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You’ve Paid Off Your Debt, Now What?

Written by
Edward Jones logoEdward Jones
• Published August 8, 2025 • Updated August 8, 2025
You’ve Paid Off Your Debt, Now What?

Quick Facts

What is the opportunity after paying off debt?
Paying off debt is an opportunity to improve financial areas, such as enhancing savings and setting new financial goals, according to Edward Jones.
How can I build wealth after debt repayment?
Increase contributions to an IRA or 401(k) for tax advantages and compound savings, suggests the article.
How much emergency savings is recommended?
Edward Jones advises three to six months of living expenses for workers, and up to three months for retirees with additional income.
Why prioritize new financial goals post-debt?
Prioritizing goals ensures your disposable income is used intentionally to achieve what matters most, enhancing financial success.
Where to learn more about budgeting effectively?
Visit Edward Jones' website for guidance on building a budget that aligns with your new financial goals and keeps you on track.
What should I do with the money I was paying toward debt?
Once you've paid off debt, redirect those monthly payments toward building financial security. You can boost your emergency savings fund, increase retirement contributions, or work toward new financial goals like saving for a home or major purchase. The key is having a plan so the money doesn't get spent on unnecessary expenses.
How do I know if I'm financially ready to stop paying off debt and focus on other goals?
You're ready to shift focus when you've eliminated high-interest-rate debts like credit cards and personal loans. At that point, you can use your freed-up cash flow to strengthen your emergency fund, boost retirement savings, or tackle other financial priorities. Consider talking to a financial advisor to create a personalized plan.
What's the best way to avoid going back into debt after paying it off?
Building a solid emergency fund is one of the best ways to stay debt-free. By setting aside three to six months of living expenses (or up to three months if retired), you'll have a financial cushion for unexpected situations. This prevents you from relying on credit cards or loans when life throws you a curveball.
Can I really get ahead financially after paying off debt?
Absolutely. Paying off debt frees up money you can use to build real wealth. You can increase retirement savings through IRAs or 401(k) plans, which offer tax advantages and compound growth over time. Many people find that the discipline they developed while paying off debt helps them stay committed to new financial goals.
What should I actually do with the extra money after I finish paying off debt?
Once you've paid off debt, you have several smart options for that extra money. You can boost your emergency savings to cover 3-6 months of living expenses, increase retirement contributions to an IRA or 401(k), or set new financial goals like saving for a home or vacation. The key is being intentional about where the money goes so you don't slip back into old spending habits. Many people find it helpful to redirect their old debt payment amount directly into one of these new financial priorities.

Edward Jones creative contentDid you just complete a big debt payment? Whether you paid off student loans, credit card debt or another debt, you’ve reached a financial milestone that’s worth celebrating.

But what comes next? If you don’t have other high-interest-rate debts, there are several ways to use your new financial freedom to set yourself up for even more success. Consider these tips to get started.

Bolster your emergency savings fund

Now that you’ve climbed out of debt, give yourself the wiggle room to stay out. You never know what life may throw at you, but a well-funded emergency account can offer financial stability even in uncertain times.

Not sure how much to contribute to your emergency savings fund? That depends on your unique situation, but it’s considered best practice to set aside enough for three to six months’ worth of living expenses if you’re still working. If you’re retired, aim for up to three months of living expenses for emergencies and about 12 months’ worth for everyday spending, adjusted for outside sources of income like Social Security and pensions.

Build wealth after paying off debt

With debt payments in the rearview mirror, now is a good time to set yourself up for the future. Build your retirement savings by increasing your contributions to an Individual Retirement Account (IRA) or your company 401(k) plan, both of which offer potential tax advantages and long-term compound savings. Worried about contributing to an employer-sponsored plan? Know that even if you change jobs or retire, you can take that money with you.

Identify new financial goals

Though you’ve taken a big burden off your plate, you probably still have other financial objectives to shoot for, such as making home improvements, preparing for a move or saving for your child’s education.

Identify and prioritize these objectives so you know where and when to allocate your newfound disposable income. This will help ensure that you use your money intentionally to achieve the goals that are most important to you.

Once you’ve identified your new financial goals, you can build a budget that helps keep you on track to achieve them.Edward Jones creative content

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