Be Smart With Your Money After Paying Off Credit Card Debt

There are no words to describe how amazing making the last payment on your credit card debt feels. For many, the road to paying off credit card debt is long, bumpy, and stressful.

You were stuck making high monthly payments. Now, you have an extra couple hundred dollars left at the end of the month. It can be tempting to splurge, but it’s not the smartest move. Here’s what you should do first.

Pay Off Other Debts

Rather than spend the extra money, you can use it to put towards payments on other interest-bearing debts like car loans, student loans, or home mortgages.

A great strategy is to start with the smallest amount debt owed, getting that paid off first, and then “snowballing” onto the next lower amount. With each loan that's paid off, more money remains to pay toward the next loan.

Start An Emergency Fund

Be well prepared for unplanned expenses, like car repairs, job losses, or medical bills. It’s generally recommended to have roughly six months of expenses in the bank. You can easily set up a second savings account for emergency purposes only. Consider setting up your direct deposit so that a certain percentage of your paycheck is deposited right into your emergency savings.

Cover Your Assets

Once you have an emergency fund, you should better cover your assets with better insurance coverage. It's recommended to reassess insurance coverages and premiums on a regular basis. Make sure you have top-notch homeowners insurance and good auto insurance for the price. By shopping rates and deductibles, a slightly higher premium can often lead to more coverage down the road if needed.

Invest

If you’ve saved and insured your belongings, think about investing that money. The first thing you should do is invest in your future. If your employer offers a 401(k) and match program, open on and start contributing now. If not, consider opening an Individual Retirement Account (IRA) or Roth IRA.

If you’re looking to invest further, consider checking out the best online brokerages, micro investing apps, and more.

Paying off credit card debt is the first step to embracing your financial future. You can continue to make your money work for you by paying off other outstanding debts, saving, and investing in your future.