- Personal Finance
Avoiding Old Spending Habits after Bankruptcy
Getting out of a bad financial situation is a lot of work. After filing for bankruptcy you may feel as though you’ve been freed from a prison created by debt but for many this newfound financial freedom can quickly turn into a disaster. After your bankruptcy proceedings are complete you’ll need to take special care to ensure you don’t follow the same damaging financial path you did previously in life. So what are you going to do?
Help On Spending Habits After Bankruptcy
Make a Solid Plan
Most people find themselves in financial trouble because they, simply put, continuously spend more than they make. During your bankruptcy proceedings you probably worked with your lawyer to create a budget that would ensure you never spend more than you earn each month. Sadly, many individuals stick to written budget for the first few months and then decide they no longer need it. As such, they lose track of their earnings versus expenses and slowly begin to dig themselves into a new financial hole. Budgeting and planning is a lifelong commitment – one you’ll need to stick to if you want to avoid unmanageable debt again in the future.
Eradicating Old Habits
There are plenty of individuals who need to file for bankruptcy because they simply can’t cope after a major financial crisis such as an injury, lawsuit, death, or divorce. The majority of people filing for bankruptcy simply have poor spending habits. They rarely save money and rely on credit cards to pay for things they don’t necessarily need (or as a way of financing things they do need).
As you go through the bankruptcy process you’ll need to evaluate your habits and determine what changes you need to make. These involve making a plan, as noted above, sticking to a budget, and not falling into old spending traps. Ask yourself a question before every purchase – “Is this really necessary?” If the answer is no, put the item back and wait until you really have enough money saved to make the purchase without putting any stress on your finances.
After you file for bankruptcy you’ll be inundated with literature from companies claiming they can help you to repair your damaged credit. They’ll claim to be able to wipe away your credit history and rebuild your credit score. The truth of the matter is that if it sounds too good to be true it probably is – and the only person who can really do those things, over time, is you.
Pay your bills responsibly each month and don’t open any lines of credit you don’t really need. If you do open a line of credit, pay special attention to the interest rates, card fees, and credit agreement terms. You’ll likely end up paying more in fees than someone who has not filed for bankruptcy in the past.
The need for a quick solution to every problem is part of what led you into debt to begin with. Don’t travel down that path again. Make a budget, plan major purchases in advance, and spend responsibly. Before you know it you’ll find you have broken all of your old spending habits.