If you’ve recently filed for bankruptcy, it’s possible you’re looking for a fresh start to turn your finances around. If so, then you came to the right place. Although bankruptcy can be devastating and emotionally challenging, it can be corrected. Granted, bankruptcy can stay on your credit report for 10 years; however, there are several effective methods you can utilize to bounce back from the situation. Keep reading to discover how you can deal with your finances after a bankruptcy today.
Revisit your budget and fix it
There’s a high chance a faulty budget sets the stage for your current situation. At this point, you need to figure out where your original budget failed. If you understand exactly where you went wrong, you can correct the problem easily.
So, how do you do it?
It’s simple. Create a new budget sheet comprising three expense columns. The first column should contain the fixed expenses. List all your fixed monthly expenses, including house payments, car payments, and house bills.
The next column should contain the variable expenses. Here, include all your variable monthly expenses, including clothes, food, and entertainment. Take some time to check all your last three bank statements and have a clear list of all the monies you spent on these expenses. It won’t be long before you discover where you’ve been overspending.
The last column should comprise your irregular expenses. These are costs that aren’t necessarily recurrent but come occasionally. Some of the things you should be having here include medical bills, gifts, and party expenses.
When you have a clear view of how you’ve been spending, you’d be better placed to plug any holes and make sensible spending trims.
Begin using cash
Have a limited amount of cash on hand to help you stay on budget and avoid charging more than you can afford on your credit card. Of course, you don’t have to use cash for all your purchases; all you may need to do is prioritize cash spending to save. For example, you’d be less likely to purchase the extra snacks at the grocery store if you find that you only have enough for necessities like milk or bread.
The main idea here is to make an effort to transition to spending cash only, and reduce how much you rely on credit cards. To make this process easier for you, simply plan a budget and set aside a certain amount of cash you’re allowed to spend in each shopping category. When you spend that amount, avoid spending in the category until you receive your next check. Alternatively, you can move money from a different shopping category.
Get a secured credit card
According to Forbes, a secured card is one of the best ways to rebuild your credit. If you don’t already have a secured credit card, this could be the best time to obtain one to have a fresh start. These cards usually come with a credit limit that is based on deposited cash as collateral. For instance, if you’re able to put $300 down, that’s essentially your limit.
Firstly, you need to have an emergency fund containing between three to six months’ worth of savings before you commit the resources to your secured card. Once your emergency savings are set, obtain a secured credit card to get a credit line. When your on-time payments have been made on your new card for roughly one year, you’ll be very likely to qualify for an unsecured card. At this point, you’ll see a significant increase in your credit score.
Just remember to make sure your secured credit card gets reported to the key credit bureaus to confirm that you have a good one. You should also focus on getting a card with flexible repayment terms and low fees. As we’ve seen, it should not take long before you transition to a regular card.
Many lenders check the borrowers’ past credit performance before giving them a loan. Having a credit card with a higher limit is a good indication that you can repay additional credit obligations, whether or not you’ve filed for bankruptcy. For instance, if you want to get a loan from VA Home Loan, you can get a VA loan after bankruptcy by proving that you’ve reestablished good credit.
Bankruptcy is challenging, but you can benefit a lot if you take it as an opportunity to make a fresh financial start. Follow the tips we’ve discussed to reset your financial situation, raise your credit score and have a better financial future.