If you find that you have paid off all of your debts, let me say this — CONGRATULATIONS!!! So, does that mean you are done? Nope – not even close!!!
Next up on your financial makeover is to build up your emergency savings. A few years ago, it was believed that if you had at least 3 months of income in the bank you would be OK. As the economy has changed, so has the way of thinking when it comes to savings. It is really important to have at least 6 months of income saved. I know that may sound like a lot of money, but just look at the debt you paid off and you thought that was impossible!
Just keep living like you are working your way out of debt. However, instead of sending the money to someone else each month, just deposit that into your bank account. One great idea is to set up 2 savings accounts. One is for your liquid savings (where you put money that we are saving for annual expenses, holidays, etc). Set up another which is strictly your emergency fund. This actually separates the money and can make it simpler to track. Not only that, you won’t ever dip into it – unless you truly need to!
The worst thing you can do to yourself is to have worked hard to get out of debt, and then to have an emergency come up which forces you right back where you started from. With careful planning now, you can avoid lots financial stress later!
(I am not a financial advisor and the information listed within these posts is not to be construed a financial advice. Financial concerns/issues should be addressed with a professional in order to receive advice and assistance.)