My Journey out of Debt

Featured customers currently enrolled in a CareOne Debt Relief Plan, share journey to become debt-free; hear how they juggle family, finances, and more.

You're Debt Free, Now What?

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You're Debt Free, Now What?Your final payment has been made, and you've contacted your CareOne representative to let them know you will be finished with your plan. 

Wow!  You are officially debt free! It's so exciting that you can hardly contain yourself.  That one payment you had been struggling to make for years is now yours - all yours. So now what?

Well, for me, I knew I needed to make some new financial goals. 

I figured since I didn't use my monthly payment for four years, I wouldn't miss it, and should start to save it. 

I watched my debt go down month by month, now it was time to watch my savings go up.  The big question was:  What should I do with my money? 

Again, I'm not a financial advisor.  However, I do work for a private club that has a few wealthy members. 

They gave me a few suggestions; you can also do your own research on the internet or read some of the financial blogs on the CareOne website. 

In the meantime, here are three basic things you can do once you've paid off your debt.

1. Increase Your Retirement Contribution or Start One:  I started a retirement fund at my job almost immediately, but wasn't putting much into it while trying to pay down my debt.  Once it was paid off, I increased my 401k contribution from 4% to 10%, and increased it again to 12%.  The great thing about a 401k is you don't really feel the deduction, as it's automatically taken from your paycheck, and most companies will match a percentage.  This is a long-term investment you'll be glad you started and it certainly falls under the "pay yourself first" motto.  Wouldn't it be great to be able to retire?

2. Add a Long-Term Savings Account:  Put at least 40% of your monthly payment into a savings account for the long term.  Do a monthly automatic transfer from your checking to your savings so you're not tempted to spend it.  Once you have a few thousand dollars, you can put it in a CD or a money market account to get a better interest rate. Imagine, a few thousand dollars that isn't debt?  Although interest rates aren't great right now, you'll make some money on your savings and will have better investment opportunities once the economy gets better.

3. Increase Your Emergency Fund:  My emergency fund was approximately $500 while in the DMP.  Since then, I have increased that fund.  My goal is to have enough to live off of for six to eight months in case I ever lose my job or I'm prevented from working due to illness, etc.  I use this same account for car repairs, unexpected bills, etc.  I do an automatic transfer to this account every month.  Although it fluctuates depending on what's going on in my life, it is growing at a steady rate.

These really are some basic suggestions to get you started.  If you have children, you should speak to a financial advisor concerning their savings or college savings.  

If you can continue to live without the monthly payment you made to CareOne, then invest it, save it, and watch your money grow! 

You are starting a whole new chapter in your financial life - one without debt!  What are your financial plans once you are debt free?

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CherylCheryl Bigos

Cheryl Bigos graduated from the DMP in 2008, and blogs as a graduate in the My Journey out of Debt blog.  She works as a Purchasing Manager in Los Angeles, teaches Pilates, and lives with her boyfriend of four years.  Cheryl is looking forward to connecting and sharing with others in the CareOne Community. Compensated CareOne Blogger.

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  • Marylin, that is a great point you are making.  For me, I'm in a high tax bracket already because I'm single, don't have children, and don't have a mortgage - at least not yet.  When I retire, I will pay a smaller percentage in taxes.  However, the exchange traded fund I've started as a long -term savings I also plan to use when I retire so I have both options.  Thanks for your comment!

    Robert, I couldn't agree more about the mortgage being paid before you retire.  Or at least be sure your mortgage is almost paid off and you haven't pulled the equity from your home recently.  Carrying debt, of course, is a lesson we have all learned.  Thanks for the comment.

  • Hello Shannon!  I was just introduced to Dave Ramsey a couple of months ago.  What's funny is, my dad has been saying those same things for years-especially the "don't ever co-sign for loan," so it's like listening to my father reiterate what I've been hearing all my life!  I haven't spent too much time on his website, but will certainly be looking at it more in the future!  Good for you on keeping an emergency fund while in school.  Every little bit helps - especially when you don't use a credit card!

    Scott you couldn't be more correct!  I teach Pilates in addition to my job and physical health appears to be less of a priority these days.  What's worse is I see more and more obese children and young adults whose life expectancy is predicted to be less than their parents.  Despite all the information concerning the benefits of being healthy, there are still people "stuck" in the vicious cycle of obesity and have no idea how much it's going to cost them in the long run.  Thanks for that important observation.

  • Would you really let a bank hold your uninsured 401k?

  • Hi Tom, I'm a bit confused on your question.  I don't have a retirement fund with a bank.  I have a 401K at work, and I've started investing in an exchange traded fund (mutual fund) as a long-term savings that I may also use as a second retirement account.  Is that what you are referring to?

  • One of the things that I did was to make money work for me. Once you do that you pick and choose where you want to have your money go. Donations, churches, projects. Congrats by the way. My plan also included to get family and friends to feel what I feel. Freedom.

  • I think the term "emergency fund" is misleading. Three months worth of expenses saved in case you get laid off or can't work might more aptly be called "cash reserves." If someone earns $25K per year and living paycheck to paycheck, it makes sense to squirrel away an "emergency fund" for unanticipated expenses like a $500 vet visit or the need to replace a blown tire. If someone earns $100K, it might make more sense to put all extra money into investments - long-term savings like mutual funds and retirement accounts -  and pay for minor "emergencies" out disposable income.

  • Thanks for the comment kiko.  Congrats to you too.  Having the freedom to do what you want with your money is just the beginning.  I've also been able to get some friends on the program, and it's working really well for them.

    Hi Barbara.  You would think that people who make more don't need an emergency fund, but I think you'd be surprised by the amount of people making six figures a year that are in debt and living pay check to pay check.  At the other end of the spectrum, there are people like one of the cleaners at my job who make very little but are not living pay check to pay check.  I've found over the years that it really doesn't matter how much you make.  If you don't know how to manage money, you're in trouble.  Of course, there are people who just don't make enough to live - especially since the recession.  But there are more of us that just don't know how to live within our means.   Thanks for the comment!

  • As someone who went through a divorce.....sexist family laws are a financial risk that most people don't consider in financial planning.  If divorce is a foreseeable risk in your future (you rarely see it coming), then make sure you build it into your plan.  Debt is a good thing in a divorce because you can split it.  Things like 401ks, are assets that can be plundered by the other person (while you pick up the tax consequences).  If you are a man and no longer debt free, I would recomend taking your new found extra income and slowly taking it out of your cash flow so that you can buy gold and hide it.  Tell no one.  Get yourself some new debt (at low interest rates).  This divorce risk management strategy should be part of your over-all portfolio

  • Sorry to hear about your divorce, Jake.  I have to say though, that more and more women are finding themselves in that same situation.  I had an aunt that was married for 33 years to a man who claimed he couldn't work and was on disability.  He went after her 401k and the house, etc.  These days, with a divorce rate still at 50%, I wouldn't get married without a pre-nup.  It may sound cold, but things change, people change, and financial situations change.  No one can predict what your relationship will be like in 5, 10, 25, even 40 years.  Pre-nups protect both parties in the long run.  Thanks for your comment.

  • For those of you with me, those who are getting closer and closer to the goal of wiping out this debt, please take a moment with me and enjoy the feeling of knowing that this day is coming.

  • People who run up their credit cards again have also failed to implement the tools and habits they used to get out of debt, or failed to solve whatever problem is driving them to overspend

  • When I signed on, I had A LOT of debt. When I learned I would not be debt free for five years, I was discouraged and thought about not doing it...then I figured out how long it would take me if I tried to do it on my own. Yikes. Now, in a blink of an

  • Once I am a debt free, I will start another debt. Life is short so why not enjoy the money now? Just spend all that money and build debt; then you will have a financial plan to clear that debt once again.

  • Debtor, do you work for a credit card company?  LOL  I don't think anyone on the program wants to be back in the place they are in right now.  :)

  • i paid my house off ten years ago this month. I had a 401(k) ROTH as did my wife.  Too complicated and who wants to wait untill 60 to retire. We bought five rental houses from 2006 to 2009.  Cashed out and paid off three.  This year we will pay off number four.  We will save 25% of the rent to pay off # five. I am still in the Army Reserve-- (retirement and GREAT health insurance as well as the GI Bill  that I can give to my kids) my wife "retired" from the blackboard jungle at age 49.

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