You’ve come so far! (Don’t stop now.)

If you have paid off or are about to pay off all your medium-interest debt (with the possible exception of medium-interest but long-term debt, like a home mortgage), you may not realize it but you are on the cusp of making huge strides to improving your financial health. But you have to continue the habits that brought you to this point in the first place.

One of the hardest parts of personal finance is staying away from lifestyle inflation. Sometimes this can happen when you get a new higher paying job or a raise. Before you know it, you’re eating out more and have slightly nicer clothes but your financial health is no better than it was before your new job or raise.

A little bit of extra spending after paying off debts may be fine. But be conscious of lifestyle inflation that prevents you from meeting your longer-term goals.

A similar thing can happen when you pay off your medium-interest debt. All of the sudden you have extra money each month that you’re not using to pay a lender. It’s tempting to think, “I paid off my debts! Now it’s time to have some fun.” And you know what, you’re right! You did work really hard to pay these debts off and you do deserve to celebrate that. We’d just encourage you to do it within reason and do it consciously. 

Make Your Plan

So take a moment and make your plan. How will you celebrate your accomplishment? Will it be to take one, two, or three months of equivalent debt payments and treat yourself to a nice night on the town, a new piece of athletic gear or clothing, or even a mini vacation? Or will you simply take a portion of what you used to pay toward debt, maybe 25% or even 50% and use it to improve your day to day life going forward? This might mean a few more luxuries with eating out or even moving to a nicer apartment. 

Ultimately, the choice is yours and only you can decide what feels right for you. But don’t forget about your medium and long-term goals like increasing your emergency fund, saving for retirement, future life events like a wedding, having children, buying a new car etc. 

Remember

The less you use your newly available “extra” money to increase the costs of your life today, the more you can set yourself up for a future of true financial abundance tomorrow. Because when it comes to things like investing, taking advantage of compound interest, or putting money away for future expenses, the best time to start saving was yesterday. But the next best time is right now. It’s up to you to strike the right balance between living for today, and setting yourself up for tomorrow’s success.