Your Financial Health Post Bankruptcy
The reasons to file for bankruptcy are as diverse as the people who participate in them. For some, bankruptcies are caused by a sudden and unexpected event like the loss of a job. But for most Americans, the cause of bankruptcy stems from simply living beyond one’s means.
Staying debt free after bankruptcy includes self assessment, some introspection, and a lot of will power.
To avoid falling back into the trap of overspending after bankruptcy, it’s necessary to view our own material wants and needs impartially. Our culture promotes easy credit. We can easily buy personal property or a home, even if we don’t yet have money saved for the complete purchase. Credit allows us to get what we need now at the expense of paying interest on the borrowed money.
We’ve been taught that as long as our income meets a lender’s debt to income ratio then getting something we can’t afford to pay upfront is okay. Just because a lender allows for a certain percentage of our income to be allocated to a payment doesn’t mean that we need to become burdened with more debt.
That’s not to say that some purchases like a home aren’t a good investment. In most cases, the benefits of buying a home outweigh renting. We shouldn’t though apply that same criteria to everything we want. This is the mindset that will make filing for bankruptcy again an inevitability.
Replacing Bad Habits
Many financial advisers suggest making your money work for you, rather than vice versa. But the first step is to develop a mindset that allows for growth and overcoming one’s own urges. It’s a difficult process, but it can be done.
Following are a few suggestions that will help you to lose those financial bad habits:
- Eliminate Credit Cards: Buying something with a credit card is extremely easy. When we pay with cash or a debit card, we often give more consideration to the item that we want. Paying with a credit card extends the payment of the item to a later date, and we don’t experience the same loss of capital as we do with paying with cash. Your bankruptcy might have eliminated all of your credit card debts. That’s great. Try to remain credit card free.
- Reduce Expenses: If you frequent restaurants, you will definitely need to consider reducing or eliminating this option. A night out, in some cases, can cost a week’s worth of groceries. The same goes for getting take out at work. These meals can really add up.
- Reduce Your Vehicle Expense: A car or truck payment can place a huge burden on your finances. If you’ve recently filed for bankruptcy, you may have already received a new generous interest rate on your car or truck payment. But if this is a new vehicle, consider replacing it with an older vehicle, one that you can pay off immediately.
Budgeting is instrumental to regaining control of your life. Most of us get into the bad habit of purchasing things that aren’t absolutely necessary. If we don’t see an itemized list of the things that we’ve purchased throughout the month, then it’s hard to see any pattern. And it’s even harder to learn from unnoticed habits.
A budget will allow you to see how much of your earnings are allocated to expenses like food, electricity, housing, gas, etc. There are numerous free online budget services that will allow you to visualize your expenses in graph or a pie chart format.
To many people, visualizing expenses in a graphic form can have a profound influence on future purchasing behavior. Following are a few of the most popular free online budgeting services.