One question we often come up against in a bankruptcy case is “What do I do to make sure this situation doesn’t happen again?” Life after a bankruptcy can seem confusing, and you may have several questions. Our free Life After Bankruptcy Report has the answers to help you move forward in your life and covers a variety of topics.
Bankruptcy is not something to be taken lightly. And after you successfully come out of bankruptcy, taking effective measures to prevent future financial trouble is vital. Managing your money is essential in planning for the future. Here are our 7 easy tips for better money management after bankruptcy.
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While this is maybe the easiest way to understand your money, tracking exactly where your money is going is often overlooked. Taking a look at your bank statements or keeping a journal of where you’ve spent money quickly outlines where you are overspending or areas in which you can cut completely.
Once you have a handle on tracking your spending and have identified clear patterns of where your money is being spent, you are able to allocate and distribute money to a clear, concise budget.
Create a Budget
Creating a budget can seem like a boring task. You probably have a good idea of what your bills cost each month, but putting each of your expenses into a spreadsheet and allocating money to different areas of your life creates a roadmap to how your money will be used. The difference between tracking spending and budgeting is the preparedness; budgets layout how the money will be spent.
This method of money tracking lays a clear path to financial security and can create many good money habits, helping you gain control of your finances after bankruptcy.
Don’t forget the value of cash
Once you’ve created a budget, stick to it! One of the easiest ways to do this is to take cash and separate it into different envelopes for different categories. This ensures you won’t spend more than the allotted amount from your budget, and gives you a clearer picture of how close you are to your budget.
This way of simplifying things also reduces the need to have credit cards on you, helping you remain financially ‘in the green.’ It will help keep you out of situations that can accumulate debt and help you avoid the need for bankruptcy in the future.
Build an Emergency Fund
According to a 2009 blog for The New York Times, two out of three bankruptcies are a result of medical bills. While often times these instances aren’t foreseen, the financial damage they tend to cause can wreak havoc on your finances.
Allocating a section of your budget towards an emergency fund allows you to grow financially responsible at a stable pace, without neglecting any of your expenses. Having a fund set up for emergencies that arise can help prevent you from using credit cards to deal with it. This also allows you to pay for it at once, rather than carrying the debt for months and/or years and needing to file for bankruptcy.
Cut Bad Spending Habits
Five dollar lattes, Redbox rentals that sit for days without return, the extra fast food meal that was too convenient to pass up – these are all things we are guilty of. Creating a budget and tracking your spending shows you a truthful look at how you spend your money.
The $5 here and there can really add up, and often ends up costing you hundreds each month in mindless spending. Take a look at where you may be throwing money away – is there an easy way to drop all of it?
Negotiate Bills Down
Do you have the highest cable package available? Does your cell phone plan include all the bells and whistles? Creating smart money habits may mean sacrificing some of the extras you can live without. To start, contact your bill providers and see about any plans or specials they have that can lower your bill. You may find better options that drastically cut your monthly payments.
Once you’ve explored all of your options, look at your usage plans and identify if there are opportunities to cut bills altogether. If there are opportunities to find an alternative that saves $25 a month, that adds up to over $300 a year in extra income.
Understand the Difference Between Need and Want
Your discretionary income is the income that you have after all of your necessities are paid. What you do with that discretionary income can have a lasting impact on your financial future. It’s important to remember that just because it doesn’t have a specific spending source attached to it, doesn’t mean you have to waste it.
In fact, investing in your savings plan by adding more than budgeted, or paying more on a loan term can help absolve long term debt and further strengthen your financial security.
Get in Touch with Your Memphis Bankruptcy Attorneys
The team at Darrell Castle & Associates includes experienced bankruptcy attorneys who are available to answer any questions you may have about financial independence. With over 30 years of helping those in financial trouble, our Memphis bankruptcy team can help you form a plan of action for debt reduction.