Declaring bankruptcy is not only devastating to your credit, it can have serious effects on your lifestyle and even your self esteem. Even though you may feel like you will be cast out, banished for years upon years of credit exile, there is reason for hope. This isn’t the end; there is life after bankruptcy. Here are a few tips to help you rebuild your financial life once you’ve completed your bankruptcy process.
1. Let go of the guilt and shame. Yes, you filed bankruptcy, but it doesn’t define you as a person. Beating yourself up over the fact, ruminating, and telling yourself that you can’t believe you let things get to this point doesn’t help the situation. Own your bankruptcy as part of your life, but force the negativity surrounding it out of your mind.
2. Pay yourself first. Being fiscally responsible isn’t just about living within your means, it’s about living below your means. Putting away 5% of your paycheck will help you to build a rainy day fund that you can draw on in an emergency, rather than incurring debt. Setting up an automated savings transfer each payday is an easy way to start saving.
3. Make and follow a realistic budget. Even if you haven’t done a written budget before, you need to do it now. Clearly outlining your income and expenses will help you be aware of where your money is going, where it needs to go, and how much of it there is. Once you look at the money coming in versus what needs to go out, you may find that you need to eliminate some items, such as high-priced phone plans, cable television, and eating out more than just occasionally.
4. Use cash. It’s time to turn on your depression-era mentality. When you’ve made your budget, you know how much money you have available for things like groceries. Take that money, in cash, to the store with you and buy only what you have the cash to cover. It’s harder to overspend when you can’t just swipe a card.
5. Automate your bill payments. Paying your bills in full and on time each month is always important, but it is particularly so after bankruptcy. When you’re rebuilding your financial life, you don’t want to be a day late or a dollar short. The phone company and power company are two creditors that we often forget are creditors. Automating your recurring month payments, such as rent, insurance, and utilities will make sure they’re all getting paid on time.
6. Get a credit card. Yes, it may sound counterintuitive, since racking up credit card debt may be what brought you to bankruptcy. A credit card is one of the best ways to start rebuilding your credit. The key is not to overspend and to pay off the card in full every month. Consider using your credit card for just one thing, like buying gasoline throughout the month. Each time you use the card, deduct that amount from your checking account. When the bill comes, you’ll have the money set aside to pay the balance.