Popular Posts

10 Things To Do After You Get Out Of Debt


As I mentioned a few weeks ago, I have been debt free for two years. After two years of enjoying life – debt free -I can state, without hesitation, that deciding to get out debt was the smartest decision I have ever made. I cannot explain how different my life is now. Instead of worrying about interest rates or late payments, I can enjoy the process of saving money and planning for the future.

Clearly, getting out of debt was a big deal. But, my goal is to live without borrowing money. To that end, I have been working my way through the following list of –

10 Things To Do After You Get Out Of Debt

I created this list almost three years ago, while I was still getting out of debt, and I have modified it, several times, since then, adding new goals as my financial situation changed. These are the steps that I am taking (or plan to take) to ensure my family’s financial well-being. I will list the step and underneath each step, I’ll indicate my own progress.

  1. Fully-fund an emergency fund with enough money to cover 6 months worth of necessary expenses.
    • Shortly after getting out of debt, I accomplished this step. Since that time, I dipped into my emergency fund to purchase an automobile. I am currently rebuilding a portion of my emergency fund. I have also begun to refer to this portion of my savings as non-retirement savings.
  2. Learn more about available retirement options. Consider pre-tax and after-tax retirement options. Understand the account benefits / restrictions.
    • I have chosen to fully-fund a 403b account, a Roth IRA, and partially fund a SEP-IRA account. My wife fully-funds her pension plan and a Roth IRA. The amount that you can contribute to a retirement account will be limited by the amount of money you make and the amount of monthly necessary expenses you have. For me, funding retirement accounts is a ‘must’.
  3. Learn more about investing – mutual funds, exchange traded funds, stocks bonds, etc.
    • While I only have a rudimentary understanding of the stock market and how it works, I have decided to stick with low-cost, index-based mutual funds and ETFs. I read several books and websites about investing. Right now, I am working to build up the funds in my retirement accounts and I am ‘keeping things simple’. Perhaps, one day, I will broaden my basket of investments, but for now, I am satisfied with the mutual funds and ETFs that I own.
  4. Learn more about college savings options.
    • My wife and I have two children (with a third on the way) and I am working very hard to fully-fund three Education Savings Accounts. I am also learning more about 529 plans and other options for college funding.
  5. Create a will and other end of life documents to ensure the safety and security of my wife and kids, should something happen to me.
    • I have a will and my wife does, too. I still need to work on some other end-of-life documents and learn more about this particular subject.
  6. Increase term life insurance coverage to an amount that will adequately support my wife and kids, should something happen to me. Do the same for my wife, should something happen to her.
    • My wife and I both have term life coverage – but we need to increase our coverage amount. At present, we both have about 6 times our annual income in term life coverage, but we would like to have about 12 times. I will revisit this issue next October, when our policies are due to be updated.
  7. Organize my financial documents. Create a system that I will actually use.
    • I have created my own, very simple, system for organizing and storing my documents. I still need to invest in a safe / safe-deposit box. For now, I keep copies of important documents in two locations.
  8. Create and maintain and easy-to-use financial inventory for my spouse.
  9. Learn more about taxes and how to minimize my tax liability.
    • I have yet to understand our arcane tax system, but I have learned that I can reduce my tax burden by increasing my pre-tax retirement contributions. Also, I have done my very best to understand effective tax rates.
  10. Find creative ways to earn extra income and become financial independent.
    • I have figured out how to monetize my various websites, I enjoy selling items for profit, and I am working hard to make myself an irreplaceable worker. Every day, I move towards financial independence, and every day, I am reminded of both how far I have come and how far I have to go!

Clearly, this isn’t an exhaustive list, but its the list that I’m working through at this time. I want to encourage you to create a list of your own. If you can’t think of your own list – that’s cool – use mine!

If you have steps / goals that I haven’t listed, feel free to leave a comment and share. Combining our knowledge and dreams, we all move forward.

20 thoughts on “10 Things To Do After You Get Out Of Debt

  1. Great list of goals NCN. Just wanted to let you know that the options we use for our documents is a safe deposit box at the bank, as well as a Sentry fireproof safe. We done a little research and got ours for under $200. It has both a key and combination lock, and can withstand up to one hour at 3000 degrees Fahrenheit.

    Looking forward to hearing about your progress!

  2. This is very relevant for me, since the only thing I am waiting on to do an official “I’m debt FREE! (except the house)” scream is for the credit union to process our last ever consumer debt payment. I think you have a very good list here, NCN 🙂 For us, the next step is the big honkin’ emergency fund: I want one big enough to cover the central heat/air unit for my house, which is almost as old as my hubby!

  3. I think a good one would be: save for something great to DO, as a reward for getting out of debt. Like traveling to Europe etc…something its impossible to do if you are heavily in debt

  4. Good list. I second creating a living trust, thus not having to deal with probate. I also agree with the safe deposit box AND fireproof safe.
    One other thing to add is to send a copy of all your most important documents (including medical) to a another geographic location. Having lived in earthquake country, I can’t tell you how devastating a natural disaster can be; who’s to say your bank/home will still be standing? Additionally, if you have young children, having arrangements for custody -again with someone outside your area- can make the worse case scenario a little less scary.

  5. I think Dave Ramsey’s Investment Philosophy ties in well with your post. Basically his recommendations of what to do and not to do with your money after getting out of debt and the reasoning behind it.

    Some things to consider: the purpose of your term life insurance is to allow your survivors to exist on the interest that the amount is drawing. Dave indicates 8x-10x your annual salary is a good range to shoot for, as it’s not hard for mutual funds to reach that on average (i.e. drawing 8%-10%). Of course more doesn’t hurt, assuming you die, but if you don’t, you’re paying a bit more for the excess. In addition, by the time your term ends, you should have enough saved up to live off of the interest of those savings.

    He also doesn’t like ETFs, because they don’t spread the risk around like mutual funds do.

  6. I like Dave – but I think he oversimplifies a few things. I have three kids and I want the additional life insurance and I think Dave underestimates the amount we should be contributing to our retirement plans.

  7. Well just wanted to point out that not all debt is bad. There is good and then there is bad debt. Good debt is what I have. My student loans are consolidated at a fixed 2.25% interest rate (I locked in during 2003/2004 when rates were lowest) and my revolving credit card debt are quite manageable as well. Despite having technical debt, I still feel free and live without much worry.

  8. Love the list. I’m thinking that in about 24 months, all but the house will be paid for. What a relief, but then the house is next. And no comments about keeping the mortgage please, I want it gone as well!

  9. Good list. The only thing that I would add is that if you are a single person, you need to let someone you trust know where they could find your financial documents and information if you become incapacitated.

  10. Nice list. I had a remark on the investment items — one thing you can do if you’re not yet in a position to have investments beyond your savings (like me; I’m still building up my emergency fund, which will probably take me most of the rest of this year to do, so my non-retirement investments are nonexistent at this point) is pretend you are. I have researched and picked out a number of ETFs and have a pretend portfolio to see how well I do over this interim period. Once I have money to play investor with, I hope I’ll have a better idea of which ones I would choose to go with.

  11. Great post… I think each point is so on the money. Although have been here before, found this article through StumbleUpon and will begin subscribing today.

    Looking forward to the updates…

  12. This is my first time here, but what a nice post to give the rest of us inspiration to become debt free.

  13. hi NCN!

    Loved this podcast and going to use the Organizational tips and Inventory Worksheet tonight.

    Gotta also look at the “I will make you thin” Keep up the great progress!

    Also wish you and your wife the best with the upcoming birth of your new addition to the family 🙂

  14. Thanks for this very informative post. This is a nice blog and will be looking forward to read more from you.

Comments are closed.