3069: How To Budget After Bankruptcy by Kalen Bruce of Money Mini Blog on Frugality

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[00:00:30] This is Optimal Finance Daily – How To Budget After Bankruptcy by Kalen Bruce of MoneyMiniBlog.com It's hard enough to declare bankruptcy, but it can be an even longer journey to rebuilding financial sustainability. The question of surviving bankruptcy is a very big one for anyone who has ever had to declare bankruptcy.

[00:00:57] The bigger question, once you've survived, is how to fix your finances after bankruptcy. It's important to be able to answer both questions so that you can get your financial life back in order. Knowing how to file for bankruptcy is difficult, but legal help can simplify the process. Once that's finished, you need to fix your finances so that it doesn't happen again.

[00:01:21] This article will answer the question of how to rebuild finances after bankruptcy. Citing practical examples, we will guide anyone through not only how to survive bankruptcy, but also how to rebuild finances right after you filed for bankruptcy. Get your life back on track with these post-bankruptcy budgeting tips.

[00:01:43] Track your expenses. Once your debts have been forgiven, you need to make sure you don't fall back into debt. Start by taking the time to track your expenses. For a month or thereabout, you should write out every dime you spend on everything and anything. If you intend to fix your financial situation, you should not cheat on this exercise. Once you find out how you spend money when you don't have a budget, you'll have a clue about how you should spend money.

[00:02:13] Tracking your normal expenses can help to shed light on your problem areas and spending habits. Avoid the temptation of the plastic card. Let's be upfront with the truth. Swiping a plastic credit card makes it far too easy to spend money and to even overspend it. When you're tracking expenses, you should endeavor to stay off credit and debit cards. While they may be convenient, they also make it easy to overspend without realizing the damage you've done to your bank account.

[00:02:42] Avoid the temptation of paying with your card. If it's possible, stay completely off it. If you can, you should go back to the old-fashioned envelope system of budgeting. Yes, it's old school to have an envelope set aside and labeled for each expense, but it works for many people. Using cash can set your budget in reality as you can see physically how much you have to spend. Cut back on non-essential spending.

[00:03:08] Once you have tracked your expenses and you know where your money's going, you can begin to check out the things you enjoy but cost you too much. While you don't have to get rid of every small luxury, you need to cut back to rebuild your finances and avoid falling back into debt. The key is for you to be able to have as much fun while spending less. For example, if you eat at a restaurant for lunch every day, you might want to trim it down to just one or two days per week. You can have a packed lunch for the remaining days,

[00:03:36] making your own food is much more cost-effective than eating out. You can free up the rest of the money for some other important expenses. Save up. If there is a golden key to surviving bankruptcy, it is saving up as much as you can. You must be able to save money and your budget will only help you to achieve that. You should be able to save up to 10% of your income while you are rebuilding your finances after bankruptcy.

[00:04:03] That means that you should be spending about two-thirds of your salary on your fixed expenses while the others go to reoccurring expenses. In a world driven by technology, you can find an ally to help you save in the form of an app. There are various budgeting apps that will remind you when you're close to your spending threshold or that can automatically put part of your income into savings. The more available and visible your money is, the more the urge to spend the money.

[00:04:31] The trick is to therefore move the money out of sight and out of the area where you can touch it. Use a savings account, invest, or find an app that will help you keep your money secure so that you can't spend it on a whim. Take advantage of a clean slate. More often than not, it was faulty budgeting that got you into your bankruptcy issue in the first place. Now that you're solvent again, it's good to think of this state as a clean slate.

[00:04:59] That will allow you to replan your strategy and be better at budgeting this time around. Look at how your former budget failed and you'll be able to build a formidable budget that can help you in the journey of surviving bankruptcy. Look at your financial situation as a positive clean slate rather than feeling sorry over your previous financial failings. You must be aware that your attitude is important if you're intent on surviving bankruptcy. Create an expense flow chart.

[00:05:28] Once you've survived the first month after filing bankruptcy and you've seen where your money has gone for the first month, you can then create an expense flow chart. It might sound complicated and time-consuming, but it's not actually. With a basic knowledge of Excel, you can find out the categories you spend on and see where you spend a lot and where you're doing well. Your adjusted tracking can help you learn the exact figures. With this information, you can make a more informed decision about how to budget going forward.

[00:05:59] Craft your budget. With all the information at your fingertips, you can now create a budget that'll be a reflection of the current realities in your spending. Your budget is the ultimate answer to how to fix your finances after bankruptcy. Do not join the category of people who discard their budgeting needs after declaring bankruptcy. Starting fresh is no excuse to make the same mistakes. It's normal to feel bitter after filing for bankruptcy.

[00:06:27] However, you must keep your mind on the fact that surviving bankruptcy is the goal. You might be tempted to do away with budgeting, but now you need to budget better than ever before. If there is any practice that can answer the question of how to rebuild finances after bankruptcy, it's budgeting. Get your budget straight and stick to it to get your finances back in a firm grip. You just listened to the post titled,

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[00:09:06] While I agree that recovering from bankruptcy will require careful money management and budgeting, I don't think it's necessarily true that financial irresponsibility is always the root cause of a bankruptcy in the first place. From what I've read, the three major causes of bankruptcy are divorce, severe illness, and job loss. In fact, over 60% of bankruptcies are related to the inability to pay for medical expenses.

[00:09:34] That being said, this article is really making me reflect on the idea of personal responsibility. Sometimes we find ourselves in circumstances that aren't our fault, but we still need to take responsibility and navigate them. I have a really good friend named Lynn Frere who runs the website PhiHealthcare.com, which is the first crowdsourced database of healthcare options for entrepreneurs and early retirees.

[00:10:00] Lynn was always super responsible with her money and started investing at a very young age. But then in her late 20s, she was diagnosed with a brain tumor, and the resulting surgery, rehab, learning to walk again, etc. completely wiped her out financially. She lost everything. And by the way, she had health insurance, but this happened in the days before out-of-pocket maximums. Now, obviously, this horrible situation wasn't Lynn's fault.

[00:10:29] But when she talks about how she rebuilt her wealth over the next 10 years and created a work-optional lifestyle before 40 years old, I'm so blown away by her degree of personal responsibility. There's so much in life that's beyond our control. But if we can remember that we always have control and how we respond to what life throws at us, we'll be in a much better position to navigate our circumstances.

[00:10:56] That should do it for another edition of Optimal Finance Daily. Have a great rest of your day, and I'll see you on the Wednesday show tomorrow, where your optimal life awaits.