenders and/or counseling agencies may contact your DRS counselor to evaluate the options for which you may be eligible. In connection with such evaluation, you authorize the credit reporting and/or financial agencies to release information and cooperate with your DRS counselor. No information will be discussed about you with entities not directly involved in your efforts to improve your housing situation. You hereby authorize the release of your information to program monitoring organizations of DRS, including but not limited to, Federal, State, and nonprofit partners for program review, monitoring, auditing, research, and/or oversight purposes. In addition, you authorize DRS to have your credit report pulled two additional times to conduct program evaluations. You also agree to keep DRS informed of any changes in address, telephone number, job status, marital status, or other conditions which may affect your eligibility for a program you have applied for or a counseling service that you are seeking. Finally, you understand that you may revoke consent to these disclosures by notifying DRS in writing.

Client Privacy, Data Security, and Client Rights Policy

NOTE: This sheet is to inform new or returning clients about our services, records, fees, and limitations that may affect you as a consumer of our services. This form also discloses how we might release your information to other agencies and/or regulators. If you do not understand a statement, please ask a Debt Reduction Services (DRS) counselor for assistance.

Debt Reduction Services, Inc. (DRS) has put into place policies and procedures to protect the security and confidentiality of your nonpublic personal information. This notice explains our online information practices and how we use and maintain your information to conduct our financial education and credit counseling sessions and to fulfill information and question requests. This privacy policy complies with federal laws and regulations.

To provide our financial education and credit counseling services, we collect nonpublic personal information about you as follows: 1) Information we receive from you, 2) Information about your transactions with us or others, and 3) Information we receive from your creditors or a consumer reporting agency. We do not share this information with outside parties.

We use non-identifying and aggregate information to better design our website and services, but we do not disclose anything that could be used to identify you as an individual.

You hereby authorize DRS, when necessary, to share your nonpublic personal, financial, credit, and any information that you provided (including any computations and assessments produced) with the following entities in order to help DRS provide you with appropriate counseling or guide you to appropriate services: third parties such as government agencies, your lender(s), your creditor(s), and nonprofit housing-related and other financial agencies as permitted by law, including the U.S. Department of Housing and Urban Development.

To prevent unauthorized access, maintain data accuracy, and ensure the correct use of information, we have put in place appropriate physical, electronic, and managerial procedures to safeguard and secure the information we collect online. We limit access to your nonpublic personal information to our employees, contractors and agents who need such access to provide products or services to you or for other legitimate business purposes.

Debt Reduction Services, Inc. complies with the privacy requirements set forth in the HUD housing counseling agency handbook 7610.1 (05/2010), including the sections 2-2 Mc, 3-1 H(2), 3-3, 5-3 F, and Attachment A.5. At all times, we will comply with all additional laws and regulations to which we are subject regarding the collection, use, and disclosure of individually identifiable information.

  1. Services: DRS provides the following housing-related services: counseling that includes Homeless Assistance, Rental Topics, Pre-purchase/Homebuying, and Home Maintenance and Financial Management for Homeowners (Non-Delinquency Post-Purchase); Education courses that include Financial literacy (including home affordability, budgeting, and understanding use of credit), Predatory lending, loan scam or other fraud prevention, Fair housing, Rental topics, Pre-purchase homebuyer education, Non-delinquency post-purchase workshop (including home maintenance and/or financial management for homeowners), and other workshops not listed above.

Please refer to DebtReductionServices.org for details of our services.

  1. Limits: Our services are limited to our normal weekday business hours. We do not provide individual counseling or education services after hours or on weekends, although our education courses are available 24/7.
  2. Fees: We do not charge fees for our financial management counseling and education. However, if you use them, you may have to pay for our Debt Management Program, Student Loan Counseling, Bankruptcy Certificate Services or certain financial education courses (homebuyer education, rental topics, fair housing, predatory lending, and post-purchase-non-delinquency including home maintenance and/or financial management for homeowners).
  3. Records: We maintain records of the services you receive, including notes about your progress or other relevant information to your work with us. You have the right to access and view your records by making a request to your counselor.
  4. Confidentiality: We respect your privacy and offer our services in confidence with the understanding that we may share such information with auditors and government regulators. Certain laws or situations may also lead to disclosing confidential issues, such as those involving potential child abuse or neglect, threats to harm self or others, or court subpoenas.
  5. Refusal of Services: You have the right to refuse services without any penalty or loss.
  6. Disclosure of Policies and Practices: You will be provided our agency disclosure statement.
  7. Sharing of Information: Sometimes we will need to contact other agencies or we may need to share your information, including your records, with other agencies or with regulators. We will do this only if you sign this form that gives us permission except for limited reasons; please see # 5 above for examples of such situations.
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You acknowledge that this authorization will remain in effect for the duration of time that DRS serves as your housing counselor or financial education provider. You also acknowledge that should you wish to terminate this authorization, you will notify DRS in writing.

Disclosure  Statement

NOTE: If you have an impairment, disability, language barrier, or otherwise require an alternative means of completing this form or accessing information about our counseling services, please communicate with your DRS representative about arranging alternative accommodations.

Program Disclosure Form

Disclosure to Client for HUD Housing Counseling Services

Debt Reduction Services, Inc. and its financial education arm, Money Fit by DRS, offer the following housing counseling and educational services related to housing, personal finance, and bankruptcy certificates to consumers:
  • Housing Education Courses: DRS offers many online self-guided education programs classified as Financial, Budgeting, and Credit Workshops (FBC), Fair Housing Pre-Purchase Education Workshops (FHW), Homelessness Prevention Workshops (HMW), Non-Delinquency Post Purchase Workshops (NDW), Predatory Lending Education Workshops (PLW), Pre-purchase Homebuyer Education Workshops (PPW), and Rental Housing Workshops (RHW). These courses help participants increase their knowledge of and skills in personal finance, including home affordability, budgeting, and understanding the use of credit, as well as predatory lending, loan scams, and other fraud prevention topics, fair housing, rental topics, pre-purchase homebuyer education, non-delinquency post-purchase topics including home maintenance and/or financial management for homeowners, homeless prevention workshop, and other workshops not listed above relating to personal finance and housing. Course details are found below under “Housing Workshops.”
  • Home Equity Conversation Mortgage (HECM) Counseling (RMC): Via telephone and virtual platforms, we offer the required HECM counseling nationwide in addition to in-person counseling in Boise, Idaho. We also offer in-home counseling options in thirty counties across southern Idaho for an additional fee to cover our travel and additional staff time costs.
  • Home Maintenance and Financial Management for Homeowners (Non-Delinquency Post-Purchase) (FBC): Clients receive counseling and materials on the proper maintenance of their home and mortgage refinancing. Clients can find help and resources by phone, in our Boise office, or virtually on all topics related to stabilizing their long-term homeownership.
  • Services for Homeless Counseling (HMC): Clients receive phone, virtual, or in-person (Boise) counseling to evaluate their current housing needs, identify barriers to and goals for housing stability, establish a path to self-sufficiency, and connect with emergency shelters, income-appropriate housing, and/or other community resources (e.g. mental healthcare, job training, transportation, etc.).
  • Pre-Purchase Counseling (PPC): Clients receive counseling through the entire homebuying process. Assistance may involve creating a sustainable household budget, understanding mortgage options, building their credit rating, and putting together a realistic action plan to set and achieve homeownership goals.  Additionally, clients will receive materials and resources about home inspections and other homeownership topics relevant to successfully maintaining a home.
  • Rental Housing Counseling (RHC): Via phone, in-person appointments (Boise, ID), or virtual platforms, clients receive housing counseling relevant to renting, including rent subsidies from HUD or other government and assistance programs. Topics can also address issues and concerns having to do with fair housing, landlord and tenant laws, lease terms, rent delinquency, household budgeting, and finding alternate housing.
DRS also offers the following services:
  • A Debt Management Program (DMP) for consumers struggling to pay their credit cards, collections, medical debts, personal loans, old utility bills, and past-due cell phone accounts;
  • The Budget Briefing and Debtor Education Certificates that are required during the Bankruptcy filing process;
  • A Student Loan Repayment Plan Counseling and application service.

Relationships with Industry Partners

Through such services, DRS has established financial relationships with hundreds of banks, credit unions, and creditors such as American Express, Bank of America, Barclays, Capital One, Chase, Citibank, Credit One, Discover, Synchrony, US Bank, USAA, Wells Fargo, and others.

No Client Obligation

The client is not obligated to receive, purchase or utilize any other services offered by DRS or its exclusive partners to receive financial education or housing counseling services. Alternatives: As a condition of our counseling services, in alignment with meeting our client services goals, and in compliance with HUD’s Housing Counseling Program requirements, we may provide information on alternative services, programs, and products available to you, if applicable and known by our staff. Alternative DMP services include negotiating better repayment terms directly with your individual creditors, paying your debts as agreed, or, in extreme cases, filing for personal bankruptcy. Alternative credit and education services can be found through MyMoney.gov or the Jump$tart Clearinghouse of online financial education resources. Housing counseling alternatives can be found through HUD at www.hud.gov/findacounselor.
Finally, you understand that you may revoke consent to these disclosures by notifying DRS in writing.

Housing Counseling and Education Fee Schedule

 

Online Education Program Fees*

Homebuyer Education Course: $59 per participant

  • Self-paced course available here, our online housing counseling and education center. Certificates will be automatically generated upon completion of the course (approximately 6-8 hours)

RentalFair HousingPredatory Lending / HOEPAPost-Purchase (Non-delinquency post-purchase workshop, including home maintenance and/or financial management for homeowners) Online Workshops: $49 per participant

  • Approximately 1 hour each

Other Self-Guided Financial Literacy Webinars (e.g. creditbudgetinghomeless preventiondebt prevention): $0

One-on-one Counseling Fees*

Pre-purchase Homebuying Counseling, Rental Counseling, Post-purchase Ownership Maintenance and Financial Management: $75

  • Session by the hour

Reverse Mortgage/HECM Counseling with Required Certificate:

  • $200†

Credit Report Fee: Paid Directly by Client

*Fees for all but our online education courses and workshops can be paid online by debit card, credit card, or PayPal or in person by cash, check or money order to: “Debt Reduction Services, Inc.” Registration fees are non-refundable 24 hours or less before the start of an in-person course or workshop. Certificates are non-transferable

*Fees may be waived for households with income of 150% or less of that identified on the US Department of Health and Human Services Poverty Guidelines Page

†Home visit counseling is available in 30 southern Idaho counties for potential HECM borrowers at additional costs to cover our travel (IRS reimbursement rates apply) and staff time ($50 per hour or fraction there).

Housing Counseling and Education Fee Schedule

 

Online Education Program Fees*

Homebuyer Education Course: $59 per participant

  • Self-paced course available here, our online housing counseling and education center. Certificates will be automatically generated upon completion of the course (approximately 6-8 hours)

RentalFair HousingPredatory Lending / HOEPAPost-Purchase (Non-delinquency post-purchase workshop, including home maintenance and/or financial management for homeowners) Online Workshops: $49 per participant

  • Approximately 1 hour each

Other Self-Guided Financial Literacy Webinars (e.g. creditbudgetinghomeless preventiondebt prevention): $0

One-on-one Counseling Fees*

Pre-purchase Homebuying Counseling, Rental Counseling, Post-purchase Ownership Maintenance and Financial Management: $75

  • Session by the hour

Reverse Mortgage/HECM Counseling with Required Certificate:

  • $200†

Credit Report Fee: Paid Directly by Client

*Fees for all but our online education courses and workshops can be paid online by debit card, credit card, or PayPal or in person by cash, check or money order to: “Debt Reduction Services, Inc.” Registration fees are non-refundable 24 hours or less before the start of an in-person course or workshop. Certificates are non-transferable

*Fees may be waived for households with income of 150% or less of that identified on the US Department of Health and Human Services Poverty Guidelines Page

†Home visit counseling is available in 30 southern Idaho counties for potential HECM borrowers at additional costs to cover our travel (IRS reimbursement rates apply) and staff time ($50 per hour or fraction there).