Filing for bankruptcy is not the end of the world as many people would have you think. In fact, you can use bankruptcy as an opportunity to start fresh and implement better financial habits.
Budgeting is more important than ever before while you go through bankruptcy and in the time following. Understanding how to responsibly manage and spend your money can help you get back on your feet and save for your future.
Look at your past
The biggest mistake you could make after bankruptcy is to continue doing things the way you have always done them. Experian suggests that you look for the root cause of your financial woes and resolve to make changes to avoid repeating those behaviors.
Create an all-cash budget. This means that your cash on hand determines your budget. For a little while, you may not have much extra to spend once you pay for necessities. Over time, as you continually live within your means, you will reach a point where you can add a little more flexibility to your budget. An all-cash budget eliminates the concerns of overspending and going into debt.
Analyze cash flow
Just because you implement an all-cash budget does not mean you cannot use a credit card. In fact, responsibly using a credit card is an excellent way to rebuild your credit score and establish financial credibility once more.
If you do choose to use your credit card, only use it when you have enough cash in your bank account to cover the cost of your purchase. Never use your credit card to compensate for the fact that you do not have enough money to buy something. Over time and with responsible use, you can request a credit increase which may also boost your credit score.