3 smart ways to spend your money when you finish paying off your student loans

• Paying off your student loans is a major milestone, and it might leave you with room in your budget to shift your priorities.
• If you don't already have an emergency fund, prioritize your savings to make one or bulk up what you have.
• If you have that, investing for the future and saving for retirement may also be a smart move.
• Or, consider putting money towards things you enjoy or want to pursue, like a small business, or investments that can help you create extra cash flow.

Paying off student loan debt is a major milestone — it means you put in years of work and budgeting. And once it's gone, you'll find yourself with a budget that suddenly has a few dollars left over each month.

For many people, getting out of debt is a pivotal moment, and it's also a chance to invest in yourself.

Says Mykail James, a financial expert and educator and founder of The Boujie Budgeter, "Now that you've paid off your debt, you have created more opportunity for yourself. So what does that look like? Does it look like traveling more? Investing in a small business? It's so many different possibilities."

Here are a few ways to harness the extra cash in your budget each month.

1. Finish topping off your emergency fund

By the time you pay off your student loans, you'll hopefully have an emergency fund. Generally, James suggests having one before prioritizing student loans. "Emergency fund [building] and student loan payments should be happening either at the same time or before you heavily pay off student loans," she says.

But, if you don't have one yet, or don't have a full six months' worth of expenses saved, topping it off is an essential move before taking on a risk like investing.

2. Start building wealth with a retirement account

Whether you're 25 or 45, saving for retirement is essential. And with some freed-up cash, putting that money towards your retirement savings could be a smart move long term.

Retirement savings grow with time, and the more you save now, the less you'll have to save later. Increasing your contribution to your workplace's 401(k) or saving in an IRA could be wise.

3. Start investing outside of your retirement account

James also recommends investing outside of retirement accounts with the money you would have put toward your student loans. "I'm always a fan of saying, 'Now that debt is gone, let's move into some wealth-building, cash-generating investments,'" she says.

Most of the time, this means investing in stocks that pay dividends. "If that means getting heavier into the stock market, that can be your thing," she says.

Paying off student loans can also be a time to invest in businesses or causes you care about outside of the stock market, James says. It can free up cash to start your own small business, or cash for investing in real estate.

"Move that money from those payments into something that is going to provide extra cash flow, or take that money and invest it into something that brings you peace," she says. "That can be your next step: create that next level of financial freedom."

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