Bankruptcy is an extremely useful tool to help you get out of unmanageable debt and start fresh financially. However, some people don’t change their spending habits and spend their way right back into debt even after a bankruptcy. I’m here to help walk you through establishing good spending and saving habits so that you start off your new financial life in the right direction.
Planning Your Spending
In the life-after-bankruptcy process, you’re required to complete two online educational courses. I encourage you to take your time and have an open mind as you learn some new skills in budgeting and how to use credit to your advantage. It’s hard to know where our money goes each month if you don’t track your spending. When you have an accurate budget, you’ll not only know where your money is spent, you’ll have greater control over how to save it as well. Even post-bankruptcy, you may find that money is still tight. I encourage you to take the time to shop around for the best price on reoccurring bills like auto insurance, cell phone plans, the internet, and cable. As you start saving in each of these areas, the total savings really adds up. You can use your savings to build an emergency fund so that when the unexpected happens, you don’t go into debt to cover the expense.
Saving for the Good and Bad
As you look at saving, don’t think of it as money you’ll spend later. Think of it as a way to stay out of debt. In the past you may have used credit cards to bail you out of an unexpected situation; now the goal is to use your emergency fund for that purpose. As you save each month with the expenses you cut and the dedicated amount you contribute, you’ll feel more confident in having that emergency fund. When it gets to a point where you feel it is sufficient, continue to save, but now you can save for a purchase or vacation.
Make Your Credit Work for You
Filing bankruptcy can feel traumatizing, and some people avoid credit partly because they don’t trust themselves to not use it the same way they have in the past. Others just want nothing to do with credit at all. Credit is not the enemy; it’s how we use it that becomes a problem. Whether we like credit or not, it is necessary to have. A good way to start re-establishing your credit is getting a secured credit card. Secured cards act like a checking account. You must deposit money into the account and that becomes your credit limit. Of course, you will have to pay fees, but it is a safe way to start building back your credit. You may have to save the very money you will use to open a secured credit card account. Once you have the card, make regular small purchases each month and pay the entire amount off at the end of the month. This will keep you from having to pay a high-interest rate, as most cards don’t charge interest if you pay if off each month. This positive action will develop good habits and help to rebuild your credit score.
The Future is Bright
Things may not be easy financially, even after bankruptcy, but with freedom from debt and help in managing your spending and savings, you can have a bright financial future. The challenge is to learn from your mistakes and build a strong future. Give me a call with any questions you may have; I’m here to help you on this journey.