Bankruptcy and Budgets

Having to file bankruptcy is one of the hardest financial decisions that you may ever make and some people feel it marks them as a financial failure. You are not alone in after a huge spike then drop in 2006 bankruptcies have been on the rise every since. But there is good news, you are now able to re-build your credit and essentially start yourself off with no debt. Using this information wisely is going to be the key to your success, sticking to the “rules” is hard but if you are serious it can be done.

At this point you probably really are not in the mood to talk finances, but unfortunately you have to, you are going to need to round up all your monthly bills (minus the bankruptcy ones) and your monthly income after taxes preferably. This is the time to set up your budget and yes you have to stick to it, you can make minor adjustments as needed. While your bankruptcy is being finalized it is the perfect time for you to begin this step into your credit “future.” We all know that it is hard to make any large purchases such as a new car or a home, but if you work hard you can achieve a high enough credit score in about two years after filing bankruptcy.

Hopefully with the filing of your bankruptcy you now know where your money is going, but more importantly is where it is going to go now. First things first though is you will be paying yourself first  out of every pay check, it doesn’t matter if it is 10 dollars a week or a 100, you will put money in a savings or any other account that you will not touch. Then budget for your monthly expenses and this needs to include everything from your monthly bills to your morning stop at Starbucks. No penny must be left unturned!

If you have your nails done once a week or you have a gym membership you have not used in a month, that is now gone. Eliminate all wastefulness from your budget; if you eat out four times a week, you need to learn to cook because once a week is all you are going to be able to afford now. Buying groceries and doing it yourself is much cheaper than dining out. This does not mean you have to become the neighborhood tight wad when it comes to money, but you will have to change your thinking and become more conscious about your spending habits.

The hard part for most people is credit cards, they are convenient and for most of us something we use daily. You still will use those credit cards, but now you will be using them “wisely.” This is a necessary step to re-establish your credit and only spending what you can afford to pay off at the end of every month is what you can put on those cards. Bankruptcy does not mean this is your opportunity to go buy those shoes you saw at Macy’s last week. The general use rule for credit cards is you never put more than 25% of your credit limit on the card and only if you can reasonably afford to pay it off every month.

Now that you know the basics of not only saving money but re-establishing your credit, stick to your budget and put money in the bank every payday. Before you know it, you will be able to check your credit score with a smile on your face instead of the frown that was there before.