After Bankruptcy: How to Establish Responsible Financial Habits

The reality is, life after bankruptcy completely depends on your attitude.

Life after bankruptcy can look many different ways. For some, it is a scary time where money is tight and it seems like you are still trying to dig out of a bottomless hole. For others, it is a time of hope and opportunity; a chance to start again. The reality is, life after bankruptcy completely depends on your attitude. If you want to get your financial situation back on track and build good habits that foster financial stability, all you have to do is make a plan and stick to it. Staying disciplined can be challenging and stressful, but when you establish responsible financial habits after bankruptcy, you give yourself a chance to reach financial freedom again. Here are the best ways to do just that, from the Auburn & Opelika bankruptcy law experts at David S. Clark.

Create a Realistic Budget

One of the most intuitive and important steps in establishing healthy and responsible financial habits following Chapter 7 or Chapter 13 bankruptcy is to create a budget, and stick to it. The act of simply creating a budget for your spending habits means nothing if you don’t stay disciplined and follow the budget. 

Some important aspects of building a budget include knowing your regular income, knowing your regular expenses, tracking your spending, and setting realistic, achievable goals. Planning for a budget requires commitment and consistency, whether you are old school and want to take the approach of allocating envelopes for monthly expense categories, or want to use more technologically advanced methods, your budget will only serve you as well as you let it. For a more detailed look at making a budget, click here.

Start Saving Money & Create an Emergency Savings Fund

An obvious step in the right direction for those recovering from bankruptcy is to prioritize saving money. Emergency savings funds are important to have, and in addition to said emergency savings funds, it is very important to be regularly putting money away for the future, even if there aren’t any looming financial crises on the horizon. Open a savings account and start earning interest. Make it an absolute priority to live below your means. This is an essential fiscally responsible practice for anyone looking to have a healthy financial future. 

Apply for New Lines of Credit

Applying for new lines of credit after Chapter 7 or Chapter 13 Bankruptcy is also an important step to take. Although interest rates may be higher following bankruptcy, it is still important to begin building back good credit. It may take an extended amount of time before you are approved to open new lines of credit post-bankruptcy, but once you can, it is absolutely recommended that you do so. 

Credit builder loans, which are intended to help you rebuild credit following bankruptcy, are another great way to start rebuilding a healthy credit score and positive financial practices. Also, consider obtaining a secured credit card, which is backed by the balance in your savings account. This balance determines your credit limit, making it a safer option than using traditional credit cards.

Make Payments on Time

In order to keep building credit and instilling responsible financial habits, making payments on time is crucial. By avoiding late fees and paying your bills on time, or earlier, you will not only be building credit, but you will also be saving money! Timely payments cannot be overlooked as a critical part of being financially responsible after bankruptcy. Without this, you can face even higher interest rates, which can be crippling when trying to rebuild financial security. 

Keep a Low Credit Card Balance

Keeping a low credit card balance is a simple, effective way to maintain responsible spending habits. Monitoring your credit utilization ratio and keeping it low will help creditors see that you are making responsible financial decisions. Keeping your credit utilization ratio means that you are not using your line of credit up to its limit. Setting spending limits for yourself– and sticking to them– will help you establish responsible financial habits.

Avoid Quick Loans

Quick loans, where individuals can almost always receive cash, involve incredibly high interest rates, and often trap financially vulnerable individuals in another cycle of debt following bankruptcy. Though they can be tempting when payments are due and cash is short, find safer and less predatory solutions. 

Some examples of better ways to solve a cash shortage include borrowing from a church or nonprofit, or finding additional short term streams of revenue, like online sales or third-party food delivery services. There are many ways to make an honest dollar these days that only take a little time. Read here to learn more financial tips and alternatives to quick loans.

David S. Clark, Auburn & Opelika Bankruptcy Attorney

From his many valuable years of experience serving the Auburn and Opelika, Alabama community, David S. Clark is knowledgeable and prepared to help you start your journey back to financial security. If you need help navigating the stress, intricacies, and complexities of Chapter 7 or Chapter 13 Bankruptcy, contact David S. Clark, Attorney at Law today!