So you have settled your debts and sent creditors back to their home after a series of negotiations months after months. Whew! A big relief! No more annoying collection calls and letters. You can go back to bed and start dreaming about a happy financial life now.

But before you go back to sleep, just answer one question. Have you decided what to do with the money you saved through debt settlement? If you haven’t, then just have a look at the 8 dazzling ways to use the money saved through debt settlement.

1. Use a part of it to pay tax: Not many people know that they have to pay tax for the money saved through debt settlement. This means if your net savings is more than $600, then you would get a 1099C form from the IRS and have to pay tax on it. So, before spending the money on other items, set aside an amount for paying the tax.

2. Use it for down payment: Every penny counts. If you’re planning to buy a home soon, then this means you would need a mortgage quickly. But, since you’ve settled credit card debt, so you would have a marginally lower credit score than others. This would create a problem for you. The lender may either refuse to give you a loan or may delay the approval process or may agree to lend you a small amount.

So, what would you do now? Will you give up a house just because the lender is not ready to trust you?

That will be a dumb idea. If plan A doesn’t work, then there’s always a plan B. And, your plan B is to use the saved money for making a bigger down payment, which in turn may make you slightly less dependent upon the mortgage.

3. Inflate your emergency fund: You’re debt free now. So, now you can very well focus on your much-neglected emergency fund. The money you saved through debt negotiation is your extra money. You can use it to boost your emergency fund so that you don’t feel helpless during the rainy days.

4. Invest to get good returns: I always feel that keeping money in a savings account is not a great idea since the interest is very low. You’ll lose money instead of increasing it.

Actual profit comes from smart investments. You can invest in commodity markets, stock markets or in any other sector. These are slightly risky markets. If you’re not afraid of taking risks, then these investment markets are just perfect for you. They’ll give you good return within a very short span of time.

5. Open a 401(k) account: Do you want to make your retired life comfortable? If so, then have a talk with the HR and ask how much more you can contribute to your 401(k) account. And if you haven’t opened a 401(k) account, then create one right now.

6. Create a will: It’s never too late to create a will. If you’ve saved around $1000, then you can use it to protect your heirs. The amount is enough to appoint a power of attorney, create a will and draft a health care directive.

Read more - Consumer law - Wills

7. Replace the old light fixtures: New light fixtures can make your room look younger and brighter. So, you can use the money to change the lighting fixtures in the front hall, dining room, bathroom, and kitchen. Each lighting fixture may cost you between $100 and $400. So choose a lighting fixture carefully so that you don’t end up wasting money.

8. Give a classy look to your home: Do you want to give a new look to your home but are at a loss of ideas? In that case, an interior decorator may help you. But an interior decorator plus costly furnishings can eat up your saved amount within a few days.

So, what’s the solution? Should you give up your hope to decorate your house? Absolutely not. What you can do is visit This website’s decorators can help you give a fresh look to your dream abode with affordable furnishings. All you need to do pay is $130 (per hour) for their service.

Another interesting way to use saved money is to pay off your remaining debts. This means if you’ve any other debt that you didn’t settle or consolidate, then use the saved money to pay it off. Perhaps this’ll help you get rid of collection calls. What’s more, you can avoid extra interests that accrue with time.

Have you paid off debts and saved a substantial amount? How did you use it? Share your thoughts with us.

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