debt free living

How to Recover After Debt

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Being in debt is not great.  It’s stressful, it’s emotional and very often money troubles affect other areas of your life such as your relationship and your health.  Getting into debt is easy and getting out of debt is hard – but what happens next?

So often we hear and read about how to improve your credit score and how to get out of debt.  But how can you rebuild your life after debt?

Here are four ways to rebuild your credit worthiness and get your life back after becoming debt free:

Don’t be afraid to spend

If you’ve ever been broke you know what it’s like and probably don’t ever want to go back.  I know I don’t.  If you’ve spent the last few years spending every single dollar you had on repaying your debt you may not even remember what it’s like to spend money on yourself.  If you’re now living debt free you may be terribly afraid to spend money again in fear of falling back into old bad habits.

It’s O.K. to not want to get back into debt, but don’t be afraid to spend.  Now that you’re debt free you probably have extra money each month to put towards savings.  Just remember that it’s O.K. to spend a little on yourself.

Set limits for yourself

By no means am I suggesting you go on spending sprees each month.  However giving yourself a monthly fun money budget is perfectly acceptable.  You work hard for your money and you worked very hard to pay off all your debt, so reward yourself with a set spending limit each month and buy yourself something nice.

When you give yourself a little wiggle room in your spending it makes life more enjoyable and you won’t feel so restricted or afraid of spending money.  Ease back into enjoying your money responsibly.

Apply for another credit card

Depending on how serious your money troubles were and what arrangements you made with the bank you may find yourself debt free and without a credit card.  Living without debt is better for your credit score than having several high outstanding credit card balances, however not having any open credit is actually hurting your credit score.

Having a credit card, using it every month and paying it off in full is how you are going to rebuild your credit score.  Don’t be shocked if banks offer you a credit card with a low limit, ask for a security deposit to secure the card or offer you above average interest rates.  This is all normal until you prove you’re responsible.  Accept the credit card with a low limit and use it wisely – you don’t want a high limit credit card anyways because it can lead to temptation.

Always remember your past

Although I am very happy where I currently am in my financial life I often think about my debt years.  My entire life was out of control and full of unstable emotions.  It wasn’t a pleasant time and remembering it helps keep me disciplined because I don’t want to go back to living in a world full of debt.

The good thing about making mistakes when we’re young is that we can correct them and learn not to make the same mistakes again.

Photo from Pixabay

 

About the author

TK

TK is a Certified Financial Planner with over 15 years of experience in the banking industry. She started blogging in 2009 after the market crash. TK enjoys helping people plan their retirement, pay off debt, invest wisely, live on a budget and enjoy happy financial lives. You can see what she's up to on Twitter @TahnyaKristina.

1 Comment

  • Great article. You made some very valid points of making the transition from being deep in debt and now being debt free and some of the psychological side affects it can cause. I can only imagine how tough it would be for some to spend money on themselves or for them to invest in their future. I like the idea of setting a limit to help them feel like they have control and won’t end up back into debt. Setting limits gives the ability to know how much money is available and where it is going.

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