Step 2 — Live Within A Budget
Once you get your spending under control, the next step in your life after bankruptcy is to create and stay within a budget.
We understand that the term budget may have some negative associations for you. "Budget" may suggest self-denial, limits, and other restrictions on your ability to live the life you really want. Although there is some truth to this, in order to make your life after bankruptcy successful, you have to start thinking about placing some limits on the behaviors that may have gotten you into bankruptcy in the first place.
However, you need not live an existence of never getting what you really 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. In other words, your own self-defeating behaviors may be causing, at least in part, some of your unhappiness.
Thus, a budget can actually help you get the things you want by keeping you focused on where your money is coming from and where it's 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
Please read these additional sections to learn the details of how you can live within a budget:
Click Here For a Free Bankruptcy Evaluation
How to Create a Budget
To create a budget, first take out the spending document you prepared in the spending section above in which you wrote down all of your expenses. If you haven't already done this but would like to do so, please review the know what you owe section. Next, you'll need to create a new document to 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.
Next to each source of income, 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.
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. Finally, 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. When you are done, total up all these amounts. This is your total average monthly income. This is the maximum amount that you can spend every month.
Next, you will need to compare your monthly expenses to your income. Go back to the spending document you previously prepared and compare your monthly expenses to your monthly income. If your expenses exceed your income, you will somehow have to decrease your expenses. Of course, if you follow the tips we provide on spending less, this shouldn't be too difficult. If you continually come up short, you may need to consider some larger changes.
Click Here For a Free Bankruptcy Evaluation
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. If you start thinking that your budget is an order from someone (like your parents yelling at you to clean up your room), it will never work. You'll rebel against it every chance you get. Instead, remind yourself that you established a budget to break the bad 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 have to make sure that you keep at it. You must track all of your income and spending (without ignoring the small details) so you have a completely accurate picture of what you're doing. 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.
Also, review the ways in which you can control your spending that are discussed in the spending section. 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. And always keep an eye out for other tips in this area; they're all around you.
» Click Here To Learn More