What Should I Do Now That I’m Done Paying Off Debt?

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Paying off DebtPaying off debt is prevalent in our society today. From those who are burdened with student loan debt to those dealing with paying down credit card balances, debt is seemingly everywhere. Having been through my own personal debt payoff journey I know firsthand the work and sacrifice that goes into becoming debt free.

The freedom that comes out of it though is great, but the problem is that little is said of what you should do after the debt is paid off.


Paying Off Debt is Good, But Focus Can Be Lost

It took me nearly five years to pay off my credit card debt and several more years to pay off my student loans. Looking back at my debt payoff days, I was committed to doing all I legally could to get the debt paid off. I sold items I didn’t use, donated plasma (a bit sketchy I know, but it was cash) and sacrificed. Those are all great ways to work at paying off debt, but there is one underlying problem in that – focus can be lost towards the overall financial picture of growing your wealth.

There is a regular debate over whether you should invest in the stock market or pay off debt first and that’s not really the point of this post, other than to point out that many take the pay off debt first option and are lost as to what to do with their money when they’re done paying off debt.

Take it from someone who went through it himself, it does happen. My encouragement to you if you’re still paying off debt and have chosen to focus on that is to educate yourself on investing now so you can hit the ground running once you’re done paying off any unsecured loans you may have as a result of the debt.

You Want to Grow Your Net Worth

Now that you’re done paying off debt, the key should be on increasing your net worth and doing so now. I realize this can be easier said than done, but it should be your focus. How can you start increasing your net worth? Of course, there are a number of way you can do this, but your activities should include some of the following:

  • Investing in the stock market
  • Making additional income on the side
  • Cutting expenses

You likely were already cutting down expenses as you were paying off debt, as well as making side income. If you were, great! The nice thing about doing it now is that it’ll have a positive impact on your net worth. Don’t just stop at these two items though, but also start investing in the stock market and better yet start building a retirement portfolio.

If you’ve not had the time to educate yourself on investing, make it simpler on yourself by investing in some solid, low-cost index funds and let them do the heavy lifting for you. Taken together, all three of these practices are a well-rounded way to help make you more money and put your focus on the future.

Your Mindset is the Key

Increasing your net worth can be easier said than done many times, but what it ultimately comes down to is changing your mindset. While paying off debt it can be easy to get sucked into the vacuum that involves doing only that. Now that you’re debt free, you need to broaden your perspective and put your eyes on the bigger picture. Growing your money isn’t going to happen overnight and it is going to take a variety of methods to realize positive net growth.

There are many things you can do to start to grow your money now, like teaching yourself something new and monetizing it, automating your saving and investing so it’s not overlooked, and giving yourself quantifiable goals to reach. That said, changing your mindset to one that’s focused on increasing net worth is likely the best and most important aspect to focus on as it’ll set you up for the success needed for long term wealth accumulation.


What wealth improving challenges did you face as you were paying off debt? What monetizable skills would you like to learn?


Photo courtesy of: Lending Memo

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  1. This is why I am a big fan of paying down debt while also saving money. Because if you are debt minded for a while, then you really do have to do a 180 once it is gone, and this transition can be difficult. I like the strategy of using the money you used to use to pay down debt, then putting that into a bank account. Once it reaches a certain level, then you start investing and letting your money work for you.
    Shannon @ Financially Blonde recently posted…5 Ways You Get Fooled Into Spending MoneyMy Profile

    • As am I Shannon. That transition can be difficult, which is why it’s so important to come up with a plan that will, at the very least, will let you hit the ground running once your debt is paid off. Hopefully you can save and grow your money while in debt, but at least have a plan to do so when out of debt.
      John recently posted…Should You Splurge on Vacations or a Nicer Home?My Profile

  2. My wife and I have never had debt, other than our mortgage. Well, my wife also had a small student loan debt, but we paid that off the month we were married. I think that people who had debt should just keep shoveling the equivalent of their debt payment into savings and investments. That’s what we did when we paid off our mortgage. When that was paid off, we revectored our $2k mortgage payment to our brokerage account. We throw any extra money after paying our monthly bills in there, as well. We did not change anything in our living condition. But $2k a month going to investments, on top of maxing our retirement contributions every year has added up to a good amount of money.
    Bryce @ Save and Conquer recently posted…Festival of Frugality #425My Profile

    • That sounds awesome Bryce! I can imagine that an extra $2k per month, on top of maxing your retirement, does add up to a price good sum. That said, I would agree, throw all that money that was going at debt and saving/investing and hopefully “you” have a plan ready to implement once at that point.
      John recently posted…Should You Splurge on Vacations or a Nicer Home?My Profile

  3. We are 1/2 debt-free! (I still have MY student loans to finish off – we paid off the hub’s student loans because it was a lower amount) We know we are capable of paying off this one debt hanging over us – we’ve had to really prioritize what our strategy should be: should we put all our money towards debt re-payment or allocate it elsewhere since it’s a very low interest rate loan with very manageable monthly payments? Ultimately, we decided we wanna be 100% debt-free so we’re going to steamroll the student loan payments. I think what makes it hard for us is that we also want to capitalize on investing and still allocate money to travel (which can be very expensive!) We’ve been able to cut that down way low because of credit card churning and travel-hacking. We’re able to travel for next to nothing. We have the opportunity to get rid of debt and still go out to see the world. It’s a win-win in our book!
    Anneli @thefrugalweds recently posted…Recipe: The Easiest Cheesiest Killer Garlic RollsMy Profile

    • That can be a hard decision to make Anneli. Ultimately, you really need to do what’s best for you and your situation, which definitely seems to be the case in your case. It can be hard to balance that with seeing saving opportunities that you’re not taking, so I’d encourage you to get your plan set now so you can hit the ground running once you kill that debt. If you do it like you have with the travel hacking then you’ll do very well. 🙂
      John recently posted…Should You Splurge on Vacations or a Nicer Home?My Profile

  4. I’m getting really close to having my non-subsidized student loans paid off. At this point, I’m trying to figure out whether or not to begin paying off my car loan or saving for a couple big academic expenses in the near future.

    Either way, the big thing for me is creating a little bit of savings. I don’t really have an emergency fund yet, and feel like investing will make me vulnerable if something goes awry.

    Thanks for this thought-provoking read.
    Sam @ Frugaling.org recently posted…This Psychological Trick Will Reduce Your Online ShoppingMy Profile

    • Congrats on being close to killing that Sam – very cool! I could see the benefit of dealing with either of those and would likely fall, not knowing the amount of either, on whatever the higher rate one would be.

      I can understand feeling leery about investing given your situation. While you may not want a true EF right now, having a buffer of savings would help if something comes up and, if not, give you something to build on once the time comes.
      John recently posted…Do You Have an Open Mind When it Comes to Your Money?My Profile

  5. Hey John and thanks for an insightful post 🙂

    I subscribe to your Making additional income on the side and Cutting expenses plan of action, but probably will never invest in the Stock Market for the simple reason that I just don’t plan to have that kind of money hanging around to play with, regardless of the risk factor.

    As a self-employed music teacher, I make enough to cover all expenses with a little extra for fun. That’s all I need and I’m happy with that. Thinking about working more to make more money so that I could invest it, is not something on my list of things to do…at the present time.

    That being said, if I did have a substantial amount of disposable income, then I might be tempted to play the Market. But for now, not gonna happen 🙂

    Take care John and all the best.

    lyle @ the Joy of Simple recently posted…You’re Not The Boss Of Me!!My Profile

  6. I think your first instinct after paying off a large debt is either to buy something new or start hoarding money. We still have a problem letting go of money and putting it into better investments than a savings account. I’m always trying to find the right balance. At least we didn’t go out and buy a boat or something!
    Kim recently posted…Better Health Equals Better Finances?My Profile

  7. My wife and I buckled down to pay off over $140k of debt in less than 3 years. We were down to a few hundred dollars after the final payoff. We’ve steadily been saving/investing since. However, we don’t save at the same rate we utilized to pay down our debt. Why? Not because we don’t want to…it’s because we now have a child with another on the way! So, the intent is there and it should be for everyone else as well once they unshackle the chains of debt. Don’t lose focus and return to your undisciplined ways!
    Mr. Utopia @ Personal Finance Utopia recently posted…A Money Mindset: Do You Have One?My Profile

  8. This is a real concern, but for me I will enjoy a little celebration the first two months I’m free. Then I will begin to add to my index funds and dividend stocks as to accelerate my financial freedom milestone.

  9. We waited about 2 months before actually planning anything out once we finished paying off our debt, and I really regret it. We wasted a lot of money on stupid things that we could have put towards growing our wealth. Sometimes you’re so focused on getting out of debt, you don’t have anything planned for when the time actually comes.
    Ryan @ Impersonal Finance recently posted…emergency fund in actionMy Profile

  10. After we paid off our debt, after all the sacrificing and everything else we decided we wouldn’t change anything about what we were doing. We simply transferred the thousands a month we were paying on debt, into our Roth IRA’s. It has been way more exciting to watch those balances go up, than when we were watching our student loan balances go down. We are advocates of keeping your lifestyle the same. You are right though, when you need to pay off debt you know exactly what you should be doing with your money. Once that responsibility is gone you need to have a good investing plan in place so that you aren’t tempted to start spending that money you were spending on debt, on ridiculous stuff. Excellent stuff.
    Jon@2-copper-coins.com recently posted…GRAND-A Legacy of GenerosityMy Profile

    • That is similar to what I did Jon. After I paid off my credit cards, I just started investing and saving the money I was paying. It does feel great to see your balances grow and your hard work paying off!

  11. For my husband and I, we expect to have all of our 3.5% and higher student loan debt paid off by mid 2015. We’re not going to worry about our 3% and lower debt as it’s not much and isn’t worth paying off early. After getting the high interest debt paid off, we’re just going to put more money into our savings as we want to save for a down payment on a house. Having a major goal in mind I think should ensure we don’t go spending crazy once we’re done with debt.
    Tara @ Streets Ahead Living recently posted…I’ve been everywhere man–how to see North America on the Cheap:My Profile

  12. I have an interesting situation. I’m 45, just now earning my degree, with unsecured debt of around $15k. I have limited savings, and only about $13k in an IRA. I’ve been focusing on paying down my debt by about $1k every two weeks, and will be done the middle of next year. Do you think this is the smart choice? I have a budget that I stick to, I have reduced expenses as much as possible, but can’t take on side jobs because I work full time and go to school part time. I am also paying cash for my education, no student loans. I am currently maxing out my IRA contributions, and plan to max out my 401K once my debt is paid off. Would it be better to focus on retirement now, and pay down debt slower? I really hate being in debt (unsecured), the though drives me crazy, so that is what I have focused on. But I realize I am way behind on retirement savings. I’ve just never had enough income to start saving until a couple of years ago when I started my IRA. Once my degree is done, I expect to increase my salary by about $15k annually, and I plan to put every cent towards retirement savings. Based on a spreadsheet I have used, if I max out my IRA and 401K (after graduation), and I can invest it at an 10% return, I will have $2.2 million saved by age 67. I feel that is adequate, but I’m not sure. I realize 10% is probably very aggressive, but based this on other blogs I have read about the typical average return in the stock market. I have invested 75% of my IRA funds in low cost stock index funds, and the other 25% in individual stocks like AIG and Coca Cola. This netted me about a 25% return over the year and a half that I have been saving, understanding this is not normal. Your thoughts?

    • Thanks for stopping by Eric and providing all that information. Not knowing your entire situation, though going off of the amount you did, it does sound you’re likely taking the best approach. If you were not maxing out your IRA, I might be inclined to say differently. That said, the important thing is that you have a plan in place and actively working towards it. Others might disagree, but having that debt paid off is going to be a huge weight off your shoulders and should allow you to start attacking saving for retirement with full force. If you had longer to getting that debt paid off I would probably say that you should divert some of the money towards extra retirement savings, but with having just a year to killing it off I think you’re likely doing the right thing by doing what you’re doing now. The one disclaimer I’d give to this though is that if you’re not currently putting money in your 401k and they offer a match I’d be inclined to put money in to get that free money available through the match and no more. In regards to the 10% return estimate, I’m more of the thought to go with an 8% assumption. That way if I get a higher return it’s a pleasant surprise but not counting on getting that extra 2%. It’s certainly possible to get 10%, but I tend to go a little lower personally. With all that being said, I’d encourage you to take this time to really go over your 401k to see what options are going to be best for you. You want to make sure you’re not going to be going into funds that are too high in fees as that’ll only eat away at your return. If your plan has little in the way of low fee funds, you can also speak with your Group Benefits area and ask them to look into that. Ultimately, use this time of paying off that debt to prepare yourself (as it sounds like you’re already doing) so you can hit the ground running come next year. Congrats on the degree and please feel free to let us know if there is any other way we can help.
      John recently posted…Barclaycard Arrival World Mastercard Review: A Great Rewards CardMy Profile

  13. My wife and I recently (October 1, 2014) paid off our mortgage and now we’re debt free. 100% out of DEBT – – We have a current NET WORTH OF ABOUT $1.211,000 (800K in investments) – -with my pension adding 5100 net dollars per month. In five years, my wife will have a pension adding another 2000 per month. In the meantime, we are BOTH still working and we net over 17K per month. I’ll be 60 years old in March and my wife will be 57 next August – – how are we doing? How does this compare to others our age?


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