Why a Budget Is Your Best Friend after Chapter 7 Bankruptcy

Submitted by Rachel R on Thu, 10/10/2013 - 11:45pm

Why a Budget Is Your Best Friend after Chapter 7 Bankruptcy

Budgeting after chapter 7 bankruptcy

Image source: MoneyCatapult.com

The good news about life after Chapter 7 bankruptcy is that your past financial troubles don’t have to dictate your future finances or cause future problems. When we talk to our clients about how they ended up in financial peril, what we hear overwhelmingly is that they were operating without a personal budget. It can be hard to develop and get on a budget when you’re cash-strapped and are living paycheck to paycheck and choosing between bills to pay and prolong. But with the financial fresh start Chapter 7 offers, there’s no reason not to get on a budget right away and stick to it so you don’t backslide and let debt overwhelm you again.

A budget can help you get your finances on track and allow you to live a comfortable life after bankruptcy, pay your bills, save for the future and stay on track. Budgeting and financial management are so important, in fact, that bankruptcy law requires you to take a course to learn these skills prior to receiving your discharge. But most people breeze through this online course without really taking full advantage of it because they see it as a barrier to getting their discharge rather than an opportunity for building much-needed financial skills that can make your future brighter.

So if you haven’t yet taken a financial management course, forgot what you learned or didn’t absorb it at the time, here’s some valuable information on budgets and why can be your best friend after bankruptcy.

Recommended personal budget

Image source: PeteThePlanner.com

What Is a Budget?

A budget is an itemized listing of your income and expenses for a given period showing where and how your money should be spent and saved. A budget allows you to always know how much money you have and where it should be allotted and how much disposable cash you have available to you on a daily basis. It is a tool to help you spend wisely. A well-crafted budget can also help you build savings which equates to financial security.

How Can I Create a Budget?

No matter how much money you have or earn, a budget will help you make the most of your finances. There are many ways and means of creating a budget. You can set up a simple spreadsheet or use an online tool. To get started, you need to know what your habits are, what your bills are and what money you bring in. For one month, track your income, bills and every dollar you spend on everything – no matter how big or small. From there, input your cash outlay into your budgeting tool or spreadsheet in major categories: rent, utilities, food, fuel, insurance, groceries, eating out, entertainment, clothing, personal care/grooming, childcare, student loans, auto payment, etc.

Develop a budget for success after bankruptcy

Image source: Forbes.com

How Do I Refine My Budget?

Look at what you’ve spent and how you are spending your money. Are you devoting a large percentage of your income to eating out? Are you saving anything? Are you spending more on clothes and entertainment and little on your savings? Are you credit spending again? Look at your choices and refine how you spend. Set yourself a dollar limit on items that are non-critical such as clothing, movies, and dining out that will allow you to save 10%-20% of your income (if possible). Prioritize rent, utilities, insurance and other necessities. Set a direct deposit to go directly to your savings account so it’s never available to you to access.

How Do I Find Budgeting Resources?

If you don’t feel confident setting up your budget in a spreadsheet on your own, here is a roster of resources you can use to help you get your budget established:

A budget can help you establish your financial footing after bankruptcy and give you the future you deserve. If you are considering filing bankruptcy in North Carolina, contact a reputable attorney like John T Orcutt for assistance. We offer a free consultation at one of our convenient locations and are ready to help you today!

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