Filing bankruptcy has a major impact on your life. The good news is that bankruptcy gives you a chance to start over. Once the court has wiped out your existing debts, you can take the necessary steps to improve your future.
Getting your life back on track after filing bankruptcy takes some time and effort, but it is doable. Here are some essential steps to take to rebound from bankruptcy and get your finances in good standing:
Change Your Financial Habits
You shouldn’t dwell on the past or beat yourself up about having to file bankruptcy, but do spend time reflecting on how you got to that point. Identifying the causes of your bankruptcy will help you adopt better financial habits and avoid having to file bankruptcy again.
This may be a good time to seek employment elsewhere or ask for a raise. You should put yourself in a position to better yourself and advance in your career. This might add to your confidence and will allow you to save more money.
You should also be changing the way you shop. When the time comes to buy some new sneakers, for example, don’t just buy the shiniest new pair you see. You need to be shopping around, and looking at some smaller retailers or outlets who specialize in sales and budget shopping.
Create a Budget
A good budget is a foundation for financial success. Creating a budget helps you keep your spending within your income. It also can give you an early warning if your expenses are more than you can afford. By planning your monthly spending, you know ahead of time what you can afford and you don’t have to make any spontaneous decisions.
Creating a budget is not difficult, you can start by totaling monthly income. Then, list all of your bills and expenses for the month. Total your expenses and bills, then subtract the total from your monthly income. The result is your net income, which should be a positive number.
If it is negative, that means your expenses are greater than your income. You will need to cut out or reduce some of your expenses to fit within your income. Write your budget down and keep it handy so you can look back over it throughout the month to keep your spending on track.
Build a Savings Habit
Having a savings account can prevent many financial problems. Ideally, you should have at least three to six months of living expenses in an emergency fund.
A good emergency fund will be able to handle the smaller, unexpected expenses that pop up from time to time. You’ll also be able to rely on your emergency fund if you have an unexpected job loss or a pay cut.
It can take time to build a savings account, so you should start saving early. If you have a hard time remembering to put your money into a savings account, consider setting up an automatic transfer from your checking account to your savings account each month.
This can make it easier because you don’t have to do the actual work of putting money into the account. You might also put your money in a savings account that’s not easily accessible–this can avoid the temptation to withdraw from it unnecessarily.
Start Rebuilding Your Credit
Rebuilding your credit is another important part of getting your life on track after bankruptcy. Credit plays a major role in many of the financial transactions that you make–including applying for a job, or taking out a loan for your first home.
If you’ve done your research before filing for bankruptcy, you know it’s normal to have a low credit score but it can be improved over time. Be cautious when you’re taking on new credit, and remember you can get into a situation where you have more debt than you can handle.
Start with only one or two credit cards and resist the temptation to open more. Charge only a small amount on these credit cards and pay the balance in full, or a little early each month. This way, you can avoid getting into major debt.
Make Better Borrowing Decisions
After bankruptcy, you should be especially wise about the borrowing decisions you make. Don’t be too eager to take on new debt, especially in the first few months after filing for bankruptcy.
Make sure that you know the necessary financial basics before applying for a loan. This includes a budget that you’re sticking to each month, along with maintaining a savings habit.
Your monthly income and expenses should be balanced out enough that you can afford another monthly payment. If you don’t think you can handle taking out a loan, you probably should wait until you’re more financially stable. It’s better to wait until the right time than to get yourself into a loan that you can’t afford.
Learn from Your Mistakes and Stay on Top of Things
If you have recently filed for bankruptcy, it doesn’t mean you can’t learn to manage your money. By following these steps, you can build your life back up after bankruptcy.
Filing for bankruptcy can be a painful process, but after you’ve made the decision, it’s important you try to and make positive changes. This doesn’t mean you can’t spend your money on things that you want, you just have to do it in a more responsible way.
Making sure that you are financially stable enough to make a big purchase would be in your best interest. That way, you will not find yourself in debt, or struggling to pay your other bills.
The aftermath of bankruptcy can be unpleasant at times, but it is possible to get your life back to normal with some self-control and patience.