If you are currently on your way to becoming debt free you are probably very excited about the day that your personal debts will be at zero. If you have spent months and years allocating a percentage of each paycheck towards your debt repayment you are probably looking forward to having some extra money each month. The truth is that being debt free provides financial freedom because it allows you to use your money however you want to instead of being forced to use it towards debt repayments.
I for one look very forward to the day that I become debt free (which will be very soon) because it means that I can use my money for other things instead of paying off my debts. I plan to build up my emergency savings fund, buy one piece of new clothing with each paycheck and take a week vacation at least once a year. Now that I am on my way to becoming debt free I have the financial freedom to start enjoying my money without being burdened by debt.
If you are on your way to becoming debt free what are you going to do with your extra income?
Spend It. This is probably the most obvious choice for many people; but keep in mind that this may be how you got into debt in the first place. If you have an extra $300 of income per month after you become debt free you may be tempted to spend it all since you have been living on a strict debt repayment budget for so long. Try to avoid the temptation of spending by giving yourself an allowance. Use 30% of your newfound financial freedom towards personal spending or upgrades (such as the new TV have you have your eye on) and save the other 70%.
Save It. Saving money is always a good way to use your extra income because it helps achieve your financial goals. If you want to buy a home, a new car or go on a vacation the only way that you can do all of these things is by saving money. If you want to eventually retire some day you will have to save money. Saving money also provides financial freedom because it gives you a security blanket of savings in case you have an emergency. It also gives you the freedom to call sick into work one day and not worry about the loss of a day’s pay. Saving a portion of your extra income is definitely a good idea.
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Donate It. If you have been focused on paying off your debts you probably haven’t had any extra income to donate to your favourite good causes. But now that you are on your way to becoming debt free you have the financial freedom to help out others who are less fortunate. Donating a portion of your income towards a good cause such as The Children’s Hospital, breast cancer research or World Wildlife Fund helps others and it also gives you a tax deduction at the end of the year. It’s definitely a win-win scenario. If you prefer donating your time towards a good cause becoming debt free can also give you the chance to do so because you won’t have to work so much in order to get your debts paid off as quickly as possible.
The goal of becoming debt free will taste sweet. So make sure you’re prepared to handle your success in a manner that preserves your long term goals and continues your progress into the future.
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