Debt Free??? Now What???

You did it!  You stopped using credit, stuck to your repayment plan, and now you are out of debt.  What a great feeling!  No more credit card statements in the mail and no more monthly finance charges to pay.

For months, possibly even years, you have lived without the money you sent in for credit payments.  Now the money that once went for dept payments is disposable income.  Think about it this way:  you have earned yourself a raise equal to the amount of your monthly debt payment.

While you were in debt, saving may not have been possible and you got out of the savings habit.  Or perhaps you never developed the savings habit in the first place.  Your first debt-free month is the perfect opportunity to develop and implement a plan for savings.

Commit as much of your former debt payment as you can to savings.  The more you can save, the better.  Saving with a plan will help you to have the money you need when it is needed.

Save for your occasional expenses — things you pay for less often than monthly.  There are two types of occasional expenses, those you know about, and those you don’t know about.  The ones you know about include gifts, annual insurance payments, car tag renewals, magazine subscriptions, celebrations and dues.  List these expenses, add up the total, divide by 12 and then set that amount aside each month so you will have it when you need it.

Handling the occasional expenses you do not know about requires a different strategy.  You may not know how much you will need or what you will need it for, but chances are good that you will have an unexpected expense in the next month or two.

Experts recommend that dual-earner households keep three months living expenses in an emergency savings fund; and six months for households with only one breadwinner.  The more money you have in your emergency savings, the easier it is to handle a lay-off, medical emergency, or other financial disaster.

Save for goals, too.  Most families work toward several goals at the same time.  They might be saving for a car, college for children and to finance life after retirement.  Identify your goals, the dollar amount you need to achieve them, and the amount of time you have to save each month.  You may need to prioritize to make sure that you work the hardest towards the most important goals.

Short-term goals can be reached within the next 12 months.  Long-term goals take a year or more to achieve.  The time between now and your goal date, determines not only how much you will need to save, but also where to put the money.  For example, savings for retirement will likely go into a tax-deferred investment plan through your employer.  Many states have special funds and investments specifically for savings for a college education.

Getting out of debt is an important first step to financial freedom.  To continue down the path towards economic independence, develop the savings habit.  Identify your goals and develop plans to achieve them.  You will never be sorry you did, but you may regret that you did not.

Questions???  Call me in Columbus at 706.653.4200.

By Joanne S. Cavis, CFCS
UGA Cooperative Extension

Family and Consumer Sciences information to inspire you to save money while you engage in Life-Long-Learning . . . 


About Save a Dime on 9

Save a Dime with 9 is part of WTVM's continuing effort to reach out to the community. Our ConsumerWatch team is constantly digging for deals and information that can help you and your family stretch your dollar. There are lots of other good savings blogs and websites out there, but Save a Dime saves you time and money because we're a one stop shop. Where else can you get free tax advice, tips on couponing and even the scoop on the latest tech gadgets all in one place? The're here! So let's start our savings journey together. If you have a blog idea for us, send an email to Please include a phone number so that we can reach you, if necessary.
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