If you’ve paid off your debt, you owe yourself a round of applause. It’s a rare feat, and one that should be celebrated—in moderation.
Now that you have extra money coming in each month, the first thing you’ll want to do is have a plan in place so that you don’t turn around and find yourself right back where you started.
Here are three things you can do with your money to set yourself up for continued success in the future:
Start an Emergency Fund
Some of the debt you paid off may have come from emergencies: a hospitalization, a car or household repair, or even a job loss.
To better position yourself for an emergency in the future, work on putting away three months of expenses in an emergency fund at your bank. From there, build up to six months to a year of savings so that you can still pay your bills if you lose your job. If you’re out of work for any period, you’ll want to have enough money to pay your rent/mortgage, transportation and food costs, utility bills and other essentials.
Save for Retirement
Saving for the future may not be at the top of your list, but you’ll thank your past self when you reach retirement age and can comfortably retire because you contributed the maximum amount to your retirement account when you could.
As you should do with an emergency savings account, be sure to automate your retirement contributions each month. Check with your employer about how to do this, and increase your 401(k) contributions each month.
Put It in a College Fund
If you have children or plan on having some, starting a college savings account (529 plan) can be a great way to invest in the stock market to help pay for college. Money from the account can be used to pay for qualified expenses such as tuition and books.
Saving for college early—just like anything else—allows you to earn compound interest and more money than you might otherwise.
This article is intended for informational purposes only and should not be construed as professional or legal advice.