Staying Debt Free After Bankruptcy

Step 2: Live Within A Budget After Filing Bankruptcy

Once you get your spending under control, the next step in your life after filing for bankruptcy is to create and stay within a budget. Seems obvious, but many of us just aren't budgeting our money.

Living within a budget doesn't mean you have to live an existence of never getting what you want. In fact, you may not be getting what you really want because you're spending money on items you don't really need or that don't make you happy.

So a budget can actually help you get the things you want by keeping you focused on where your money is going. Don't think of a budget as a way to deny yourself things; think of it as a way to empower yourself to make intelligent financial decisions

• How to Create A Budget
• Living Within Your Budget

How to Create a Budget After Bankruptcy

Make the most our your bankruptcy filing. Create a budget and stick to it.

1. List your expenses. Look at the the monthly bills you pay, but also analyze your day/week habits. Do you buy lunch every day? How much are your transportation costs? Do you get a morning coffee? An afternoon soda each day? You may be surprised at how the little things add up.
2. List your income. List all of your jobs, any income you receive from self employment, and all of your other income, such as interest or dividends, alimony or child support, pension or retirement income and public assistance.
3. List the total amount you receive during each pay period. If the amount you receive differs from period to period, average the amount you have received over the last 12 pay periods.
4. Break it down by pay period. Next to each amount, enter the period covered by the payment-such as weekly, twice monthly (24 times a year), every other week (26 times a year), monthly, quarterly or annually.
5. Multiply or divide the pay period into the net amount to determine the monthly amount. For example, if you are paid twice a month, multiply the net amount by two. If you are paid every other week, multiply the amount by 26 (for the annual amount) and divide by 12.
6. Total the amounts. This is your total average monthly income. This is the maximum amount that you can spend every month.
7. Compare your monthly expenses to your income. If your expenses exceed your income, you will have to decrease your expenses. If you continually come up short, you may need to consider some larger changes, like getting another job, finding a cheaper apartment, etc.

Living Within Your Budget

Creating a budget and living within it are obviously two different things. Creating a budget is relatively easy to do; the hard part is sticking to it. You can use several methods, however, to keep yourself within your budget.

The most important thing to do is to keep reminding yourself why you're doing this.

Remind yourself that you established a budget to break habits that got you into financial trouble in the first place and that your goal is to free up money that you can use to buy necessities or to save for the things that make you truly happy.

The next thing you need to do is keep a close watch on your spending. Many people think they've done all the work they need when they set up the budget and then they forget about following it.

You may well be tempted to forget this five dollar expense here and that ten dollar one there. But all these small amounts add up, causing you to fall short on your monthly budget and to overextend yourself on any credit cards you may still have, thereby landing back in the hot water you're trying to get out of.

You should also think about adjusting your budget if necessary. Be realistic. If you're finding that you simply cannot live without certain expenses, then consider reducing your expenses in other areas. Your specific budget need not be fixed in stone; but your determination to live within it should be.

If you haven't tried all of these techniques, what are you waiting for?

Many of these techniques are easy ways to free up some cash, which will allow you to live more easily within your budget. You probably will think of many more ways to save money on necessities and the other items you regularly purchase once you start getting in the habit of living this way.