Bankruptcy is a harsh blow for anyone to go through. Despite the fact that a Chapter 7 or Chapter 13 can sometimes wipe the proverbial credit slate clean when it comes to creditor harassment and a sea of never-ending debt, it doesn’t come without consequences. In some cases, a portion – or all – of the debt must be repaid in spite of the bankruptcy filing. Once the bankruptcy is final and debts discharged, it’s time to start building your life again, and there is no better way to do that than with an effective budget.
Step 1: Create a plan
Some folks are spreadsheet people, other folks are online people and still others are smart phone aficionados. Examine the type of person you are and find a budget solution to interface with that. If you are a spreadsheet wiz, open up Excel and search the plethora of online resources available for budget templates and spreadsheets. If online is your thing, consider using a budgeting service like Mint.com; it’s free and easy to use, interfacing quickly with your online banking resources. As another option, if your smart phone is surgically graphed to your palm, you can implement numerous budgeting resources with your smart phone.
The best thing about online budgeting options is that most of the guesswork is taken out of the process since these solutions are already optimized to synchronize with your online banking programs, categorizing your spending and clearly revealing where you need to cut back and make changes.
Step 2: Cut out the luxuries
After bankruptcy, you have to consider that you will be living on a cash only basis for the next couple of years. It’s time to start saving. In order to save most effectively, cut out the luxury expenses you have become accustomed to having. Consider cutting back on cable, chewing down the cell phone minutes and retracting eating out to a few times per month, as opposed to a few times per week. Create a line item in your budget for your savings, equal to at least 10 percent of your monthly income.
Step 3: Establish goals
Of course, credit isn’t always going to be a thing of the past, and there is no better time to begin building your credit than right after bankruptcy. Set aside some of your savings and open up a secured credit card. These cards come with the convenience of a Visa or MasterCard logo; you open a secured card with a security deposit that becomes your credit limit. Use this card for normal monthly expenses and create a line item in your budget to pay it off each month. The more you do this, the faster you will see improvements. In fact, you can put yourself in a position to get a personal loan or buy a car in as little as a year of responsible use of your secured card.
Step 4: Check up, regularly
Just as you need to shower often, you need to check up on your finances regularly. Visit your budget at least twice per month and evaluate how well you are maintaining your commitments and financial goals. Oftentimes, the reason for bankruptcy is due to falling into poor financial management habits, coming out of bankruptcy, it is imperative to break those habits once and for all.