Assuming you don't have a way to significantly increase your income, the only way you can get the fresh start you deserve after bankruptcy is by controlling your spending.
If you spend less than you make, you'll have more money available to spend on those things that truly make you happy, to start a savings program, and to prepare for emergencies that would otherwise force you back into bankruptcy.
In fact, controlling your spending is the foundation of what we like to call the 'golden rule' of smart money management: spend less than you make and save the rest. If you can do this, your life after bankruptcy will be successful.
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The first step in controlling your spending is to understand your spending: what you spend and why. Because you must spend less than you make in order to be financially successful, you first must know what you're actually spending in order to spend less than you make.
If you take a long, hard, and honest look at what you spend, you may be shocked to find how much money you spend on things that are simply unnecessary.
Also, you may find that you spend too much on things you need and use everyday. In other words, the goal here is for you to understand exactly what it is you're spending your money on, and to try to find ways to reduce this spending after filing bankruptcy.
To start this exercise, buy yourself a daily planner or some other small blank book. The book should be small enough to make it easy for you to carry around with you at all times. For the next month, write down every penny you spend on everything you buy.
And we mean everything.
Every doughnut, every cup of coffee, every subway token, every cell phone call, every quarter you throw in a tip jar, and every bill that you pay.
It's also important to list separately all charges associated with your spending.
For example, for your credit card bills, list your interest costs, late fees and other charges in addition to the cost of the underlying items.
This exercise may seem a bit tedious, but it's only for one month and it's a lot easier and it will help you recognize where your money is going.
At the end of your one-month tracking period, analyze your expenses closely.
First, group them into categories. For example, separate your expenses into utilities, entertainment, travel, commuting, food and all other applicable categories and then total each group separately.
For expenses that you incur regularly but didn't come up during this one-month tracking period (such as expenses that you pay quarterly or semi-annually), figure out what your total was in these areas during the last year and divide each such expense by 12 to obtain the monthly amount for each such expense.
These amounts must then be included in your post-bankruptcy spending total.
After you total everything up and review your spending carefully, you may start seeing certain patterns. You may notice a number of things you bought that, in retrospect, you could have done without.
When you start to become aware of where your money is actually going, you'll be better able to see the consequences of your spending and to start thinking about making other choices with your money.
For example, did you spend $100 on coffee during the month? Did that store-bought cup of coffee make you $100 happier than the $10 you would have spent for home-brewed coffee?
Think of what you could have done with the $90 you would have saved by making your coffee at home. You could have paid a bill you've been putting off (and incurring finance charges on), or you could have socked that $90 away into a savings account for something much more important than a cup of coffee.
Use this information to start refocusing your spending on what is really important to you.
In trying to understand your spending, you may find patterns that suggest that your spending is caused by certain feelings or emotions you have.
Sometimes spending can be the result of unhappiness in some area of your life.
If you can address this underlying unhappiness, you may find that some of your spending will decrease.
Some people who have problems with controlling their shopping (the 'shop till you drop' syndrome) may be suffering from emotional conditions that cause the excessive shopping.
Psychoanalytic research has linked excessive shopping to depression and some healthcare professionals describe compulsive shopping as an addiction, just like alcoholism.
Spending may also be caused by a number of other factors:
Compulsive spending can be a vicious cycle. You may spend because of depression or anger. Then, when the bills come due and you can't pay them, the depression increases, causing increased spending, increased depression and the cycle repeats itself every month.
For some people, this is exactly the kind of cycle that contributed to bankruptcy in the first place.
If you see patterns in your spending that are linked to these or other causes and if you can address the cause, you may be able to control your spending.
For example, if you can find an activity in winter to keep you occupied, you may well spend less.
If you find that you cannot overcome your desire to spend and it's causing you problems, you may need to get professional help. If you have access to an employee assistance program (EAP) in your workplace, this may be a good place to start.
An EAP program will allow you to obtain free and confidential personal counseling. If you have health insurance, many plans provide coverage for therapy and other mental health counseling. If you can't afford professional help, seek out friends or others with whom you can share some of your most private money secrets.
Sometimes simply talking about your problems, as well as finding out that others share your same problems, can be of great help.