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Fantastic Ways to Spend the Money you Used to Get Out of Debt

Chris Gottschalk

Chris Gottschalk About The Author

Dec 20, 2022 4:45:00 AM

Congratulations! It’s taken some time and sacrifice, but you’ve finally paid off your debts. It might be because you used the snowball method to pay off one debt and move onto the next or because you got a debt consolidation loan.

Regardless of how you got yourself out of debt, the result is the same: you now have some extra money in your budget that you were using to pay your IOUs. What can you do with that money, outside of treat yourself to something now that you’re debt free?

Take your first step to getting out of debt! 

Get OrganizedInvest in Your Emergency Fund

Emergency fund in a jarf you’ve been prioritizing paying off your debts, you might not have been putting as much money towards your emergency fund as you might have otherwise. Now is the time to rectify that situation. Use the money you were putting toward your debts to build up your emergency fund, in addition to any money you’re currently saving.

Building up your emergency fund won’t just help you get through emergencies. It will also mean you don’t have to rely on credit cards or loans, which will keep you from falling in debt again.

Build Up Your Retirement Fund With the Money

Another area you might have held off on while paying your debts is your retirement fund, and this is another place to which you can channel the money you were putting toward your debts. While putting your money in an IRA or Roth IRA is always a smart move, you should check to see whether or not your employer has a 401(k) retirement plan or something similar, like a 403(b) .

These plans let you put pre-tax money into your retirement fund, which will actually lower your tax bill. If that weren’t enough reason to put money in them, many employers will also have a matching program, where they will match your 401(k) contributions up to a certain amount.

No matter where you decide to keep your retirement fund, though, you’ll want to make consistent contributions to it. While your employer will automatically deduct your 401(k) contribution from your paycheck, you may want to use Direct Deposit to automatically send money from your paycheck to a savings account you have dedicated to funding an IRA.

Got questions about saving for retirement? Ask us!

Get Some Help

Use the Debt Money to Save for a Big-Ticket Item

Travel goals from a suitcaseIf you’ve been funding both your emergency fund and retirement fund while you’ve been paying off your debts, you could use the money to save for a major purchase instead. This is an especially good idea if you’ve been holding off on a big-ticket item while paying for your debt. 

  • Some big-ticket items are: 
  • Traveling internationally
  • Appliances
  • Home improvement projects
  • New furniture

Step up Your Insurance Coverage

Okay, increasing your insurance coverage is far from the most exciting use of extra money. However, if you’ve been getting by with minimal coverage while you’ve been paying off your debts, now is the time to start looking for a more comprehensive auto insurance plan, homeowners or renters insurance plan and even life insurance.

While you’re looking for insurance plans, make sure you get quotes from multiple companies. Also, make sure you know what kind of deductible you’re getting, as well as the amount the insurance policy will cover.

Pay off Your Debts With First Alliance Credit Union

Once you’ve paid off your debts, you get to figure out what to do with the money you used to pay off your IOUs each month. You could use it to build up your emergency fund, add to your retirement or just get a big-ticket purchase you’d been putting off while you paid your debts.

If you’d like help paying off your debts, become a First Alliance Credit Union member today. We have guides that will help you pay off debts, and you can also apply for a debt consolidation loan to reduce your monthly payments to one, and probably save money on interest in the process. Once you’ve paid off your debt, you can use our SMART goal packet to save up for that big-ticket item you’ve always wanted.

We do our best to provide helpful information but we cannot guarantee the accuracy or completeness of the information presented in the article, under no circumstance does the information provided constitute legal advice. You are responsible for independently verifying the information if you intend to use it in any way. Additionally, the content is not intended to be reflective of First Alliance Credit Union’s products or services, for accurate and complete details about our product and service information you must speak to an advisor at First Alliance Credit Union.