By Taylor J Kovar, CEO – Kovar Capital 

–Hi Taylor – So, I’m about to pay off the last of my credit card balances, and I know I should be excited, but I’m mostly afraid. How do I make sure I don’t fall back into debt? – Ivy

–Hey Ivy – It’s good to be cautious of debt, but you shouldn’t be afraid. You’ve proven to yourself you have control over your finances, so now you just need to use the same habits that helped you eliminate those outstanding balances. If you keep spending wisely, debt won’t even enter into the conversation.

  1. Maintain the same budget.The first and worst decision some people make after paying off debt is to change spending habits. Now that you aren’t putting money toward credit cards, you have a bunch of cash to use however you like. While you do have more money than when you were getting hammered by interest each month, frivolous spending is what got you into the debt problem in the first place. Instead of spending, lean on saving. Invest, think about buying property, and make sure your emergency fund is stocked. You can break out of a spending freeze and feel a little more comfortable, but going from significant debt to a brand new car lease is a bad idea.
  2. Plan for credit card swiping. It’s good to have credit cards, but only if you can trust yourself. When you use credit as though it were debit, meaning you only charge if you have enough in your checking account to cover the expense, you’ll earn rewards and end up saving money via cash back and travel rewards. However, the moment you disassociate credit spending from the rest of your finances, you’ll head back down a dangerous path. If it helps, only use your credit card for one specific category, like groceries or gas. You should also make sure you only keep one or two cards in your wallet so you don’t feel tempted.
  3. Stay focused on the future.You got out of debt because you kept your eyes on the prize. You’re not doing anything different now, it’s just that the prize has changed. Instead of hitting zero on your Visa, you now want to hit maximum IRA contributions or get enough saved up to buy a car with cash. As long as you keep playing the long game, you won’t cave on extravagant purchases like you used to. As someone who climbed out of debt myself, I was never really concerned about falling back into that trap. Financial freedom feels way too good, and I was always focused on how I could make that feeling last forever.

Stay diligent in your spending, Ivy, but don’t worry too much. As long as you set good goals and stick to them, your financial situation will continue to improve.