After you pay off all your debt there is a feeling of relief, a feeling of freedom, and a feeling of emptiness (at first). You’ve spent all that time with one goal – getting out of debt. You pool all your resources, sacrifice your time, some relationships, enjoying some of the “normal” things in life to get to the point where you owe no one anything. After everything is paid off and you breathe that sigh of relief, you wonder, what’s next. The thing is, there’s always more to do because life is a journey.
If you’ve gone through Financial Peace University you know What’s Next. If you haven’t gone through the course, let me recap for you.
FPU Baby Steps:
- Save $1000 for your Emergency Fund
- Pay off all your debt using the debt snowball, not including your house if you have one
- Save 3-6 months of expenses to have a fully funded emergency fund
- Invest 15% of your household income (Gross, not Net) to retirement funds
- Save for your children’s college fund
- Pay off your house early – Dave recommends a 15-year mortgage, with 10%-20% down, that is no more than 25% of your take home pay
- Build wealth and give
After becoming debt free our next goal was to complete a 6 month emergency fund. Our next focus was saving for big expenses which were trips we had planned to take when we became debt free to: Florida – May 2018, Barcelona – July 2018 and Jamaica – August 2018 along with a trip to New Jersey – October 2018 while also saving for a trip to Florida for Mr. HutchLife’s sister’s wedding – January 2018. We wanted to make sure we didn’t end up back in debt with the big trips coming up and planned accordingly. I’ll share more details on the trips in the next post. That was much of our focus for a lot of 2018.
We each also purchased Life Insurance outside of what our jobs offered that is the equivalent of 10x our annual pay. We wrote our wills and had them notarized. Now that Baby HutchLife is here we recently updated our wills and had them notarized.
Now in 2019 our focus is Baby Step 4. In 2018, thanks for company match we were saving a total of 24% of our gross income so it wasn’t a concern and still isn’t. However, we are now going to save 15% of our gross income outside of company match and look into Roth IRAs, mutual funds and index funds. We also want to have 12 months of expenses in our emergency fund, so we have to add another 6 months. It’s quite evident that the economy is going to take a downturn and this Government Shutdown was a reminder to be prepared for a rainy day, because it will rain.
While on your debt free journey it is important not just to focus on paying off your debt but focus on what your dreams are, what you want to accomplish and how becoming debt free will get you there. The freedom of knowing that you can decide where your money goes instead of having to throw it all at debt is freeing. The freedom of knowing that you don’t have to stay in a job that makes you unhappy because you have a fully funded emergency fund and can look for a new job is priceless. The freedom of knowing that you are building a legacy for your family is something no one can take away.
If you haven’t started your journey to debt freedom, get started. It’s never too late, but starting earlier than later has its benefits.
What legacy do you want to build and leave? What are your goals and dreams and how will being debt free help you get there?
