Nothing will feel quite as satisfying as making that last repayment – perhaps second only getting into a bed with freshly-washed sheets after a shower, or the first sip of an ice cold can of coke on an excruciatingly hot day.
Regardless, you’ve set a goal for yourself and you’ve met that goal. It’s taken time and effort and a few tears and having to say no to things you’ve wanted. That hard work has, quite literally, paid off. And doesn’t it feel good? You’re debt free.
So, now the goal posts have changed. What do you do with the extra income that you’ve previously had to use paying off your credit card debts? In this article we look at:
Different ways to save
Planning for the future with P2P
Making the most of your money
Different Strategies To Save
You’ve spent time learning good spending habits and creating a lifestyle that allows you to live within your means, and there’s no reason to abandon that – as tempting as that may be.
Now you’ve become debt free, it’s easy to slip into old spending habits. So remember the feeling of becoming debt free. Hold onto it. Don’t let the now disposable income you’ve freed up by paying off your credit card debts disappear as you scale up your spending.
Set yourself a new goal. This time, make it a savings goal. ‘By X date I want to have X amount in savings.’ Then use those good habits you’ve acquired and adapt your lifestyle in order to exceed that goal.
There are different saving strategies to determine how much you should be putting away every month.
The most obvious is to transfer the same amount you were using to pay off your credit card debts into savings instead. This way, you won’t notice any changes in quality of life.
Many people argue that 20% of your income should go into savings – following the 50/30/20 rule. Saving around 10-20% of your monthly income appears to be the most common rule of thumb, but remember it has to suit your lifestyle.
Saving can be flexible.
Realistically, you’re not going to have the same amount of outgoings every month (let’s not talk about Christmas just yet).
Some months you may be a little more flush with cash. Some months it just won’t happen. Make sure to save when you can to account for those months where things are a bit too tight for comfort.
Planning For The Future With P2P
If you want to go even further, it’s worth looking at investment opportunities to make your money work for you. Creating a source of passive income is a good way to make sure that you don’t slip back into credit card debt and build on the money you’re saving. Peer to peer lending, otherwise known as P2P lending, can be an effective way of doing this. Explore the definition of P2P .
A peer-to-peer investment offers you attractive return rates in comparison to traditional investment opportunities. Savings accounts, Cash ISAs and other traditional investments with leading banks offer around 1-2% return rate. At Leap, we offer up to 5% return rates over 1-5 years. As with all investments, your capital is at risk with P2P. See Investing risks.
So, if you were to invest £1000 with the Leap P2P platform for 3 years fixed term, it is projected that you would make a total earning of £1077.12. This final amount can then be re-invested or withdrawn as suited to you.
What if you could earn this additional income tax-free? Say hello to the Innovative Investment ISA.
The Innovative Finance ISA, also known as IFISA, is a way for you to invest up to £20,000 as part of your annual ISA investment allowance, whilst still benefiting from the high-returns of a peer to peer platform.
Remember how it felt to pay off your credit card debts? Imagine how freeing it will feel to have your savings making tax-free money on your behalf. Do remember to check out the risks (link) of P2P lending to make sure it’s right for you!
We’ll be launching our innovative finance ISA very soon, so drop us your email to be the first to know.
What To Do Now You’ve Paid Off Your Credit Card? Key Take Aways
Remember how good it felt to pay off your debts as an incentive to keep on track.
Use the money you were using to pay off your credit card debts to build your savings instead.
Look at different investment opportunities to make the most of your savings and create a passive income source.
Invest in peer to peer lending to get up to 5% return on your savings so you can continue on your path of financial freedom.