If you stick with your spending plan and keep applying the money you save to reducing your debt, there will come a time when you have no debt. The emotional burden that’s been weighing you down will be lifted. When you have no debt or low levels of debt, you can really start making your money work for you instead of against you. Instead of working to reduce your debt, you’ll be working to build your net worth. Some of these steps are for the future, but some can be part of your money plan even if you’re just starting to work on your debt.

Start a savings account

Building a savings account for emergencies is the first place to start. If you look back at the commitment you made on page 14, you’ll see that only half of the money you found in your spending plan is going toward bigger payments on your debt. The other half goes to build an emergency savings reserve. Set up an arrangement with your bank to have this amount deducted from your paycheck and added to a savings account. It’s important to move it out of your checking account and into a savings account so that you aren’t tempted to dip into it for regular monthly expenses.

As this account grows over time, you can use it as a reserve for those big unexpected expenses that would otherwise push you back into debt—car and home repairs, dental bills, taxes, and other surprises. And it will be your protection from financial disaster if your income is ever interrupted. Make it a goal to build an emergency fund that’s equal to three months of your current monthly expenses if you’re in a two-earner household, or six months of expenses if you’re the only wage-earner.

Once you’ve built a comfortable emergency fund, shift the monthly savings amount back to debt reduction. Until you’ve eliminated your high-interest debt, it doesn’t make sense to put too much money in a lower-interest savings account.

Start a retirement account

After your emergency savings account, retirement savings should probably be your next priority. You may be able to get started on this, too, while you’re still working down your debt. Tax laws are designed to encourage retirement savings. If you’re not investing in an Individual Retirement Account (IRA) on your own or a 401(k) retirement account through your employer, you’re missing out on one of the best deals going. You put money into a retirement account before income taxes are taken out of it, so a bigger chunk of your earnings goes into your account to earn interest for your retirement. If you start investing when you’re young, even modest contributions can turn into significant savings. If you put $100 a month into a retirement account that earns interest or grows in value at a rate of 9 percent a year, you’ll end up with roughly $20,000 in ten years, $65,000 in 20 years, and $185,000 in 30 years. Because the money is taken out of your paycheck before you get it, and because there are penalties for early withdrawal, retirement accounts turn out to be the one savings method that really works for most people.

Save for your next big purchase instead of relying on debt spending

Before making a big purchase (a car or a major household appliance), figure out what you can afford in monthly payments. Try making those payments into your savings account for a few months before you buy. You’ll find out if you can handle the monthly expense, and you’ll have a big down payment toward the purchase. Better yet, delay your purchase for a few more months and pay in cash.

Buy insurance to protect your family’s finances

Insurance should be an important part of your financial plan. Without it, you run the risk of facing huge expenses that could wipe out all of the gains you’ve so patiently made. And you could leave yourself or those who depend on you in financial ruin if something unforeseen were to happen. Here are some things to consider when looking at insurance:

• Health care is extremely expensive and is the cause of many bankruptcies for those without adequate insurance. Be sure you have health insurance that covers unforeseen physical and mental health needs for you and your dependents.

• Life insurance protects your family from the loss of your income if you were to die. Look for term life insurance (which is far less expensive than whole life insurance) and buy enough coverage to pay for your funeral and to cover your survivors’ living expenses for three to five years.

• Buy disability insurance. Statistically, we are more likely to become disabled during our working careers than we are to die before we retire. And a disability can be very costly to you and your family. Not only is your income reduced, but you may incur higher medical and living costs, as well. Consider the percent of your income (60 or 70 percent) that the policy will cover. But also look at how it defines a disability. Some policies make it very difficult for a person to qualify as disabled.

• Buy automobile, homeowner’s, and umbrella liability insurance appropriate to your family’s situation ($100,000 per injury, $300,000 per accident, and $50,000 in property damage is the minimum automobile coverage most people should consider). Don’t assume that the minimum required by your state or the most basic policy offered will be enough for you.

Buy your own home

Buying your own home turns housing from an expense into an asset. Instead of being at the mercy of rent increases over time, your costs will stay flat or decrease as you pay down your mortgage. Mortgage interest and property taxes are tax deductible, which makes the cost of home ownership more affordable. And if property values increase, you’ll own a growing asset.