The relief of a restart begins as soon as you make the decision to file a bankruptcy. However, it is once the discharge takes place that people truly become free from the past and can move on with a new outlook. This moment is a perfect time to build a more secure financial life. Here is how to make the most of your new start.
#1. Establish a realistic budget
Many people add to their budget the basic bills like utility payments, rent, and groceries. There are often many forgotten expenses that come along. A few dollars here and there will add up over the month and can make a difference.
Keep a journal for a month and record every penny spent. It could be some spare change in a vending machine or a couple of extra trips to the grocery store, but record it all. Also, include all the money that came in at the same time. Do not make any adjustments to how money is handled as the journal is kept.
The result is a realistic look at how money comes and goes in the household. The data makes it easier to see where to tighten spending and what is realistically needed for other items. Complete the journal every 4–6 months to identify any changes.
#2. Build a savings account
The part of the budget that needs the most attention is the amount that you will save. How much to set aside will depend on your financial situation. Experts typically recommend at least 10–20 percent of any income be saved. Extra cash is not always abundant, even after a bankruptcy discharge, but nearly everyone has something available.
Consider the payment to the savings account to be another bill. The benefit is that it is a payment that you make to your own future. If you discover that the money never makes it to the bank after a week or two of internal promises, have it automatically deducted from your paycheck. It is easier to save money when it is never seen or handled.
#3. Ignore all junk mail
Creditors see consumers like you as a target. Just remember, they want to help you rebuild your debt, not your credit. Ignore all the offers for the first year. The guaranteed approvals are typically cards with a high interest rate and large annual fees.
It may become sensible to obtain a card once your credit score improves and you have become acclimated to your budget. However, modern life can continue even without a credit card. Credit card-free options exist to rent cars and hotels, personal loans also build credit scores, and an emergency fund keeps cash available for the unexpected.
#4. Develop a little patience
Patience prevents debt. Do not replace things just because they break or seem imperfect. Patience allows you to buy clothes, shoes, and many other items at the end of a season for half of what they cost when the season begins. Things that affect the health and safety of people are immediate needs. Everything else is a want. Always pay cash for wants.
#5. Monitor your credit scores
Credit scores can take a hit from bankruptcy, but many people rebound quickly. Monitor the scores to watch the numbers climb, as well as to make certain the reports stay accurate. About 20 percent of credit reports include errors and these can affect loan decisions, rental applications, and much more.
Consumers can access their credit reports at any time through online websites. The three credit reporting agencies also provide consumers with an annual credit report for free when requested. Contact the agency and the creditor involved with any errors immediately.
Life after bankruptcy is a time for credit rebuilding and new financial habits. Everyone can make improvements, even when bankruptcy takes place due to medical expenses or job losses. At Phoenix Law, we want to help you to have the opportunity for a fresh start. Contact us to schedule a consultation so we can find the right solution for you.