Though it may not seem like it, settling your debts was a big step into getting your finances back on track. Remember, you decided to go through with debt settlement because your debts were likely wreaking havoc on your finances. By taking steps to get debt free, you also took a huge step in getting your finances in better shape. Now there’s a little more work you should do.
Resume contributions to your retirement plan. If you stopped your automatic 401(k) deductions so you could save up for debt settlement sooner, contact your human resources department to find out what you need to do to restart these contributions. Saving up for retirement is important since you want to make sure you have enough money to survive when you decide to stop working.
Create an emergency fund. An emergency fund can be critical to keeping yourself out of debt. Lots of people end up in debt because they had an unexpected emergency and didn’t have the liquid assets available to pay for it. Start putting money in an emergency fund every month until you’ve accumulated about six months of living expenses. It may take several months or even years to build the ideal emergency fund and that’s ok. Even smaller emergency funds could come in handy when you need to pay an insurance deductible or cover a medical bill.
Update your budget. If you don’t already have a budget, create one now. In fact, you can do this long before you ever start debt settlement to figure out how to make the most of your money. Your budget should reflect that you’re no longer setting aside money for settlement each month. It should also account for the money that’s going into your retirement fund and your emergency savings account.
Rebuild your credit. Don’t procrastinate on your credit repair; get started right away. One of the first things you should do is order your credit reports to make sure the settlements are being reported correctly. The accounts should at least say that they’ve been settled and should all have a $0 balance. Contact your creditors if your credit report doesn’t show the settlement accurately.
Avoid getting into credit card debt again. Rebuilding your credit will probably require you to use your credit cards. As you make credit card purchases, keep in mind that you’re not using your credit cards to buy things that you want, but to repair your credit. Only charge what you can afford to pay off and make sure you pay off your credit card balance every month. Only open one or two credit cards and keep the balances at $0.
Pay off the debt you have left. You probably didn’t settle all your debts. Chances are you may have some loans that you’re still paying, like a mortgage, student loan, or auto loan. Use your budget to figure out what you can spend toward paying off these debts. Check your loan paperwork to make sure there aren’t any prepayment penalties.